foreign capital combines with resilient fundamentals to keep

Transcription

January 2016
Each Multi-Housing Pulse highlights the equity and debt markets that support transaction volume within the multi-housing industry as well as various
regions of the country. For this edition, Atlanta, Austin, Boston, Charlotte, Chicago, Dallas/Fort Worth, Denver, Houston, Los Angeles, Miami, Minneapolis,
New York, Northern New Jersey, Philadelphia, Portland, San Antonio, San Diego, San Francisco, Seattle, Tampa, and Washington D.C. are featured as
well as Affordable Housing, Student Housing and Seniors Housing.
FOREIGN CAPITAL COMBINES WITH RESILIENT FUNDAMENTALS TO KEEP CAP RATES LOW
Multi-housing landlords concluded 2015 enjoying an atmosphere of
opportunism. China’s economic deceleration, unrest in the Middle East,
weak commodity prices and a strengthening US dollar fueled investors’
sustained interest in US Treasuries, even as the Federal Reserve’s FOMC
telegraphed their intention and eventually gave rise to the Federal Funds
Rate before the end of the year. Balancing aversion to risk with demand
for higher yields, investors increasingly turned to commercial real estate
– and multi-housing assets in particular - for better risk adjusted returns.
biotechnology jobs. As a result, these secondary markets are experiencing
a tightening of capitalization rates. Raleigh/Durham benefitted from
$440 million of overseas investment in 2015 across eleven assets, an alltime high for foreign investment in terms of nominal investment. With
Congress’ improvement of FIRPTA allowing foreign-based pension funds
alleviated tax treatment for larger percentage interest in direct property
investment, the industry widely hopes cross-border capital flows will
continue to ascend.
Canadian investors have traditionally invested more capital annually
than their foreign counterparts and it is no surprise they led Real Capital
Analytics’ list of foreign funds. Preliminary estimates show overseas
capital invested in the US multi-housing space surpassed $16 billion
last year, with Canada accounting for more than $10.5 billion. The United
Kingdom, who invested over $800 million, ran a distant second place and
China registered third with $680 million. The past several years have
witnessed an explosive rise in capital flows into U.S. real estate from
abroad, including both institutional and high net worth investors, much of it
spurred by a desire to dollar-denominate and seek a haven from domestic
political and economic unrest.
The hunt for yield also led foreign investors to venture into riskier property
investments, especially multi-housing development deals, the leader
of the housing recovery. HFF capitalized $1.5 billion of multi-housing
development in 2015, underscoring our growing presence in the foreign
capital arena.
While the overwhelming majority of foreign capital was once solely
interested in gateway markets including Manhattan, Washington D.C. and
San Francisco, foreign investors broadened their appetite to “secondary”
locales in 2015, investing significant capital in Dallas ($1.04 billion), Atlanta
($725 million) and Phoenix ($490 billion). As buyers venture beyond coastal
markets, second tier cities have become a viable substitute, especially
if they offer urban centers and can attract high-paying technology and
Partially due to portfolio offerings, 2015 marked a record year for multihousing transaction volumes. Although growth in sales volume has begun
to decelerate since May, overall volume was still up 26% ahead of last
year’s 3Q (latest data available). While a wave of new construction hitting
many markets paired with rising debt costs may be to blame for this sudden
deceleration, escalating prices in primary markets such as New York, Los
Angeles, and San Francisco continue to push capitalization rates to new
cycle lows. Real Capital Analytics reports liquidity for the twelve months
ending September 2015 at $9.8 billion in Los Angeles, and nearly double that
amount in New York. Building momentum, the Dallas multi-housing market
unexpectedly outpaced gateway markets like Washington, D.C. and San
Francisco in terms of liquidity, corroborating the notion secondary markets
are increasingly in favor with investors. With many foreign investors eager
THE RETREAT AT PARK MEADOWS | Littleton, CO
Property Sale
HFF | 1
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HFF | 2
214.953.2242
to get large amounts of capital out the door, offshore capital can provide
an exit strategy for multifamily owners who have ardently built up a large
portfolio and find it draining to sell the portfolio gradually.
Despite the fact U.S. multi-housing prices have eclipsed their 2007 peaks,
capitalization rates remain higher than in other developed countries, driven
primarily by higher benchmark Treasury rates. However, capitalization
rates don’t merely depend on interest rates, but also required risk premia
and economic growth rate, which in the US is thought to have grown at an
annual rate of 2.2% last year. On December 16th, the Federal Open Market
Committee (FOMC) unanimously decided to raise their Fed Funds Target
Rate for the first time in nearly a decade. Many investors awaited the hike
nervously, concerned over the trajectory of capitalization rates. While
historically capitalization rates have decreased in periods of FOMC rate
hikes, this performance has been in milieu of a multi-decade compression
cycle for both USTs and capitalization rates. For example, the yield on the
10yr UST rose around 110 basis points from September 2003 to June 2007,
while capitalization rates on commercial real estate transactions dropped
roughly 150 basis points. As of 3Q 2015, Garden-asset capitalization rates
stood at a nationwide average of 4.78%, while Mid-Rise/High-Rise assets
registered 3.80%. As the below graph illustrates, by historical standards,
average capitalization rates are still significantly higher than the interest
rates available for financing, leaving ample room for interest rates to inch
higher without rattling the property markets.
the nation’s largest. Investors are anticipating household formation and
rental demand will expand in tandem alongside the labor market. This
unprecedented growth will test the ability to address the spiraling need
for housing units. Should the supply of rental properties fail to keep up,
younger people may end up competing for housing, with the burgeoning
population of Baby Boomer renters placing mounting pressure on rents for
all types of multi-housing assets.
Commercial real estate, and multi-housing assets in particular, are proving
the beneficiaries in an environment of increasing capital allocations and
demand for predictable and higher-yielding assets. Intermediaries such as
HFF can play a pivotal role in seizing opportunity and in bridging the gaps
between buyers and sellers.
Investors placing more weight on unlevered returns will of course be less
impacted should the Fed Funds Rate hike adversely impact capitalization
rates. And foreign investors will likely prove the most resilient in this
regard.
Proving equally buoyant, underwriting discipline of both equity and
debt remains vital to sustainability. Investors and lenders alike remain
scrupulous, structuring deals with greater vigilance. In light of this
measured approach, commercial real estate loans held by banks’ having
reached a record high in 2014 is cause for a sanguine outlook in the face
of whatever concerns investors may harbor.
Providing further runway to the sector’s recent performance, the multihousing sector appears to be in the midst of a generational shift. Aging
Baby Boomers, the arrival of the Millennials in the workforce and the
increasing desire of a “live, work, play” lifestyle in a bustling city center
are redefining this industry. The Urban Institute in Washington predicts the
number of renters who are 65 or older to reach 12.2 million by 2030, more
than double the level in 2010. Millennials, on the other hand, are prime
renters and, representing one-third of the nation’s working population, are
10yr UST
9%
PARK LA BREA | Los Angeles, CA
Fixed-rate Financing
All Multi-Housing
Garden
Mid-Rise/High-Rise
8%
7%
6%
5%
4.78%
4.50%
4%
3.80%
3%
2%
2.17%
1%
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Real Capital Analytics
HFF | 3
HFF OFFICE LOCATIONS
Portland
Boston
New York
Chicago
Pittsburgh
Florham Park
San Francisco
Philadelphia
Denver
Indianapolis
Washington, D.C.
Los Angeles
Carolinas
Orange County
Atlanta
San Diego
Dallas
Austin
Houston
Orlando
Tampa
Miami
CLASS B STILL RULES, BUT CLASS A RISING
Class B apartments continued to record the strongest performance among
the primary asset classes during the first three quarters of 2015, but rentgrowth rates in the Class A sector have soared in the past year to their
highest in at least three years.
Class A apartments in the U.S. rented for an average $1,763 per month in
September 2015 – some $84 higher than the September 2014 average and
by far the largest increase among the three asset classes. That translated
to an annual effective-rent-growth rate of 5.0% in September, compared
to 3.2% one year earlier.
The increase in Class A rent growth can be partially credited to upticks in
urban-core performance in many markets. (Urban-core submarkets have
the highest concentration of new supply, though suburban areas in total
may be receiving more total units).
Though most of these central-city submarkets have recently
underperformed the metro as a whole – with a notable exception being
Philadelphia’s Center City submarket, which has the highest effective
rent growth of any submarket in the metro – the difference in the
September 2015 rent-growth rate compared to that of September 2014
often exceeds that of the market as a whole. In other words, many urban
cores showed the largest rebounds in 2015.
