Top Five Apartment Sub-Markets in the Country

Posted on August 8, 2016

Research firm Real Capital Analytics (RCA) has released a list of sub-marketswhere investors paid top dollar relative to income for apartment properties in the past two years.  “The results mostly point towards the six major markets of the U.S…. but other areas are places where I’d dream of living: Miami Beach, La Jolla, Marin County,” says Jim Costello, senior vice president with RCA. “It’s not surprising that with tenant competition for these locations, investors compete as well.”

Miami Beach, Fla.

Apartment communities in Miami Beach sold at higher prices relative to income than the properties in any other neighborhood in the U.S., according to RCA’s survey of sub-markets where information from more than five property sales was available over the past two years. Miami Beach properties traded at an average cap rate of just 3.12 percent.

Miami is much smaller than many U.S. apartment markets—it is the 44th largest city in the country, behind Omaha, Neb. It’s a highly desirable sub-market and apartment properties here aren’t often up for sale. Only six properties sold in the neighborhood during the two years studied by RCA.


New York’s Upper East Side

Investors paid cap rates averaging just 3.24 percent for the deluxe apartment assets on the Upper East Side in New York City, the largest metro area in the U.S. New York City neighborhoods dominate the list of the 25 sub-markets with the lowest cap rates, filling roughly one third of the spaces. These included Midtown East, with an average cap rate of 3.44 percent; Midtown West, with a cap rate of 4.11 percent; Downtown Manhattan, with an average cap rate of 4.13 percent; Midtown South, with a cap rate of 4.20 percent and Upper Manhattan, with a cap rate of 4.37 percent. The boroughs of Queens (4.42 percent) and Brooklyn (4.51 percent) also made the list.


Hollywood and Santa Monica, Calif.

Apartment sector experts consistently rank Los Angeles in the “top xix” U.S. apartment markets. But the city does not appear on the list of areas where investors pay the most for property relative to income until the #10 spot. Investors paid cap rates averaging 4.17 percent for properties in Hollywood and Santa Monica, however. These investors bought 153 apartment properties over the two years studied by RCA.