Following the Trends, Multifamily Investors Look to Smaller Metro Areas

Adnan Zai
4 min readMar 1, 2021
Adnan Zai

For people who are trying to make money in real estate, multifamily investing is an integral part of any portfolio. Although the past year has been a tumultuous one for the nation, with the pandemic changing the way Americans shopped, worked, and lived, the trends for multifamily investing have held steady. One trend in particular has been amplified because of the events of the past 12 months: a shift from the largest metros — New York, L.A., and San Francisco — to smaller, less crowded cities. Over the last five years, investment into non-major markets has increased 13.9%. Multifamily investors are focusing their money on smaller markets in order to see a significant return on their investments. Aside from the fact that there are more metros to choose from, and therefore more quality investment opportunities, investors are beginning to realize that there is more value to be found in smaller markets compared to the largest cities.

Smaller Metro Areas Targeted

When thinking about multifamily investing, many people achieved success in small markets outside of major cities. Globe St. reported that “75.8% of multifamily investment happened outside of major metros last year, according to new research from Newmark.” That percentage is a key to understanding how smaller metro areas were better for multifamily investors, and how they can be a great addition to an investment portfolio in the coming years.

Recent reports show that there were several smaller metro areas that surpassed the national average for rent growth, since many rental situations, especially in the largest markets, were going downhill because of the pandemic. New evidence in Globe St. reported that “Phoenix, Philadelphia and Kansas City all had significant rent growth during the pandemic of 5.5%, 3.2% and 2.8% respectively. This is impressive considering that many markets, including the nation, saw average rents decline during the pandemic.”

There are several reasons why multifamily investment has maintained its strength during a difficult economic cycle. CREXi reports that “low-interest rates, limited housing supplies and population migration to the south and west have all contributed to the rise of multifamily. All of this was happening prior to…

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Adnan Zai

As an Advisor-In-Residence, Adnan particularly focuses on strategy, deal pipeline, and structuring.