Such a trend was found in Austin, Boston, Chicago, Los Angeles, Nashville,
New York, San Diego and Washington, D.C. among others. Even in Houston,
where oversupply is one of the primary reasons for a decrease in rentHFF | 4
growth rates last year, the urban-core Montrose/River Oaks submarket
recorded less of a rent-growth-rate decline than the entire metro.
For all the Class A strengthening, this asset class still performed below
Classes B and C, though the gap between A and C is narrowing. Class B
properties recorded 5.8% annual effective rent growth in September with
an average rent of $1,223 per month– some $440 below the average Class
A rent. And similar to the national market, Class B rent-growth rates have
been remarkably consistent from February through September, staying
within a 22-basis-point range in those eight months.
Class C rent-growth rates decreased in the third quarter, ending at 5.2%
in September off an average monthly rent of $871. While Class B performs
the strongest in most metros throughout the nation, Class C dominates
in Texas, among other metros. Class A paces Oakland, Sacramento, Fort
Lauderdale and several smaller markets.
Occupancy was 95.5% in Class A and B properties in September, and
95.0% among Class C units, meaning not many units are available for rent.
As more Class A units are built with rents more than $500 above the Class
B average and almost $900 higher than the Class C average, the outlook
seems bright for all asset classes. Since classification is a function of
comparative rent – Class A comprises the 20% of all properties with the
highest rent, Class C the lowest 20% and Class B everything in between
– the addition of new units could push some older properties into lower
classes, increasing rents for all.
CONSISTENT STRENGTH MARKS 2015 APARTMENT MARKET THROUGH THIRD QUARTER
The consistent strength of the national apartment market so far in 2015
has not been seen since 2006, as solid job gains for most of the year and
decreasing affordability of single-family homes has maintained annual
effective rent growth at 5% or higher and apartment occupancy rates
above 95%.
If 2014 was “The Year of the Apartment Market,” as Axiometrics, the
source of the data in this edition of “Pulse,” described it, then 2015 was
“The Year of the Apartment Market II.”
While 2014 saw rapid increases in the rate of annual effective rent
growth (up 185 basis points from year-end 2013), 2015 was the model of
high-level consistency. Rent growth, 5.3% in the third quarter, remained
within a 22-basis-point (bps) range during the first three quarters, and the
three-quarter streak of 5.0% or higher rent growth is the longest at that
level since a four-quarter string from the fourth quarter of 2005 through the
third quarter of 2006.
U.S Annual Effective Rent Growth
and Occupancy
Occupancy
Effective Rent Growth
6.0%
95.5%
5.0%
95.0%
94.5%
4.0%
94.0%
3.0%
93.5%
2.0%
93.0%
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
92.0%
1Q11
0.0%
4Q10
92.5%
3Q10
1.0%
Source: Axiometrics Inc.
Third-quarter annual effective rent growth was the highest since the
aforementioned third quarter of 2006, while the July-September period’s
quarter-over-quarter effective rent growth of 1.7% was the highest thirdquarter figure since 2010, which was just 3 bps higher. The last time thirdquarter quarterly rent growth was higher was in 2005.
Quarterly rent growth in each of 2015’s first three quarters was above the
figures for the corresponding quarter of 2014. The metric has outperformed
the previous year for seven straight quarters. As usual, the second quarter
of 2015 was the strongest, recording 2.7% quarterly effective rent growth.
Higher Rent, Higher Occupancy, Fewer Concessions
QUARTERLY EFFECTIVE RENT GROWTH
Quarter
First
Second
Third
Fourth
2012
2013
2014
2015
0.61%
2.25%
1.30%
-0.55%
0.42%
2.11%
1.19%
-0.92%
0.54%
2.66%
1.66%
-0.28%
0.87%
2.74%
1.74%
One reason effective rent levels have increased is that the value of
concessions offered by landlords has decreased drastically over the past
six quarters. In the third quarter, concessions were 0.5% of asking rent –
with 8.3% equivalent to one month’s free rent on a 12-month lease.
The average value of these concessions were $5.98 per month
(almost $72 per year), or about 2 days of free rent.
The third quarter’s concession value was the lowest since Axiometrics began
reporting the metric for all apartments in the third quarter of 2002. The table
below shows the monthly concession value, percentage of asking rent,
and average asking rent in the third quarter of post-Great Recession years.
The average asking rent has increased by $262 since the third quarter of
Year (3Q)
2015
2014
2013
2012
2011
2010
Concession
Value
$5.98
$8.40
$12.71
$20.14
$30.25
$48.13
% of Asking
Rent
Average Asking
Rent
0.5%
0.7%
1.1%
1.9%
2.9%
4.9%
$1,254
$1,177
$1,123
$1,075
$1,030
$992
2010, while concession value decreased $42.15 per month. So, landlords
and property owners are pocketing an additional $300-plus per month for
the average unit nationally.
And, they are able to do that because of the occupancy rate and demand
for apartments nationwide. Apartments nationwide were 95.3% occupied
in the third quarter, the highest rate since the first quarter of 2001 and the
highest third-quarter rate since 2000. Axiometrics considers a market or
property “essentially full” at 95% occupancy, and less than five units were
available for every 100 on the market in the third quarter.
That creates a landlord’s market, since demand for apartments is increasing.
As a note, the concession statistics are only based on stabilized properties.
New properties often offer incentives such as one month free prior
to stabilization.
More Jobs Create More Apartment Demand
Axiometrics has found an 86% correlation between job gains and
apartment demand, and the number of jobs being added to the
economy – 2.71 million during the 12 months ended September 2015,
according to the U.S. Bureau of Labor Statistics’ initial estimates for
September – means more people are looking for apartments. Though the
number of jobs added per month moderated during the third quarter, it
hasn’t been enough to affect apartment demand.
About 34,081 more apartments were absorbed on an annual basis in the
third quarter of 2015 than new units that came to market, according to
Axiometrics’ Supply/Demand Model. Though the balance is forecast to
tilt toward equilibrium during the last part of the year, the fact remains
that there aren’t yet enough new apartments to accommodate those
who want them.
Occupancy remains high and effective-rent-growth rates have been at
near-record high rates for a near-record length of time, because demand
is increasing – even though a post-recession high number of units have
were identified for delivery last year.
Some 187,713 new apartment units came to market during the first three
quarters of 2015, with another 83,736 identified to be delivered in the fourth
quarter and 269,265 identified for 2016 delivery.
If all those are delivered and no more are added for 2016 completion,
almost 760,000 new units will have come to market in 2014-2016.
A lot of this new supply is catch-up from the recession and immediate
post-recession period, when hardly any new units were built.
