Demographics Favor Apartment Demand in Small Utah Market of Provo-Orem

Provo-Orem has been one of the nation’s fastest growing apartment markets recently. And all that new stock has taken its toll on market fundamentals. Yet, demand for apartments – buoyed by a rapidly growing population and steady job increases – reached a five-year high recently.

Provo-Orem, situated in the Utah Valley, borders Salt Lake City/Ogden/Clearfield to the north. Downtown Salt Lake City is a 45-minute drive from downtown Provo and a 40-minute drive from downtown Orem. The Provo-Orem apartment market, with roughly 28,500 apartment units, is about one-fifth the size of Salt Lake City/Ogden/Clearfield.

Provo-Orem is home to several large universities supplying a healthy dose of young adults in the renter pool and providing lots of jobs. Utah Valley University is the largest public university in the state of Utah with an enrollment of nearly 50,000 students. Brigham Young University (BYU), a private university operated by the Church of Jesus Christ of Latter-day Saints (LDS Church), has an enrollment of more than 35,000 students. Both those universities employ thousands of people in Provo-Orem. Utah Valley Hospital is another major employer in the area, with roughly 400 beds and employing more than 800 people. Other hospitals in the area include American Fork Hospital, Mountain View Hospital, Spanish Fork Hospital and Timpanogos Regional Hospital.

With major universities and health care establishments, it’s no surprise that Education/Health Services is the largest employment sector in Provo-Orem, accounting for 22% of the metro’s jobs. That’s a much larger share than the national average of 17%, based on data from the Bureau of Labor Statistics.

Other major industries in Provo that have a larger concentration of jobs than the U.S. overall include Mining/Logging/Construction (11% versus 6%) and Information (4% versus 2%).

Provo-Orem also has a large concentration of technology-related companies, including companies involved in software and biotech technologies. Among those companies are Adobe, Micro Focus, Oracle, Qualtrics, plus locally based companies Ancestry.com and Vivint Smart Home Security.

Provo-Orem-Lehi (Provo), with a population of roughly 732,200 people, is Utah’s second-most populous metropolitan area after Salt Lake City, according to U.S. Census Bureau data. Provo has a young population base. The 20 to 34-year-old cohort – a key demographic in apartment renter households – makes up 27.4% of Provo’s population. That is well above the U.S. average of 20.4% and the fourth largest nationally, behind College Station, Gainesville and Champaign-Urbana, all of which are also college towns. With such a young population base, Provo’s median age is a little more than 25 years, while the national average approaches 39 years.

From 2021 to 2022, Provo saw its share of 20- to 34-year-olds grow 5.4%. That was the second-fastest growth pace among the nation’s 150 largest apartment markets (behind Lakeland-Winter Haven, FL at 5.5%) and registered well above the national average of 1%. More recently, from 2022 to 2023, Provo’s overall population grew 2.4%, the seventh-fastest growth rate among the nation’s largest markets.

In addition to a large and rapidly growing population of young adults, Provo has a highly educated workforce. Roughly 42.5% of Provo’s population 25 years and older have a bachelor’s degree or higher, compared to the U.S. average of under 34.5%. As such, the median household income in Provo was more than $91,200, while the U.S. norm was roughly $75,100.

Unlike population growth, Provo’s job market has been a slow and steady performer in recent years but has shown some cooling in recent months. After achieving 3.2% job growth in July, the employment base expanded 1.4% in the year-ending September 2024, in line with the U.S. average (1.5%) which has remained below 2% throughout 2024, based on data from the Bureau of Labor Statistics. While the rate of increase is expected to slow across the U.S., it is expected to accelerate slightly in Provo. According to data from RealPage Market Analytics, Provo is expected to add jobs at the fastest rate among the nation’s 150 largest apartment markets, expanding its job base 1.8% in 2025, with the addition of roughly 5,900 jobs.

Looking at Provo’s apartment market, completions have soared over the past two years, with nearly 3,400 units coming online. About half of those units (1,705 units) came online in the year-ending 3rd quarter 2024, according to RealPage Market Analytics. Completions over the past year grew existing stock 6.4%, more than double the national norm (2.8%) and the 17th most rapid expansion pace among the nation’s 150 largest apartment markets. For perspective, Provo added an average of roughly 1,000 units annually over the past 10 years.

Spurred by population and job growth, demand has picked up in Provo. In the year-ending 3rd quarter 2024, demand in the market reached a five-year high of 1,577 units. While that volume fell short of concurrent supply, the gap between supply and demand is narrowing. It is worth mentioning that Provo has not seen notable net move-outs on an annual basis since 2010 and was one of only six markets nationwide to avoid net move-outs on a quarterly basis since 2021.

With so much new supply coming online, operators have turned to preserving occupancy. In turn, operators in Provo have cut rents on a year-over-year basis for the past 18 months. Prices came down 2% in the year-ending October, which was quite a change from rent hikes that were consistently in the double digits throughout much of 2021 and 2022. For comparison, during the five-years leading up the pandemic (2015-2019), rents increased an average of 3.3% annually in Provo. Monthly rent in Provo as of October averaged $1,538, slightly above the Salt Lake City’s average of $1,531.

Price cuts have helped occupancy gain some traction in recent months. As of October, occupancy in Provo registered at 94.8%. That rate matched the U.S. norm and was in line with the market’s five-year average of 94.9% from 2015 to 2019. Provo’s recent occupancy rate rose 180 basis points from the year-earlier rate, with that improvement ranking among the top 10 performances nationally.  

Underlying demographics will continue to benefit Provo once the current supply wave subsides. By the end of 2024, demand is expected to exceed new supply and that trend should continue throughout 2025.