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Multifamily investors are looking anew at underserved midsize markets in the Willamette Valley.

In Salem and Corvallis, in particular, strong rent growth, low vacancy rates and growing populations are driving sales of multifamily properties and some sizable new development projects.

It’s a natural outgrowth of the long economic expansion, said Greg Frick, co-founder and partner of Portland brokerage聽HFO Investment Real Estate. Portland and Eugene saw waves of multifamily investment in recent years. Now, it’s smaller cities’ turn to attract capital.

鈥淚nvestment dollars are really trying to get down there,鈥� said Frick, who added that he frequently hears from investors interested in the mid-Willamette Valley.鈥� You’re just seeing capital looking for investments and having to expand their horizons.鈥�

Two major multifamily projects are under construction in Corvallis, where Oregon State University has driven growth. Enrollment at OSU reached 30,986 in fall 2018, up from 20,320 students a decade earlier.

Gilbane Development, based in Rhode Island, is building a 228-unit multifamily complex called Sierra next to the campus. The project is in a mixed-use industrial zone, and includes small storage structures to satisfy zoning requirements. The site, known as Washington Yards, was home to a feed store and a fruit company.

鈥淭hey had to have a minimum square footage of industrial use, which they satisfied with those (storage units),鈥� said Jared Voice, a senior planner with the city of Corvallis.

Construction of Sierra began recently.

Gilbane Development Director Andrew Ang said he was not authorized to speak on behalf of the company.

The other large project under construction in Corvallis is Witham Oaks from Corvue Holdings, a Chicago-based developer. The 292-unit complex is also student-focused; it’s scheduled to open in the fall, Voice said. Townhomes would follow in a second phase.

Otak Inc. of Portland designed the Witham Oaks master plan and also provided project management, civil engineering and landscape architecture services. The public improvements have been completed, and construction of the residential buildings is under way.

鈥淚t’s really going up quick,鈥� said Brian Fleener, Otak’s director of architecture.

Witham Oaks comprises 29 buildings. Units have four bedrooms each. Every bedroom has its own bathroom, but the four units share a kitchen and living room.

Corvue took over the development from Campus Crest after buying several of the latter company’s properties.

Corvue did not respond to messages seeking comment.

A proposal from a local group to build a 125-unit multifamily development in the Timberhill area of Northwest Corvallis has not moved forward.

Deals in Corvallis typically show strong occupancy rates and rent growth, but survey data on the city’s multifamily market is scarce, Frick said.

Corvallis has historically had a high barrier of entry for new construction, with annexations requiring voters’ approval since 1977, according to the Corvallis Gazette-Times. A state law limiting cities’ ability to vote on annexations was challenged by Corvallis and Philomath, and the Oregon Court of Appeals is expected to issue a ruling in the case in coming weeks.

In Salem, vacancy rates have hovered near 4 percent with 4 percent annual rent growth, according to Multifamily NW‘s fall 2018 report. The trade group for landlords will release its spring 2019 report on Monday.

Prices show some appetite for new multifamily product in Salem. A newly built 56-unit apartment building in Salem sold for $166,071 per unit last year. On average, Salem multifamily buildings sold for $95,426 per unit.

More supply is coming. Koz Development of Snohomish, Washington, plans to build a 146-unit multifamily project at 260 State St., a vacant lot in downtown Salem. The building will have small, affordable rental units targeted at 20-somethings.

The project is in the late stages of development, and the team is on track to break ground in late May or early June, said Cathy Reines, Koz’s president and CEO.

The project is backed by local capital investors in Salem, Reines said.

Koz had initially considered a small grocery store as a possible use for the building’s ground-floor retail space, but the developers are reconsidering that concept, Reines said. The average age of tenants in Koz buildings is 26.

鈥淎s we’ve talked to younger residents, they’re ordering their groceries online and having them delivered,鈥� Reines said. 鈥淲e’re starting to challenge ourselves whether a market makes sense given who we believe the resident will be.鈥�

Investors have taken notice of signs of life in downtown Salem, including projects to revitalize historic buildings and the pending purchase of the former Nordstrom building. The department store closed in April 2018.

鈥淚t just seems to be more vibrant than it has been historically,鈥� Frick said of Salem. 鈥淎nd I think you’re seeing that across the board with some of these tertiary markets.鈥