HFF | 5
CAPITALIZATION RATE FORECAST
City
Class A
Class B
Class C
Atlanta
Austin
Bay Area - Urban
Bay Area - Suburban
Birmingham
Boston
Charlotte
Chicago - Urban
Chicago - Suburban
Charleston, SC
Columbus
Dallas - Urban
Dallas - Suburban
Denver
Greenville
Houston - Urban
Houston - Suburban
Indianapolis
Jacksonville
Kansas City
Los Angeles - Urban
Los Angeles - Suburban
Louisville
Minneapolis
Nashville
New Jersey - Northern
New Jersey - Southern
New York - Long Island
New York - Outer Boroughs
New York - Westchester
New York City
Orange County
Orlando
Philadelphia-Urban
Philadelphia-Suburban
Phoenix
Pittsburgh
Portland - Urban
Portland - Suburban
Raleigh
San Antonio
San Diego
Seattle - Urban
Seattle - Suburban
South Florida - Broward
4.25% - 4.75%
4.50% - 5.75%
3.50% - 4.00%
4.00% - 4.50%
4.75% - 5.00%
4.00% - 4.50%
4.25% - 5.00%
4.25% - 4.75%
4.75% - 5.50%
4.50% - 5.00%
5.50% - 6.00%
4.25% - 4.75%
4.75% - 5.50%
4.50% - 5.25%
4.75% - 5.25%
4.50% - 5.00%
5.50% - 6.00%
5.50% - 6.25%
5.25% - 5.75%
5.25% - 6.00%
4.00% - 4.50%
4.25% - 5.00%
5.25% - 6.00%
4.75% - 5.50%
4.25% - 5.00%
4.25% - 5.00%
5.00% - 5.75%
4.75% - 5.25%
4.00% - 4.50%
4.75% - 5.25%
3.50% - 4.00%
4.00% - 4.25%
5.00% - 5.50%
4.75% - 5.25%
5.00% - 5.50%
4.50% - 5.00%
6.00% - 6.50%
4.00% - 4.50%
4.50% - 5.00%
4.25% - 5.00%
4.50% - 5.50%
3.75% - 4.25%
3.75% - 4.50%
4.25% - 4.75%
4.25% - 5.25%
4.75% - 6.00%
5.00% - 7.00%
4.00% - 5.00%
4.75% - 5.25%
5.00% - 6.50%
4.75% - 5.50%
5.00% - 6.25%
4.50% - 5.00%
5.50% - 6.50%
5.00% - 6.00%
6.00% - 7.00%
5.00% - 6.00%
5.00% - 6.50%
5.25% - 5.75%
5.25% - 6.00%
5.25% - 6.00%
5.75% - 7.00%
6.25% - 7.00%
6.00% - 6.50%
5.75% - 6.50%
4.75% - 5.25%
5.00% - 5.50%
5.75% - 6.50%
5.50% - 6.50%
4.75% - 6.00%
5.00% - 6.00%
6.00% - 7.00%
5.50% - 6.25%
5.00% - 5.50%
5.50% - 6.25%
4.50% - 5.00%
4.00% - 4.50%
5.50% - 6.00%
5.50% - 6.50%
5.75% - 6.25%
5.00% - 6.00%
6.75% - 7.25%
4.50% - 5.25%
5.00% - 5.75%
5.00% - 6.25%
5.00% - 6.00%
4.25% - 5.00%
4.50% - 5.25%
4.75% - 5.50%
5.50% - 6.50%
6.00% - 7.00%
6.00% +
5.00% - 5.50%
5.50% - 6.00%
6.50% - 7.00% +
6.00% - 7.00%
6.25% - 7.00% +
5.50% - 6.50%
6.75% - 7.50%
6.00% - 7.00% +
7.00% +
6.00% +
6.50% +
5.50% - 6.00%
6.00% - 7.00% +
6.00% - 7.00%
7.25% +
7.00% +
7.00% +
7.00% +
5.50% - 6.00%
5.75% - 6.00%
7.00% +
6.50% - 7.25%
6.00% - 7.00%
6.50% - 7.25%
7.25% - 8.00%
6.50% - 7.25%
6.00% - 6.50%
6.50% - 7.25%
5.50% - 6.00%
5.00% - 5.50%
6.50% +
6.50% - 7.00%
6.75% - 7.25%
6.00% - 7.00%
7.50%+
5.25% +
5.75% +
6.25% - 7.00%
6.50% +
5.00% - 6.00%
5.25% +
5.50% +
6.50% +
South Florida - Miami
South Florida - Palm Beach
St. Louis
Tallahassee
Tampa
Washington D.C. - Urban
Washington D.C. - Suburban
4.00% - 5.25%
4.50% - 5.00%
5.25% - 6.00%
6.00% - 6.50%
4.75% - 5.25%
4.25% - 4.75%
4.75% - 5.50%
5.50% - 6.50%
5.75% - 6.50%
5.75% - 6.75%
6.50% - 7.25%
5.50% - 6.00%
4.75% - 5.75%
5.00% - 6.00%
6.50% +
7.50% +
7.00% +
7.50% +
6.50% +
6.00% +
6.00% +
HFF | 6
THE CORDELIA | Portland, OR
Property Sale
THE MARKE AT SOUTH COAST METRO | Santa Ana, CA
WINDERMERE CAY| Winter Garden, FL
A recent study by Axiometrics’ real-estate economists found that had the
recession not occurred and multi-housing construction starts remained
at the average level recorded from 1995-2008, about 562,000 more units
would have been built from 2009-2013 than actually were built during that
time frame.
Even some Midwestern metros, such as St. Louis and Detroit, have seen
healthy rent-growth rate increases, though Chicago, Kansas City and
Indianapolis were down.
The construction boom of 2014-2015 has reduced that shortfall by 12%
to date. If starts maintain their 2015 level, the shortfall will be made
up in 2024.
Metro Division
Whether the demand will merit that number of units, in addition to those
that would be built anyway in the next nine years, remains to be seen as
fluctuations in job growth, population shifts and home-buying rates will
affect demand and construction.
The top 25 markets for annual effective rent growth in September were:
Annual Effective Rent Growth Sept. 2015
Portland-Vancouver-Hillsboro, OR-WA
14.31%
Oakland-Hayward-Berkeley, CA
13.03%
San Francisco-Redwood City-South San Francisco, CA
11.30%
Sacramento-Roseville-Arden-Arcade, CA
9.95%
San Jose-Sunnyvale-Santa Clara, CA
9.33%
Higher Home Prices Also Boost Apartment Market
Denver-Aurora-Lakewood, CO
8.79%
Meanwhile, the homeownership rate was 63.4% in the second quarter,
the lowest since 1968. Though the propensity to rent is as strong as
ever – credit is still tight for mortgages, though loosening a bit; the
millennial generation is still marrying and having children later in life;
student debt is a big issue; and aging baby boomers are downsizing from
homes to apartments – rising home prices also are a major factor in the
decision to buy or rent.
Orlando-Kissimmee-Sanford, FL
8.42%
San Diego-Carlsbad, CA
8.41%
Seattle-Bellevue-Everett, WA
8.03%
Riverside-San Bernardino-Ontario, CA
7.70%
Phoenix-Mesa-Scottsdale, AZ
7.39%
As strong as rent growth has been for apartments during the past
year, home prices have risen at an even faster pace. The median home
price was $229,400 in the second quarter of 2015, according to the
National Association of Realtors, an 8.7% increase over the median for
the second quarter of 2014. Meanwhile, median household income
increased by 3.0%, though falling mortgage interest rates helped
potential home buyers.
West Palm Beach-Boca Raton-Delray Beach, FL
7.18%
Los Angeles-Long Beach-Glendale, CA
7.13%
Charleston-North Charleston, SC
6.84%
Nashville-Davidson-Murfreesboro-Franklin, TN
6.74%
Charlotte-Concord-Gastonia, NC-SC
6.59%
Tampa-St. Petersburg-Clearwater, FL
6.58%
Fort Worth-Arlington, TX
6.54%
Jacksonville, FL
6.38%
Atlanta-Sandy Springs-Roswell, GA
6.35%
Las Vegas-Henderson-Paradise, NV
6.30%
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
6.16%
Dallas-Plano-Irving, TX
6.12%
Raleigh, NC
5.97%
Salt Lake City, UT
5.96%
Widespread Strength
The Western third of the nation continued to dominate the apartment
market in the third quarter of 2015. But marked increases in fundamental
metrics in parts of the nation that have strengthened over the
year – especially the Northeast – were major factors in the national
market’s performance during the third quarter and the year so far.
The West contributed 11 of the top 15 metro areas with the highest
rent-growth rates among Axiometrics top 50 markets, based on number of
units, in September 2015. Seven of those 11 were in California. Northern
California swept spots 2-5, even though their growth rates have moderated
a little bit from their unsustainable peaks earlier this year.
Portland, OR was the story of the third quarter, as the Northwestern metro
area surpassed Oakland as the No. 1 rent-growth market. Its 14.3% annual
effective rent growth in September was almost 2 and half times the rate of
September 2014. Oakland remained No. 2.
In Conclusion
With annual effective rent growth forecasted to have ended the
year at 5.0% and occupancy forecasted to have finished at 95.1%, the
2015 apartment market shapes up to be the second straight year of
surprising strength.
Florida also remained strong in the third quarter, though the metros leading
the state’s apartment fundamentals have mostly changed. A year ago,
South Florida was the second-hottest area in the nation behind the San
Francisco Bay Area. But this September, Orlando, Tampa and Jacksonville
all were among the nation’s top 20 rent-growth markets, joining South
Florida’s West Palm Beach.
Apartment properties are attractive investments, as indicated by the number
of deals made so far this year on both large-portfolio and one-off basis.
The value of these deals will almost certainly surpass the $112 billion
worth of transactions in 2014, according to Real Capital Analytics.
Though most of the Northeast’s markets are underperforming the national
rate, their rent-growth rates have significantly increased over the
past 12 months. Boston led the way at 5.7%, with Philadelphia at 4.3%,
New York at 4.2%, Baltimore at 3.0% and Washington, D.C. – emerging
from the depths – at 2.1%. Jobs have found their way back to this portion
of the country, and new supply is minimal in the region, except for
New York and Washington D.C.
Though rent-growth and occupancy rates are predicted to moderate in
2016 – to 3.8% and 94.6%, respectively – those rates are still above the
long-term average for both metrics. Through 2018, rent growth is expected
to average 3.7% and occupancy 94.9%, even with hundreds of thousands
of new units being delivered. The current apartment growth cycle has
been in place for five years, one year longer than the previous cycle.
