Contrary to popular belief, not everyone seeking a better lifestyle moves to Atlanta or Houston. If you live in the Midwest, Columbus has become a prime destination, especially for young people. The metro has a reputation for being more modern, cosmopolitan, and affordable than its other Ohio peers like Cincinnati and Cleveland, and it is ranked in the top 30 in the U.S. News and World Report list of “most fun places to live in the United States.” It should come as no surprise, then, that according to a new Bank of America report, it tied with Austin for seeing the largest population growth on a percentage basis among major U.S. metropolitan areas during the last half of 2023.
Reliable in-migration, however, is just one of the reasons Columbus, the 14th largest city in the country, has become an attractive option for multifamily investors. Another reason is its thriving economy. Columbus is home to both the state capital and Ohio’s largest university, which together account for approximately 30% of its workforce and give its economy exceptional stability. Ohio State, for example, enrolls more students—66,500 of them—than the University of Texas at Austin and has a larger staff than any other college in the country. In addition, Fortune 500 companies like Cardinal Health, Nationwide Insurance, and American Electric Power have long been headquartered in the Columbus area, and the economy is highly diversified, with no single industry representing more than 18% of the workforce.
As a result, the Columbus economy does quite well—and does so dependably. According to the U.S. Bureau of Labor Statistics, unemployment has consistently been lower than the U.S. average, and it was ranked seventh in the nation for economic growth in 2023.
Yet a third reason for multifamily investors’ enthusiasm for Columbus is its scorching residential housing market. Zillow placed it third on its 2024 list of hottest markets, based on such considerations as speed at which homes are sold and expected appreciation. As a result, the housing affordability gap has soared, causing the homeownership rate in Columbus to fall eight percentage points below the state average. This disparity is intensifying the demand for apartments.
Resilient Fundamentals
Perhaps it’s that Midwest sensibility, but these advantages have not led Columbus’ multifamily developers to go overboard, at least compared to their colleagues in Sunbelt markets. Recent deliveries, though higher than in the past, did not represent an unprecedented wave of new supply but were an extension of a long history of sustained construction. Columbus saw approximately 8,300 units delivered in 2022 and 2023, growing the apartment stock by 4.7%, compared to an average of 5.3% for the rest of the country. There has been a concentration of deliveries in Downtown and the University District, but the majority of new units were located in such outer suburbs as Dublin, Gahanna, Grove City, and Reynoldsburg.
With robust demand, Columbus saw the absorption of many of these new units in 2023, and market fundamentals, though weakening slightly, remained strong. The vacancy rate reached 5.3% at the end of 2023, a modest increase of 70 basis points from 2021. Rent growth also moderated to 4.1% year-over-year at the end of 2023 to a more sustainable level, following a post-pandemic surge of 12.1% in mid-2022.
These favorable market fundamentals were the primary reason that, in the face of high interest rates and rising insurance costs, 2023 apartment sales held up as well as they did. Although transaction volume at the end of 2023 dropped 53% over the previous year, Columbus still outpaced the rest of the country, which saw an average decline of 60%.
Tech Is Set to Boom in Columbus
But there’s another reason that transactions didn’t slow as much in Columbus as elsewhere—and it’s one that augurs well for the market once interest rates start to fall. That’s Intel’s decision to invest more than $20 billion in the construction of two leading-edge chip factories. They are currently under construction at a 1,000-acre megasite in New Albany, an outer suburb northeast of Columbus in Licking County. This massive undertaking, requiring 7,000 construction workers, will bring 3,000 permanent jobs to the Columbus economy when they open in late 2026.
The follow-on effect is already well in evidence. Amazon, Google, and Microsoft have all declared their intention to build new data centers in the area or expand existing facilities. In 2023, Amazon Web Services announced plans to spend $7.8 billion to grow its data operations in central Ohio and purchased nearly 400 acres near the Intel site. Google has already completed a data center in New Albany and announced a $1.8 billion investment to create two more Columbus-area facilities, while Microsoft recently bought 500 acres of land in Licking County, including 200 acres in New Albany.
This tech boom has even begun to spill over to other industries. For instance, Columbus’ largest employer, financial services giant JPMorgan Chase, is building a new technology hub in northeast Columbus.
At the same, Columbus is showing no sign of losing its manufacturing base. Honda and LG Energy Solutions have already begun to ramp up hiring for their new electric vehicle battery plant in Jeffersonville, southeast of Columbus. The $4.4 billion facility will employ 2,200 workers when it opens in 2025.
The influx of billions of dollars and thousands of new jobs into the Columbus economy bodes well for the multifamily market. And while a substantial percentage of any new construction will likely occur in the outer suburbs, the entire city will benefit. New Albany, for instance, is just a 25-minute commute from downtown. Although inevitably there will be some bumps in the road, this dependable market for multifamily investors seems on the verge of accelerating.
