Apartments file photo

While multifamily real estate investment in the U.S. begins to show stagnation, one study has found rental conditions in Fresno have made it the No. 1 market in the country for properties under $20 million.

In other parts of the country, a rush of apartment inventory has slowed rental growth. But in the Central Valley, tight apartment supply, low vacancy and room for rental growth have made opportunities for significant returns on investment, according to The Mogharebi Group’s Senior Vice President Robin Kane.

Population growth of 8.4% and activity in the logistics, tech and health care industries has driven a stable rent appreciation of 8.9%. Average monthly rent nationally is around $1,600, compared to Fresno’s average rent of $1,325.

Vacancy rates are are less than 2%, according to data from real estate site CoStar, which ranked Fresno the top multifamily market for property under $20 million for the second time in a row. Pricing for apartment complexes is also typically $100,000 less per unit in Fresno than the national average.

William Austin, a Sacramento-based director of market analytics at CoStar, stated in the CoStar article, “While rent growth is slowing nationally due to the influx of supply across the country, Fresno is still a relative exception to that. Fresno’s tight apartment supply has also kept vacancy rates low: Fresno has the lowest vacancy rate on our list at 1.8%.”

Most of the investors in properties below $20 million are private capital or high net-worth individuals as opposed institutional buyers, Kane said. Properties in that price range are typically found in secondary markets, where year-over-year rent growth has been better than other markets.

At the same time, another study has found the Fresno metro experienced the 11th highest increase in market rent, with smaller apartments driving up the market.

Using Consumer Price Index data, software company Construction Coverage found rents had increased an average of 33% from 2019 to 2023, ahead of the national 24.1% average. Studios and one bedrooms showed the most growth while two-bedroom and above apartments increased less so. Rental growth for studios topped 30% nationally while one-bedroom apartments topped 25%. Two-bedroom apartments were around 24% while three and four-bedroom apartments increased just over 20%.

Arizona and Nevada showed the biggest increases, exceeding 50% rental growth in some markets.