It doesn’t look like it’s going to end any time soon.
HFF | 7
AFFORDABLE HOUSING
Investment in Low-Income Housing Tax Credit (“LIHTC”) communities
remains strong as investors continue to recognize the ability to diversify
their portfolios while achieving attractive yields. One of the major benefits
of owning a LIHTC community is the generation of stable cash flow,
sheltered from surrounding market volatility. The gap between maximum
allowable rents under the LIHTC program and rents charged at comparable,
market-rate properties generates consistently high occupancies and
attractive risk adjusted returns throughout the given hold of a LIHTC asset.
HFF is currently in the process of completing the sale of a 32 property,
8,948-unit LIHTC portfolio that garnered considerable interest from
a diversified buyer pool. In addition to the nation’s largest affordable
housing owners, the portfolio saw institutional intrigue from investors
with unique sources of capital including pension fund advisors,
university endowments, foreign family offices, mortgage REITs, and real
estate fund managers. Despite having minimal (or no) prior affordable
housing experience, these institutional owners and advisors pursued the
Portfolio with earnest due to, among other characteristics, the offering’s
relatively risk free cash flow, superior risk adjusted return profile and
large equity requirement.
The Portfolio benefitted from the market trends below which combined
to create a distinctive offering unique to the affordable housing sector,
yielding high-watermark pricing for the asset class:
• Significant Rental Spread
• Low Cost of Capital
• Attractive Risk Adjusted Returns
• Large Equity Deployment
Significant Rental Spread
The spread between maximum allowable rents under the LIHTC program
and rents charged at comparable, market-rate properties allows for
consistently high occupancies and stable rental revenue throughout
the given hold of a LIHTC community. America’s economy has surged
out of the recession, experiencing significant job growth, wage gains
and GDP growth. Intuitively, gains in area median income (AMI) would
be expected as families across the country benefit from a growing and
healthy economy, but the resurgence has yet to take hold in HUD’s annual
AMI calculations. The spread has also widened further due to rapid
market-rate rent growth, minimizing the volatility of revenue streams
at LIHTC communities. As illustrated in Exhibit 1, effective rents nationwide
have increased 37% since 2009, while maximum LIHTC rents have only
increased 3% over the same time period. As of the third quarter, the
current spread exceeds $330 and value appreciation has been seen as
investors adjust their return requirements downwards to more accurately
reflect the risk profile of the asset class.
Low Cost of Capital
Despite recent gains, the 10 yr UST continues to trade well below its
50-year average. Since 1961, the 10 yr UST has averaged 6.47%.
As of this writing 10-year treasuries closed at 2.25%, more than 400 basis
points below historical levels. While interest rates remain comparatively
muted, affordable housing investors who typically focus on levered
cash-on-cash yields are able to generate attractive returns at elevated
pricing thresholds. Cap rate compression across the affordable housing
space has been seen as quality sponsors are able to source debt
at attractive terms.
Exhibit 1
Spread Between Max LIHTC Rents and Market-Rate Effective Rents
$1,300
$1,200
$1,100
$1,000
$900
$800
$700
$600
2004
2005
2006
2007
Average Effective Rent - USA
2008
2009
2010
2011
2012
2013
2014
2015
2 Bedroom 60% AMI Max LIHTC Rent - USA
Sources: U.S. Department of Housing and Urban Development, Axiometrics Inc.
HFF | 8
Attractive Risk Adjusted Returns
Well located LIHTC communities in markets with significant
rental spreads offer attractive risk adjusted returns, generating
value-add yields, while operations reflect that of a core plus asset
class. In many cases LIHTC communities experience lower vacancy
and turnover than comparable market-rate product, but can be
acquired at discounted pricing that is well below replacement costs.
Furthermore, the asset class produces returns heavily weighted
towards current cash flow with limited downside risk, creating an
ideal investment vehicle for institutional investors who have been
priced out of other product types and are on the “hunt for yield.”
As demonstrated in Exhibit 2, the cap rate premium for top
quartile assets has increased to nearly 100 basis points, up from
approximately 60 basis points at the turn of the century. Accordingly,
many institutional investors have migrated up the risk curve seeking out
higher returns in secondary markets and alternative asset classes such
as affordable housing.
Premium For Top Quartile Deals Is Growing
Exhibit 2
Average & Top Quartile Cap Rates, Spread
Average Cap Rate
110
Top Quartile Cap Rate
9%
100
8%
90
7%
80
6%
70
5%
60
4%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
50
Spread Between Average & Top Quartile (bps)
Capitalization Rates (%)
10%
Source: Real Capital Analytics, as of September 30, 2015
Large Equity Deployment
Billions
Commercial real estate allocations and assets under management (AUM)
among institutions have notably increased during the current cycle as
commercial real estate continues to gain acceptance as a distinct asset
class. Real estate was recently bifurcated from “financials” by S&P and
MSCI after a review of the Global Industry Classification Standard and,
beginning August 2016, real estate will officially stand as its own sector
on the S&P index. Additionally, real estate has significantly outperformed
other investment vehicles over the past 15 years. Over the past year
alone, the NCREIF and REIT indexes returned a total yield of 13% and 10%,
while corporate bonds and the S&P 500 yielded total returns
of -1.3% and 11.2%, respectively.
As real estate allocations have increased, fund managers and institutions
have “struggled” to keep pace. Based on 2014 allocations, institutions
invested approximately 90 basis points less in real estate than they
would have preferred. Despite this, institutions increased real estate
allocation targets by 20 basis points in 2015 and total dry powder
reached an all-time high of $137 billion as of September 2015
(Exhibit 3). As a result, institutions are eager to deploy large buckets of
capital, especially into programmatic portfolio offerings that require
significant equity investments.
Total Dry Powder Now Highest All-Time
Dry Powder Raised
$160
Exhibit 3
$137
$140
$120
$106
$100
$80
$86
2007
2008
$93
$101
$89
$78
$70
$56
$60
$40
$84
$95
$37
$25
$26
2002
2003
$20
$-
2004
2005
2006
2009
2010
2011
2012
2013
2014
Oct-15
Source: Prequin
HFF | 9
2016 MULTI-HOUSING DEBT OUTLOOK
In 2015, where most were anxiously awaiting what decision the Fed would
make on interest rates, the year ended with the true volatility coming from
increasing spreads. The 10 year treasury closed 2015 at 2.31%, which was
only a 12 bps increase year-over-year and currently sits at 2.13%, showing
virtually no change. On the other hand, spreads increased on full leverage
deals by around 50-75 bps, depending on leverage and type of transaction.
All of this had zero effect on lending volumes however, as every lender
group either reached or exceeded volume goals for the year.
2016 brings a new year of continued volatility outside the real estate
umbrella both domestically and internationally, as well as an election year
in the United States. Lending appetite for all lenders is projected at or
above all previous 2015 levels. 2016 starts the beginning with a significant
amount of debt rolling over from 10 year maturities placed between
2006-2008 warranting a significant amount of refinance volume. This,
accompanied by a very active acquisition market, looks for lenders to be
very active in the first half of the year.
GSE’s are still the dominant force, but look for ups and
downs throughout year
Capital consumers continued to look at the GSE’s as the primary source of
financing for multi-housing properties throughout 2015 and will continue
into 2016. The cap requirements set into effect at the end of 2015 by the
FHFA were $30 billion each for FNMA and Freddie Mac. Fannie Mae finished
the 2015 calendar year with $42 billion in volume compared to Freddie Mac
with $47 billion. Assuming the same uncapped percentages in 2016, look
for both groups to hover around the $50 billion in 2016 volume. The biggest
question for 2015 however, will be how well both groups manage their
respective pipelines in order to avoid the volatile swings of lending appetite
that was witnessed in 2015. Both groups are rumored to have upwards of $15
billion in 2016 pipeline rollover business, which is a large chunk of first quarter
2016 volume.
CMBS: Crowded Volatile Room
On any particular day, you will find around 46 different CMBS groups
actively originating CMBS loans for securitization. This is up significantly
year-over-year and has resulted in hyper competition for CMBS loans. Total
2015 U.S. CMBS volume was $101 billion over all product types, marking a
7.3% increase over the prior year. Volatility has crept back into the space
over the past 3 months and anticipated to continue as AAA spreads have
widened from a low of 80 bps all the way out to 145 bps since mid-2015.
