Huntsville Multi Family Real Estate Investing

Rapidly Growing Huntsville, AL Multi-Family Garden Style Market

Huntsville Multi Family Market Overview

Huntsville multifamily real estate was meteoric in the two years before the pandemic and recession with the vacancy compressing to a new low in mid-2020.

With the influx of new supply, A-class vacancy has trended higher over the past few quarters as 5,000 units under construction have begun to deliver, trending to the highest rate since 2015. Despite Huntsville's elevated supply pipeline, the demand-side outlook remains strong and proves why we believe Huntsville is one of the best cities for multi family investing.

Economic Growth Driving Real Estate Demand

The Huntsville job market has bounced back quickly from the effects of the pandemic, and strong economic growth is helping support demand across all multifamily subclasses. Furthermore, owners have pushed rents aggressively in the face of Huntsville's current supply wave, and year-over-year rent growth of 5.5% is far above the metro's recent trend.

Strong demand and attractive pricing have drawn investors to Huntsville over the past several quarters. Transaction volume has increased since the onset of the pandemic, and out-of-state investors are driving the activity on the buyer side. Pricing continues to rise, but Huntsville assets can still be had at a significant discount to those in larger Southeastern metros such as Nashville and Atlanta.

Huntsville Rental Rate Trends

Landlords are pushing rents at a brisk pace, despite Huntsville's substantial supply pipeline. Year-over-year rent growth of 5.5% is above the market's five-year average of 5.9%. Impressively, recent rent gains come on the heels of resilience in the early months of the pandemic.

Unlike most markets nationwide, Huntsville's rent growth hardly slowed in 2020, highlighting the strengthening demand in the region, but may moderate in the coming quarters, especially in A-class as even more new supply come on line. However, owners should be able to retain some pricing power in the near term if recent demand trends persist. Average asking rents in Huntsville are well below the national average, but are among the most expensive in Alabama. This is expected given Huntsville's rise in educated population.

The city rose from #4 to #1 in just a decade and currently boasts the highest concentration of engineers in the U.S.  Asking rents are in line with those in nearby Birmingham and are well above those in Mobile and Montgomery. Top-of-the-line inventory in Huntsville also comes at a steep discount compared to high-end assets nationally. Huntsville's A-class product's asking rents are only $1,430/month, compared to the national benchmark of $2,100/month. Considering that median household incomes in Huntsville are right around the national average, the metro holds a significant affordability advantage compared to most markets nationwide. This could provide additional room for rent growth over the next several years.

Huntsville Multi Family Real Estate Construction Trends

Construction has increased in Huntsville over the past few years, as developers have zeroed in on the city due to its strong demographic growth and favorable long-term economic outlook. Roughly 5,000 units, or 14.8% of existing inventory, are under construction. Projects attract workers in Huntsville's technology-related, government, and R&D sectors. Mixed-use developments such as MidCity and Town Madison are attracting renters-by-choice who will pay more for a true live/work/play environment. 

Most developments consist of garden-style assets that ask relatively low rents compared to other Southeastern metros. Average asking rents on properties built since 2010 are about $1.45/SF, but a few properties are commanding asking rents close to $2/SF. Recently, there has been a focus on building mid-rises. Close to half of the units under construction are in mid-rises, up from less than 20% in 2010.

Huntsville Investment Real Estate Transaction Trends

Transaction volume surged in Huntsville since the coronavirus pandemic, and most is driven by out-of-state buyers. A record $550 million changed hands in 2020, and sales volume eclipsed $400 million in 2021. Since 2012, the Madison/Airport Submarket has accounted for roughly half of all multifamily real estate investment in Huntsville, thanks to its large concentration of recently built and renovated apartment buildings. This trend continued into 2021, as Ballpark Apartments at Town Madison traded for $77.25 million. Steadfast Apartment REIT paid over $280,000/unit less than a year after it was delivered.

Huntsville Multi Family Real Estate Portfolio Properties