Huntsville Multifamily Market Report

Huntsville, Alabama, known as “The Rocket City,” is one of the fastest-growing cities in the Southeast, with a diverse and expanding population. Driven by a thriving economy, robust job market, and high quality of life, Huntsville attracts a wide range of residents, from young professionals to retirees. Its mix of technology, defense, and manufacturing industries makes it a regional powerhouse, while its affordability and amenities continue to draw national attention. The market boasts an unemployment rate of 2.6%, well-below the 3.7% national average, and boasts an average annual growth rate of 2% over the last decade.

Accolades

• Bizinsure’s Gen Z IRL Tech Index ranked Huntsville #1 in Alabama for new grads looking to start their career in tech. Source: Huntsville Business Journal.
• The Huntsville metro area maintains a growing dynamic economy, outpacing the U.S. in both population and employment growth and rated by Moody’s as one of the top performing economies in the U.S. Source: ASmartPlace
• Huntsville ranks No. 15 for renters to live in 2024 in terms of costs of living, local economy, and quality of life. Source: RentCafe
• Huntsville maintains a spot on the U.S. News & World Report Best Places to Live, ranking No. 7 for 2024, No. 2 in 2023, and No. 1 in 2022. Source: WAAY31 ABC

Key Findings

Past 12-Months | Source: CoStar Group

• Over the last 12 months, net deliveries in Huntsville have totaled 6,176 units, more than triple the market’s historical yearly average.
• Submarkets with the highest demand over the last 12 months include Madison/Airport, Limestone County, and University/Research Park.
• Affordability is paramount in Huntsville. Rent for Class A properties average $1,430/month, 32% lower than the national average for 35% of the market’s recent supply.

By the Numbers

Past 12 -Months | Source: CoStar Group

• Units Delivered: 6,176 ↑ from Q3 2023
• Units Absorbed: 4,741 ↑ from Q3 2024
• Vacancy Rate: 18.2% ↓ from Q3 2024
• Rent Growth: -2.6% ↓ from Q3 2024
• Market Asking Rent per Unit: $1,260 ↓ from Q3 2024
• Units Under Construction: 3,126 ↓ from Q3 2024
• Cap Rate: 6.1% ↑ from Q3 2024

Huntsville Demographics

Past 12-Months | Source: CoStar Group

• Unemployment Rate: 2.6%
• Current Population: 534,752
• Households: 217,300
• Median Household Income: $86,028

Construction

In Huntsville, AL, a record amount of construction activity has saturated the multifamily market and spiked vacancy levels, despite strong demand. Vacancy has ticked down from a record high earlier this year, currently standing at 18.2%. Regardless, this rate remains far above the market’s 10-year average of 10.1%.

The high vacancies are not due to a lack of demand. Over the past year, Huntsville has seen net absorption of over 4,700 units and market deliveries of 6,300 units. These quantities are more than three times Huntsville’s historical annual average, as the market benefits from domestic migration and robust job growth.

As Huntsville’s vacancy rate has risen and interest rates have made financing new developments more challenging, construction starts have slowed. As a result, Huntsville’s construction pipeline has been shrinking, while construction starts have also slowed. There are now 3,100 units under construction, which has been slowly decreasing since the beginning of 2023.

Sales

Over the last year, Huntsville’s multifamily market has seen a total of $109 million in transactions.That amount is a fraction of the market’s 10-year average of $226 million, representing a decline of 51% in sales volume. In addition to the lower-than-average dollar volume over the past year, the number of units sold in Huntsville has decreased. Many multifamily sales in Huntsville are quite small. Over the previous year, the average transaction size in the Huntsville market was $4.1 million, with an average price of $140,000 per unit.

Concluding Statement

The outlook & fundamentals of the Huntsville market remain strong heading into 2025. Over the last 12 months, net deliveries in Huntsville have totaled 6,300 units, more than tripling the market’s historical yearly average. Madison/ Airport, Limestone County, and University/Research Park received the majority of this new inventory. Because of strong demand, the metro’s vacancy rate has declined since the all-time high it reached earlier this year—now standing at 18.2%. Class A properties & new developments have experienced sustained elevated vacancy rates due to the significant amount of competition. With slowing lease-up velocities, higher concessions, and stagnant rent growth, reaching stabilization has become more and more difficult.

Huntsville has had considerable housing expansion in recent years, with about 20,000 new single-family housing starts and over 15,000 multifamily units built in the prior five years. During this same period, population has increased by 14% with unemployment still standing below the national average. This increase in population has contributed to a tight real estate market. Owing to strong demand, the retail market’s availability rate is significantly lower than the national average.

As 2024 comes to a close, investors should remain optimistic moving into 2025.As starts continue to decline, and absorption rates remain high, it is anticipated that the gap between supply and demand will continue to narrow closer to equilibrium moving into late 2025 & 2026.