The b-piece investor field has also impacted spreads with fewer groups
playing in this space today.
the 135-175 range for their primary business placing all in rates at 3.353.85% today. Floor rates will continue to be in play if the ten year treasury
drops below 2.0% as CIO’s are focused on all in coupon returns achieved
compared to alternative investments. The other ask that is common at
the beginning of the year and mostly available are forwards through year
end, which have been more common of late to address later in the year
maturities locking in today’s coupon. For the right type of business we
continue to see life companies get more aggressive than the market on
prepayment flexibility, spread and ability to rate lock at application.
Banks: Aggressively pursuing the right business
2015 was a year where banks absorbed the new Basel III regulations and
learned how to interpret the new HVCRE (high volatility commercial real
estate) regulations put in place. We found a variety of interpretations used
and different banks had different solutions in dealing with this. However,
several overall themes were consistent here. 1. The cost of construction
debt increased. Whether it was passed on directly to the consumer
is a case by case basis. 2. The largest impact on developers was the
requirement of 15% cash equity in transactions. This impacted developers
who had significant equity gains in land that typically contribute this as
equity on transactions.
Banks have thus targeted “less risky” multi-housing opportunities of
late and have done so very aggressively. Spreads are 140-200 over the
applicable index and Borrowers are also able to obtain financing for
renovation work in addition to their initial advance rate. Continued health
in the regional bank space has prompted additional options for local
markets as well as foreign bank interest providing aggressive coupons.
Look for banks to continue to aggressively seek business throughout 2016
and also be mindful of 30 Day LIBOR, which is at 0.42% today versus 0.16%
45 days ago.
More of the same in 2016
Borrowers are prudent to address financing needs early in 2016. With the
onset of the 2006 CMBS maturities and also a large balance of carryover
pipeline with the GSE’s, look for the first part of the year to be an active
time for financings. The good news is there is more debt capital available
than any other part of this cycle and will continue to provide a wide market
of options for consumers of capital across the board. As is typical with
any year, the onset of competition and start of the year conferences in our
industry bring aggressive behaviors with all lenders, so being in a position
to take advantage of this is key.
The ten-year swap rate is currently hovering around 2.0%, which puts
all-in rates at 4.60% for ten-year fixed rate loans today. We anticipate
similar volume or more as rollovers of existing CMBS loans will continue
to increase over the next two years. Overall, continued demand for quality
underwritten CMBS product is anticipated, which will benefit Borrowers
and spreads well into 2015.
Insurance Companies: Earlier is better
Like in 2015, insurance companies will come out of the gates hard and fast
in 2016. The majority of these groups look to tie up commitments with the
first half of the year. That being said, the majority of these groups have as
much or higher volume targets than 2015, and will therefore likely remain
active throughout 2016 to reach these goals. There has been a continued
appetite by some reaching for yield to look at higher leverage as well as
equity opportunities and this will continue. Currently, life companies offer
the cheapest long term fixed rate option in the market, with spreads in
HFF | 10
THE Q | San Diego, CA
TELLUS
Arlington, VA
HFF | 11
Quarterly Vol.
HISTORICAL TRANSACTION VOLUMES ($MIL)
Year
T12 Vol.
Qtr. Vol.
Avg. Cap
2007
$2,293.08
$609.41
6.61%
$2,691.87
$709.78
6.51%
$2,625.19
$493.40
6.57%
$2,332.89
$520.30
6.81%
$2,151.41
$427.93
6.91%
$2,680.05
$1,238.42
7.22%
$2,511.49
$324.84
7.09%
$2,143.83
$152.65
7.19%
$1,877.84
$161.93
7.49%
$779.87
$140.45
7.26%
$513.14
$58.11
7.60%
$507.20
$146.71
7.37%
$568.17
$222.91
6.91%
$606.69
$178.96
7.29%
$955.70
$407.13
7.12%
$1,635.84
$826.84
7.05%
$1,969.46
$556.53
7.09%
$2,260.76
$470.26
6.92%
$2,226.30
$372.67
7.02%
$2,392.13
$992.67
6.69%
$2,190.65
$355.06
6.60%
$2,121.15
$400.76
6.56%
$3,069.11
$1,320.63
6.43%
$3,970.27
$1,893.83
6.64%
$4,330.74
$715.53
6.69%
$4,331.56
$401.58
6.65%
$3,810.41
$799.48
6.77%
$3,266.37
$1,349.78
6.63%
$3,078.26
$527.42
6.57%
$3,146.47
$469.78
6.65%
$3,455.61
$1,108.62
6.34%
$3,152.02
$1,046.19
6.26%
$4,070.76
$1,446.17
6.16%
$4,691.22
$1,090.24
6.11%
$4,419.57
$836.96
6.11%
$4,000
$3,500
Volume ($MM)
HISTORICAL MARKET TRENDS
$4,500
2008
$3,000
$2,500
$2,000
2009
$1,500
$1,000
$500
$0
2010
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$4,500
$4,000
2012
$3,500
$3,000
Volume ($MM)
REAL-TIME SNAPSHOT
STUDENT HOUSING
Rolling 12-mo. Total
$5,000
2013
$2,500
$2,000
$1,500
2014
$1,000
$500
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
US Acq # Props Global Acq # Props
1
American Campus Communities Austin, TX
$423.73
9
$4,745.57
2
Scion Group
Chicago, IL
$385.33
14
$894.98
3
Starwood Capital Group
Greenwich, CT
$293.25
11
$28,810.86
4
Campus Advantage
Austin, TX
$282.68
9
$709.38
23
5
Harrison Street RE Capital
Chicago, IL
$268.44
6
$3,260.97
135
6
EdR
Memphis, TN
$245.80
5
$1,662.31
61
7
Candlebrook Properties
New York, NY
$219.57
5
$2,070.49
175
8
Lubert-Adler
Philadelphia, PA
$219.57
5
$4,352.70
304
9
Principal Financial
Des Moines, IA
$209.86
6
$12,998.60
326
10
Vesper Holdings
New York, NY
$194.80
7
$373.60
16
Location
Top Sellers
Rank Buyer
190
35
1,370
MARKET PERFORMANCE ($MIL)
1
American Campus Communities Austin, TX
$571.75
25
$1,178.52
49
2
Harrison Street RE Capital
Chicago, IL
$280.89
6
$1,073.06
50
3
Landmark Properties
Athens, GA
$240.64
4
$515.34
10
4
Jeff Sutton
New York, NY
$222.73
2
$774.54
19
5
Harel Insurance Invts
Tel Aviv, Israel
$222.73
2
$1,032.29
16
6
SL Green
New York, NY
$222.73
2
$10,612.78
126
7
Tristate Equities
New York, NY
$222.73
2
$347.04
7
8
Trinitas Ventures
Lafayette, IN
$219.57
5
$260.57
7
9
Blue Vista Capital
Chicago, IL
$208.68
5
$942.83
45
10
ASB Capital
Bethesda, MD
$192.52
5
$1,496.07
39
HFF | 12
The Student Housing sector continues to build momentum crowing enviable
liquidity as trailing twelve month volumes have well eclipsed $4 billion.
During the first three quarters of 2015, private investors accounted for 48%
of all acquisitions while also remaining active on the sell side. Institutions
accounted for 36% of the buyer pool, 800 bps above the national average.
Foreign capital remains muted in this property sector, with Canadians
being the only country actively investing with significance. Barriers to
entry resulted in few supply additions to the market and therefore pent-up
demand began to aggregate. Demographic and economic trends point to
continued growth in this niche sector.
Sources: Real Capital Analytics, HFF Research
actual
Volume
# Trades
Units
$/unit
Avg. Cap
chg vs prior
T12 Vol.
$4,419.57
28%
Q3 '15
$836.96
-23%
T12 Vol.
174
-4%
Q3 '15
34
-24%
T12 Vol.
30,678
13%
Q3 '15
5,582
-29%
T12 Vol.
$145,380.66
1%
Q3 '15
$164,599.11
12%
T12 Vol.
6.11%
-23
Q3 '15
6.22%
-13
Quarterly Vol.
