Multifamily rents in Huntsville, Alabama, are rising at one of the fastest paces in the nation. High-income renters have been lured to Huntsville due to its strong economic foundation, and a temporary reprieve from new construction has limited the options for renters and shifted the power back to landlords.

Rents across Huntsville have risen by 6.5 percent since January 2018. Only three cities in the country -- with at least 20,000 units of inventory -- are increasing rents at a faster pace than Huntsville: Reno, Nevada, Phoenix and Las Vegas. This is an impressive feat given that Huntsville has historically averaged minimal rent increases in a given year.

Several factors have contributed to this recent surge in multifamily asking rents. First and foremost, office-using employment growth has been notable. Huntsville is close to 20 percent above its prerecession peak for office-using employment, doubling the national rate over the same period. Companies such as Boeing, ADTRAN and Lockheed Martin have contributed to this uptick, which has helped incomes grow by the fastest pace in Alabama. In fact, households earning more than $100,000 have been driving the growth within the 24 to 34 year old cohort. This is one of the most important age groups when it comes to apartment demand, so this increase bodes well for high-end apartment stock in the city.

Landlords have taken notice of the growing population and rising incomes and have responded by increasing rents at a rapid pace. Despite already being the most expensive area in the city, downtown Huntsville has been one of the largest drivers of this rent growth. With an abundance of jobs, as well as easy access to retail and entertainment centers across the area, downtown Huntsville has generated interest from renters and has a vacancy rate near 3 percent, which is one of the lowest in the area. While the downtown area continues to grow in popularity, infrequent construction has limited rental options, allowing landlords to push rents considerably in 2018, which are up more than 10 percent on the year.

However, new construction will soon be taking off in the area, with several large mixed-use developments already under construction around the Huntsville metropolitan area. These projects are expected to add nearly 1,400 units by 2020 and have will attempt to extend the city-living feel into the suburbs. While these projects will almost certainly charge premium prices, they may limit rent growth for high-end properties by increasing competition.

Huntsville’s diverse economy, favorable demographic trends and relative affordability have all helped the city perform well over the past year. However, as rents continue to rise and new construction provides renters with more options, annual growth may begin to soften.

