TTI Capital

Hot in the Market: Why Multifamily Developers Have Soared on the Sunbelt?

The migration trend towards the southern part of the United States dates back to the 1950s. Over the years, cities in the Sunbelt region have gained immense popularity as preferred destinations for immigrants due to their favorable climate, high standard of living, affordable cost of living, and low taxes.

The Sunbelt, also called the Smile States, witnessed a remarkable 30% surge in population between 1945 and 1975. By the mid-1970s, only four major cities in the country had recorded population growth, while the Sunbelt continued attracting people. This trend persisted through the 2020s, with the region again emerging as the top destination for Americans relocating in the last decade.

The pandemic accelerated the trend. People were liberated from the confines of their physical workplace and allowed to move anyplace in the nation. They overwhelmingly chose the Sunbelt, which led to a record-breaking influx of people into the area. Cities in the Sunbelt saw a substantial population increase in 2020 and 2021, and the region is home to all 10 of the country’s top growth markets. 

Why Have Multifamily Developers Soared on the Sunbelt?

Multifamily developers and owners have long flocked to the Sunbelt cities to make investments, attracted by the area’s rapidly expanding markets, firm foundations, and lax regulatory framework. But all that construction has taken a toll, and this year, Sunbelt regions are anticipated to see weaker flat rent increases than Gateway cities.

  • The end of the year will see a relatively modest 1.4% increase in rent in gateway markets. However, Sunbelt rent growth will only increase by 0.04%.
  • This decline in rent growth started in Q4, and investors reacted immediately. Sunbelt multifamily transaction volume decreased at year’s end in 2022 compared to the year’s beginning for the first time since 2015. “Investors are observing these cities, like Phoenix and Raleigh, and watching how their expectations for rent growth have been completely upended. The exits don’t appear promising either, and there is little rent growth.
  • This pattern will continue through 2024, but things will shift once more. Over the following two years, the Sunbelt will face challenges, but many of the elements that brought flat investors to the area will still be present in the long run. Just because investors are taking a break at the moment doesn’t mean it will last.
  • It’s crucial to comprehend precisely how quickly and furiously development has occurred in the Sunbelt to comprehend the region’s seesaw trajectory. “The amount of construction has been at an unprecedented level.
  • Currently, multifamily building makes up 7% of the overall inventory in the Sunbelt, compared to 4.4% in Gateway cities. Products under development as a proportion of total stock were 4.9% in the Sunbelt in 2019 compared to 4% in Gateway cities.
  • As more individuals moved to states like Florida and Arizona, the pandemic was one factor that caused the acceleration. However, other factors had been simmering for longer, explaining the rush to the Sunbelt.
  • One is that businesses and individuals can find lower costs in the South. The Sunbelt continues to be more affordable in terms of rent to income, notwithstanding the recent two years’ overall spike in rent growth.
  • The Sunbelt boasts some of the nation’s fastest-growing educated populations, and there have been several business expansions into the region, creating improved work prospects. However, those metros now have very different people.
  • There are fewer restrictions on construction in the Sunbelt because there are fewer zoning regulations.
  • The Sunbelt seemed poised to continue on this course until inflation crept in and hampered people’s ability to pay their rent. The issue? The Sunbelt developers wagered that robust growth and ongoing spending would maintain solid fundamentals. In the end, they were mistaken.
  • The Sunbelt’s cheap tax system, undoubtedly a big lure, is the one longer-term problem. However, developers will need services to help them with their initiatives if they grow, which could be challenging given the current tax structure.

The Sunbelt Retains the Top Multifamily Activity Position

Although the Sunbelt’s fundamentals are changing, the region still demonstrates strength. Despite what PwC refers to as a “normalizing” of market fundamentals, Sunbelt markets are ranked as the top cities for multifamily investment in 2023 by PWC and CBRE. 

The typical suspects from the Sunbelt have changed. Notably, Nashville, Dallas, and Atlanta are at the top of the list, while Phoenix, Raleigh, and Charlotte have all dropped to the bottom. Nevertheless, the Sunbelt is still the only US region with positive population growth, despite a slowdown in migratory trends over the past year.  

The fundamental shift, increasing interest rates, and an upheaval in the economy will undoubtedly limit investment volume in 2023. According to CBRE, 60% of investors nationwide intend to scale back their acquisition activities this year. Nevertheless, multifamily housing still needs to be supplied nationwide, giving developers a solid incentive to keep looking for possibilities. 

Florida, Texas, and California will supply 40% of the additional 4.3 million apartment units that the US would need to build by 2035 to meet demand, according to the National Apartment Association. 

Developers will have plenty of opportunities to build flat goods in Sunbelt areas due to the undersupply, rent increases, and ongoing inward movement of tenants, even if changing fundamentals require revisions to underwriting standards. 

To proactively pursue these development opportunities—and make them work—developers can use new technology to assist them in managing market headwinds and altering fundamentals. 

In Northspyre, automation and predictive analytics are used to automate administrative tasks, streamline workflows, and forecast market changes that could affect pricing and scheduling. 

More predictable outcomes, fewer budget overages, and fewer scheduling inaccuracies are the outcomes. This is an essential tool for developers to stay engaged and reduce emerging market dangers.


Long-term residents and investors alike have favored the Sunbelt as a place to settle down and look for investment opportunities. After a period of record growth, the fundamentals are changing, but the region is still experiencing high demand dynamics and a supply shortage. Nevertheless, there are still plenty of reasons for developers to be optimistic. By adapting to changing market conditions and staying ahead of the curve, developers can continue to thrive in this dynamic and competitive market.

About TTI Capital:

TTI Capital is a vertically integrated real estate investment company with a strategic focus on developing, identifying, buying, enhancing, managing, and profitably selling US multi-family and mixed-use properties in markets with strong economic, employment, and property growth, along with flat solid rental demand, in states with low tax rates.

We seek out exceptionally positioned properties where we can quickly and significantly improve cash flow and equity to offer attractive high yielding returns in markets supported by strong demographic and favorable economic trends.

We offer reliable, increasing payouts, excellent transparency, and the chance for capital growth, all underpinned by sound long-term fundamentals.

We combine financing, expertise, and experience with those of our Advisory Board partners for a higher success and return rate.

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