2007
$25,000
$20,000
Volume ($MM)
Year
2008
$15,000
2009
$10,000
$5,000
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$20,000
$18,000
2012
$14,000
Volume ($MM)
REAL-TIME SNAPSHOT
$16,000
$12,000
2013
$10,000
$8,000
$6,000
2014
$4,000
$2,000
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
1
Northstar Healthcare
Englewood, CO
$3,637.12
299
$3,676.62
300
2
Brookdale Senior Living
Brentwood, TN
$3,589.10
244
$5,166.13
362
3
NorthStar Realty Finance
New York, NY
$3,137.44
177
$14,775.49
762
4
Omega Healthcare Investors
Cockeysville, MD
$2,431.76
413
$4,377.19
675
5
Welltower
Toledo, OH
$2,193.52
98
$16,906.56
927
6
HCP Inc
Irvine, CA
$1,964.44
57
$20,499.79
1,066
7
Ventas
Chicago, IL
$1,708.54
75
$19,614.21
1,024
8
CNL Financial Group
Orlando, FL
$1,380.26
56
$10,825.55
425
9
Newcastle
New York, NY
$1,299.29
66
$1,777.15
99
10
New Senior Investment Group New York, NY
$1,273.05
58
$1,273.05
58
Top Sellers
Rank Buyer
T12 Vol.
Qtr. Vol.
Avg. Cap
$14,180.96
$7,331.73
11.24%
$15,131.03
$1,351.84
10.74%
$15,720.07
$1,694.46
10.98%
$11,064.94
$686.91
7.20%
$5,308.34
$1,575.13
7.97%
$4,905.03
$948.53
8.68%
$3,751.99
$541.42
8.66%
$3,572.78
$507.70
8.72%
$2,559.28
$561.63
9.09%
$2,105.86
$495.12
9.39%
$1,781.70
$217.25
9.53%
$3,045.53
$1,771.53
10.21%
$2,798.39
$314.49
9.95%
$3,862.12
$1,558.85
9.77%
$6,103.43
$2,458.56
9.65%
$6,368.42
$2,036.53
9.40%
$11,265.91
$5,211.97
9.15%
$20,659.34
$10,952.28
9.07%
$27,347.72
$9,146.93
9.11%
$27,684.28
$2,373.09
8.87%
$23,687.72
$1,215.42
8.65%
$14,498.64
$1,763.20
8.56%
$8,099.73
$2,748.02
8.28%
$11,894.57
$6,167.93
8.26%
$12,063.20
$1,384.05
8.49%
$12,024.31
$1,724.31
8.03%
$13,953.69
$4,677.41
7.90%
$12,527.12
$4,741.35
7.66%
$13,593.00
$2,449.93
7.56%
$15,447.57
$3,578.88
7.61%
$18,736.09
$7,965.93
7.53%
$18,403.16
$4,408.42
7.42%
$20,452.17
$4,498.93
7.72%
$24,997.29
$8,124.00
7.97%
$20,077.47
$3,046.11
7.96%
Trailing twelve month volumes are approximately $20 billion in the Seniors
Housing sector. Price per unit has risen as new deliveries take the highest
share of sales. Listed REITs accounted for 60% of all acquisitions during
the first three quarters of the year. Private investors were net sellers in
this time period. The aging population paired with housing preferences
and needs are creating an attractive outlook from both domestic and
international investors. Expect an increased participation from an array
of foreign equity sources, particularly from Asian capital, who have have
injected over $110 million into the sector over the past 24 months.
Location
1
Fortress
New York, NY
$3,600.42
159
$17,715.99
1,008
2
Emeritus
Seattle, WA
$2,431.65
194
$4,736.05
351
3
Aviv REIT
Chicago, IL
$1,740.34
333
$1,772.54
354
4
G-A Healthcare REIT II
Newport Beach, CA
$1,249.82
65
$3,998.75
245
5
ARC Healthcare Trust
New York, NY
$1,185.49
47
$2,564.81
115
6
Chartwell Retirement Residences Mississauga, Canada $1,115.40
43
$1,797.62
77
7
Formation Capital
Atlanta, GA
$1,083.25
81
$1,284.76
103
8
Safanad
Geneva, Switzerland
$1,012.00
80
$1,012.00
80
9
Welltower
Toledo, OH
$971.37
50
$2,840.80
197
10
Brookdale Senior Living
Brentwood, TN
$943.24
21
$1,022.48
29
actual
Volume
# Trades
Units
$/unit
Avg. Cap
chg vs prior
T12 Vol.
$20,077.47
7%
Q3 '15
$3,046.11
-63%
T12 Vol.
1,627
23%
Q3 '15
202
-75%
T12 Vol.
169,269
24%
Q3 '15
21,593
-73%
T12 Vol.
$121,904.62
7%
Q3 '15
$128,590.90
-13%
T12 Vol.
7.96%
43
Q3 '15
7.59%
-75
HFF | 13
SENIORS HOUSING
$30,000
ATLANTA, GEORGIA
Occupancy
Forecast
Long-Term Average
96%
95%
OCCUPANCY
94%
93%
92%
91%
90%
89%
88%
2009
2010
Occupancy and Absorption
Atlanta apartments were 94.8% occupied in the third quarter of 2015, 140 basis
points above the long-term average of 93.4%. Atlanta is expected to have finished
2015 at 94.5% occupancy. In 2016, occupancy is expected to moderate to 94.1%
but remain above 94% throughout the forecast period (2016-2018).
Absorption has outpaced new supply since 2012 because of the great job growth
Atlanta has experienced. As of the third quarter, Atlanta absorbed 9,997 units,
leaving a deficit of supply of nearly 3,000 units. Through the end of 2015, absorption
is expected to have increased to 11,372 units and average 9,366 units per year
over the next three years.
2016
2017
2018
Forecast
Rent/Unit/Mo.
$1,000
$800
$600
2009
2010
2011
2012
2013
2014
Forecast
2015
2016
2017
2018
Long-Term Average
8%
6%
YoY Change (%)
ANNUAL RENTAL RATE GROWTH
$0
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Completions Net Absorption Completion Forecast Net Absorption Forecast
14,000
12,000
10,000
Units
Most of the new supply was delivered into the Buckhead, Midtown and
Downtown submarkets, in which 4,770 units are expected to deliver, according
to Axiometrics’ identified supply. Over the next three years, new supply will
average 9,552 units per year, peaking in 2016 with 12,488 units. Though new supply
continues to increase, currently delivery totals remain below the pre-recession
average of 11,668 units per year.
2015
$200
COMPLETIONS & NET ABSORPTION
After recovering later than most major U.S. metros, apartment construction in
Atlanta has been gaining momentum. More than 7,000 units have been delivered
to the Atlanta market, as of third quarter of 2015. Atlanta is expected to have
finished the year with 9,640 new units, roughly 1,000 more units than 2014.
2014
$400
Atlanta was among the top markets for job gain during the third quarter of 2015,
adding more than 76,000 jobs (3.0% annual growth). Atlanta is expected to have
finished 2015 among the top three markets for job gain, adding about 83,700 jobs,
a 3.3% increase over 2014. Looking forward, job gain is expected to moderate to
76,115 jobs in 2016 and average 63,500 jobs per year through 2018.
Development
2013
$1,200
RENTAL RATES
Atlanta is ranked fourth in the number of Fortune 500 companies headquartered
within the city. These companies include The Coca-Cola Company, Home
Depot, UPS and Delta Airlines, and they, along with many more, have produced
phenomenal job growth recently.
2012
Effective Rental Rates
$1,400
Overview
2011
8,000
6,000
4,000
2,000
0
2009 2010 2011 2012 2013 2014
2015 2016 2017 2018
HFF | 14
Job Gain (000) Population Gain (000) Job Gain Forecast Population Forecast
250
200
YoY Change (%)
Atlanta has had strong rent growth, despite the increase of new supply. Annual
effective rent growth was 6.9% in the third quarter, beating the non-recessionary
average of 2.9%, with full-year growth expected to be right around the thirdquarter mark. Looking forward, rent growth is expected to moderate, averaging
3.9% over the next three years.
EMPLOYMENT & POPULATION TOTALS
Rental Rates
150
100
50
0
-50
-100
-150
2009 2010 2011 2012 2013 2014
2015 2016 2017 2018
Source: Axiometrics
Quarterly Vol.
$8,000
Year
T12 Vol.
Qtr. Vol.
2007
$4,209.05
$772.02
6.62%
$3,917.25
$960.20
6.36%
$4,104.10
$1,277.09
6.36%
$4,482.60
$1,473.29
6.31%
$4,100.26
$389.68
6.11%
$3,776.20
$636.14
6.30%
$2,958.23
$459.13
6.30%
$1,816.24
$331.29
6.42%
$1,474.60
$48.04
6.54%
$2,000
$950.44
$111.98
6.72%
$797.26
$305.95
7.32%
$1,000
$638.45
$172.48
7.40%
$718.26
$127.85
7.58%
$779.83
$173.55
7.39%
$806.79
$332.91
7.14%
$1,167.23
$532.92
6.99%
$1,279.27
$239.89
6.68%
$1,879.64
$773.91
6.75%
$2,128.39
$581.67
6.82%
$2,137.27
$541.80
6.67%
$2,517.36
$619.98
6.72%
$2,680.13
$936.69
6.50%
$2,934.94
$836.48
6.38%
$3,370.04
$976.90
6.28%
$3,594.90
$844.84
6.18%
$3,580.41
$922.20
6.37%
$3,714.94
$971.00
6.48%
$3,887.38
$1,149.35
6.77%
$4,231.46
$1,188.91
6.82%
$4,056.27
$747.01
6.95%
$4,569.69
$1,484.43
6.82%
$5,918.68
$2,498.33
6.69%
$6,534.72
$1,804.95
6.72%
$6,817.74
$1,030.03
6.63%
$7,092.14
$1,758.82
6.64%
$6,000
$5,000
Volume ($MM)
$7,000
2008
$4,000
$3,000
2009
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$7,000
2012
$5,000
Volume ($MM)
REAL-TIME SNAPSHOT
$6,000
$4,000
2013
$3,000
2014
$2,000
$1,000
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
ATL Acq # Props Global Acq # Props
1
Clarion Partners
New York, NY
$310.23
8
$27,415.19
1,080
2
Carroll Organization
Atlanta, GA
$307.13
9
$2,213.58
60
3
Radco Cos
Atlanta, GA
$305.70
14
$1,010.85
50
4
CWS Capital Partners
Newport Beach, CA
$281.83
5
$2,488.91
82
5
Cortland Partners
Atlanta, GA
$255.56
5
$2,323.13
84
6
Resource America
Philadelphia, PA
$234.06
7
$2,026.77
114
7
Strata Equity Group
San Diego, CA
$233.00
4
$1,542.58
44
8
TriBridge Residential
Atlanta, GA
$230.00
6
$2,001.04
71
9
Cocke Finkelstein
Atlanta, GA
$225.73
11
$628.46
50
10
Bridge Investment Group
Salt Lake City, UT
$222.68
10
$3,189.59
152
Top Sellers
Rank Buyer
Avg. Cap
Atlanta’s Business Chronicle described its apartment market as
“smoking hot” earlier last year. With rents rising in its Buckhead and
Midtown markets, demand has spilled over into suburban locales. Private
investors made up 53% of all acquisitions in the first nine months of 2015,
while the less active Institutions made up 30%, who were more interested
in selling. During the first three quarters of 2015, foreign firms together
invested a whopping $650 million. Fundamentals remain strong across
the board despite rising housing and business costs. It’s central location
in the Southwest coupled with its economic leader status make the area
attractive to relocating and expanding businesses.
Location
ATL Acq # Props Global Acq # Props
1
Worthing Companies
Atlanta, GA
$402.12
7
$1,234.74
37
2
Gables Residential
Atlanta, GA
$310.23
8
$5,178.01
121
3
The Connor Group
Dayton, OH
$303.36
9
$1,643.99
71
4
Pollack Shores RE Group
Atlanta, GA
$299.10
6
$578.85
12
5
GE Capital
Norwalk, CT
$277.58
6
$56,242.32
3,402
6
Morgan Stanley
New York, NY
$254.98
5
$68,884.75
1,641
7
Centennial Holding Co
Atlanta, GA
$210.16
6
$877.32
8
Orion Residential
Deerfield, IL
$207.00
3
$1,041.42
37
9
Wilkinson RE Advisors
Atlanta, GA
$178.56
6
$556.91
34
10
Harbor Group Int'l
Norfolk, VA
$176.00
4
$4,172.34
147
26
actual
Volume
chg vs prior
T12 Vol.
$7,092.14
55%
Q3 ‘15
$1,758.82
71%
T12 Vol.
276
24%
Q3 '15
67
16%
T12 Vol.
73,296
26%
Q3 '15
17,319
35%
$/unit
T12 Vol.
$97,066.34
19%
Q3 '15
$98,658.59
Avg. Cap
T12 Vol.
6.64%
-17
Q3 '15
6.47%
-38
# Trades
Units
20%
HFF | 15
AUSTIN, TEXAS
Occupancy
96%
Forecast
Long-Term Average
OCCUPANCY
95%
94%
93%
92%
91%
90%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$1,400
2015
Development
Austin was one of the first markets to receive new apartment supply after the
recession. The market has seen a consistent amount of supply delivered each
year from 2013-2015, approximately 10,000 new units per year. A high percentage
of the new supply has been delivered into the Central submarket, which
encompasses Downtown Austin. According to Axiometrics’ identified supply, the
Central submarket received about 1,050 units in 2015, and an additional 1,100 units
in 2016. Austin’s new supply is expected to moderate over the next three years,
averaging 5,994 units per year, nearly half of what the market has seen in recent
years.
Rent/Unit/Mo.
$1,000
$800
$600
$400
$200
$0
2009
2010
2011
2012
2013
2014
2015
Forecast
10%
Long-Term Average
8%
6%
YoY Change (%)
The population growth was a result of phenomenal job growth. Austin’s high
concentration of government, technology and education sectors have fueled job
growth averaging 3.9% over the past four years. Austin employers added 30,633
jobs (3.3% growth) over the four quarters ending the third quarter of 2015. Job
growth is forecast to moderate over the next three years, but remain healthy,
averaging 2.7% annually.
The Austin apartment market was among the first to recover after the recession.
Tremendous population growth of 12.5% during the past four years, compared to
the national average of 3.1%, has fueled demand for housing in the market.
RENTAL RATES
$1,200
Overview
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Rental Rates
Despite the large amount of new supply, annual rent growth was 5.2% as of the
third quarter of 2015, outpacing its historical average of 1.6%. Austin is expected
to have finished 2015 with an annual rent growth of 4.7%. Through the forecast,
annual rent growth is expected to moderate to 3.6% in 2017 and pick back up to
5.1% in 2018.
HFF | 16
12,000
10,000
Units
8,000
6,000
4,000
2,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
100
80
YoY Change (%)
Absorption has been fairly even with supply over the last two years, after three
years of absorption outpacing supply. About 3,000 units were absorbed in the third
quarter, outpacing new supply by nearly 1,000 units. Absorption is expected to
average close to 6,000 units per year in 2016-2018.
Occupancy remained above 95% during the third quarter of 2015, outperforming
its historical average of 93.9%. Austin is expected to have finished 2015 at 95.2%
occupancy. Occupancy is expected to moderate to 94.7% in 2016, but average
95.0% over the next three years.
60
40
20
0
-20
-40
2009
2010
2011
2012
2013
2014
2015 2016 2017 2018
Source: Axiometrics
Quarterly Vol.
$3,500
T12 Vol.
Qtr. Vol.
2007
$1,600.51
$337.83
6.14%
$1,632.44
$201.44
6.07%
$1,401.87
$328.08
5.92%
$1,377.38
$510.04
6.07%
$1,347.52
$307.97
6.57%
$1,368.92
$222.84
7.10%
$1,598.38
$557.54
7.28%
$1,241.35
$153.00
0.00%
$960.77
$27.40
0.00%
$769.94
$32.00
0.00%
$354.16
$141.76
0.00%
$265.66
$64.50
0.00%
$308.43
$70.18
0.00%
$394.68
$118.25
7.29%
$539.59
$286.67
6.61%
$588.08
$112.98
6.41%
$625.64
$107.74
6.39%
$653.05
$145.65
6.25%
$587.07
$220.69
5.98%
$2,500
Volume ($MM)
$3,000
Year
2008
$2,000
$1,500
2009
$1,000
$500
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$3,000
2012
$2,000
Volume ($MM)
REAL-TIME SNAPSHOT
$2,500
2013
$1,500
$1,000
2014
$500
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
AUS Acq # Props Global Acq # Props
1
Clarion Partners
New York, NY
$197.08
5
$27,415.19
2
Northland
Newton, MA
$169.65
2
$1,715.81
1,080
63
3
Starlight Investments
Etobicoke, Canada
$163.55
4
$3,076.79
199
4
Weinstein Properties
Glen Allen, VA
$142.10
3
$976.53
5
Blackstone
New York, NY
$135.79
4
$191,599.69
6
MIG Real Estate
Newport Beach, CA
$120.45
3
$1,364.63
7
Griffis Group
Denver, CO
$118.75
3
$1,179.18
45
8
Intercontinental RE
Boston, MA
$118.30
3
$4,044.43
115
33
6,868
65
9
Heitman
Chicago, IL
$114.50
2
$12,705.34
298
10
Nimes Capital
Los Angeles, CA
$109.10
4
$336.37
10
Top Sellers
Rank Buyer
Avg. Cap
$979.96
$505.87
5.92%
$1,131.36
$259.15
5.83%
$1,438.01
$452.30
5.85%
$2,201.00
$983.68
5.97%
$2,600.18
$905.05
5.91%
$2,589.44
$248.41
5.96%
$2,471.02
$333.88
6.02%
$2,017.57
$530.23
5.93%
$1,843.89
$731.37
6.29%
$2,099.81
$504.34
6.25%
$2,329.88
$563.95
6.04%
$2,213.91
$414.26
6.13%
$2,225.03
$742.48
6.00%
$2,750.08
$1,029.39
5.99%
$2,843.95
$657.83
5.81%
$3,070.63
$640.93
5.84%
Austin’s multi-housing market is enjoying record liquidity as it gains favor
with investors. During the first three quarters of 2015, private investors
accounted for 61% of all acquisitions. Listed REITs were net sellers
during this time period. While permits for new multi-housing units are
approaching the most in 30 years, Austin’s multi-housing market remains
stable thanks to its strong fundamentals. High-tech employment is up by
one-third over the past five years, triple the national increase and a trend
that will propel the area over the coming years. The aggressive increase in
house prices has left affordability much lower than in other parts of Texas.
Demand for multi-housing units has therefore accommodated the
heightened levels of deliveries.
Location
AUS Acq # Props Global Acq # Props
1
Gables Residential
Atlanta, GA
$278.58
7
$5,178.01
121
2
Investors Management
Sherman Oaks, CA
$251.35
3
$1,183.64
60
3
Greystar RE Partners
Charleston, SC
$181.42
5
$3,346.12
90
4
McDowell Properties
San Francisco, CA
$155.07
8
$1,294.97
61
5
Ares Management
Los Angeles, CA
$142.17
7
$7,553.04
1,044
6
Abacus Capital Group
New York, NY
$126.12
3
$629.38
19
7
Hamilton Zanze & Co
San Francisco, CA
$105.73
2
$788.53
34
8
Carlyle Group
Washington, D.C.
$105.00
3
$36,421.78
1,029
9
Principal Financial
Des Moines, IA
$104.50
1
$12,333.17
378
10
Riverside Resources Corp
Austin, TX
$104.50
1
$270.70
7
Volume
# Trades
Units
actual
chg vs prior
T12 Vol.
$3,070.63
39%
Q3 '15
$640.93
-3%
T12 Vol.
113
3%
Q3 '15
23
-21%
T12 Vol.
26,652
Q3 '15
5,831
3%
6%
$/unit
T12 Vol.
$121,107.56
2%
Q3 '15
$115,495.25
-16%
Avg. Cap
T12 Vol.
5.84%
-30
Q3 '15
0.00%
0
HFF | 17
BOSTON, MASSACHUSETTS
Occupancy
Forecast
Long-Term Average
97%
96%
OCCUPANCY
96%
95%
95%
94%
94%
93%
93%
92%
92%
2009
2010
2013
2014
2015
2016
2017
2018
Forecast
Rent/Unit/Mo.
$2,500
RENTAL RATES
Boston employers added close to 59,000 jobs annually in the third quarter of 2015,
and are expected to have finished 2015 with nearly 44,000 jobs added, compared to
2014’s 39,600 added jobs. According to Bureau of Labor Statistics, the Professional
& Business and Education & Health Services sectors each added approximately
14,000 jobs to the economy over the past year. Boston’s job growth is expected to
remain healthy through the forecast, averaging 1.7% growth (46,000 jobs per year)
from 2016-2018.
2012
$3,000
Overview
2011
$2,000
$1,500
$1,000
$500
$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Rental Rates
Boston’s annual effective rent growth was 4.7% in the third quarter, outperforming
the long-term average of 3.1%. By the end of 2015, Boston’s effective rent level
was expected to rise to $2,215 per unit, an increase of 4.3% over 2014. Looking
ahead, annual effective rent growth is expected to average 4.3% from 2016-2018.
HFF | 18
Long-Term Average
YoY Change (%)
6%
4%
2%
0%
-2%
-4%
-6%
-8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
12,000
10,000
8,000
Units
Absorption outpaced new supply in 2014 and is expected to continue to do so
through 2016. Boston has absorbed 9,460 units as of the third quarter and is
outpacing new supply by roughly 3,000 units. Historically, Boston absorbs 2,900
units annually, but will average 5,700 units annually over the next three years,
most of which will be new supply.
Occupancy has remained strong, reaching 96.2% in the third quarter, meaning the
market is absorbing the new supply well. Boston’s high demand for apartments
means occupancy is not expected to drop below 95% through the forecast.
Forecast
8%
6,000
4,000
2,000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
80
60
YoY Change (%)
A total of 6,395 units were delivered this year, as of the third quarter of 2015. Last
year, Boston is expected to have delivered about 8,300 units of which 1,529 units
are targeted for the Central City submarket, according to Axiometrics’ identified
supply. New supply is expected to moderate to more historical levels by 2018.
Development
40
20
0
-20
-40
-60
-80
-100
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$3,500
T12 Vol.
Qtr. Vol.
2007
$1,706.60
$604.46
6.20%
$1,773.11
$258.92
6.23%
$2,500
Volume ($MM)
$3,000
Year
2008
$2,000
$1,500
2009
$1,000
$500
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$2,500
2012
Volume ($MM)
REAL-TIME SNAPSHOT
$2,000
$1,500
2013
$1,000
2014
$500
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
BOS Acq # Props Global Acq # Props
1
Lone Star
Dallas, TX
$597.08
10
$28,971.26
1,566
2
AEW Capital
Boston, MA
$207.72
1
$33,564.90
1,768
3
Prudential RE Investors
Madison, NJ
$197.00
1
$43,844.86
1,152
4
Blackstone
New York, NY
$190.80
4
$191,599.69
6,868
5
DSF Advisors
Waltham, MA
$172.00
2
$852.97
15
6
Bell Partners
Greensboro, NC
$154.16
3
$6,248.03
264
7
Akelius Fastigheter AB
Danderyd, Sweden
$150.00
1
$5,387.73
678
8
ASB Capital
Bethesda, MD
$147.00
3
$3,372.16
91
9
National Development
Newton, MA
$147.00
3
$1,211.95
45
10
Mesirow Financial
Chicago, IL
$145.00
1
$2,107.61
36
Top Sellers
Rank Buyer
Avg. Cap
$1,848.59
$653.42
6.60%
$3,054.87
$1,538.08
6.71%
$2,556.00
$105.58
7.33%
$2,455.34
$158.27
7.03%
$1,910.18
$108.26
6.26%
$556.87
$184.77
5.83%
$460.21
$8.91
5.51%
$321.95
$20.02
5.71%
$285.86
$72.17
6.27%
$338.01
$236.91
6.48%
$334.42
$5.33
6.86%
$405.71
$91.31
6.40%
$539.70
$206.16
6.48%
$720.68
$417.89
6.43%
$972.24
$256.89
6.13%
$1,331.69
$450.76
6.12%
$1,374.02
$248.49
6.03%
$1,470.04
$513.91
5.86%
$1,426.73
$213.58
5.83%
$1,529.70
$553.73
5.71%
$2,044.87
$763.66
5.59%
$1,990.34
$459.38
5.37%
$2,769.93
$993.17
5.28%
$2,570.52
$354.32
5.59%
$2,148.41
$341.55
5.50%
$2,276.00
$586.96
5.68%
$1,486.96
$204.13
5.98%
$1,685.81
$553.17
5.62%
$1,700.35
$356.10
5.10%
$1,523.04
$409.64
5.07%
$2,249.43
$930.52
4.95%
$2,338.43
$642.17
4.90%
$2,642.46
$660.12
5.10%
Boston’s trailing twelve month volumes are racing towards 2007 levels.
Private investors accounted for 36% of all acquisitions in the first nine
months of 2015, more than three times the share of listed REITs, who were
net sellers in this time period. Institutions have shown a larger appetite than
the national average of 28%, representing 43% of the buyer pool. Boston
remains popular among young adults, who are often lured by its transit
and pedestrian-oriented lifestyle. Boston’s total nonfarm employment
has surpassed its pre-recession peak and continues to expand steadily.
Healthcare, high tech and financial services are the main drivers of the
economy and bring very educated, high-wage earners to the local multihousing market.
Location
BOS Acq # Props Global Acq # Props
1
Home Properties
Rochester, NY
$644.83
11
$10,666.45
238
2
Wood Partners
Marietta, GA
$238.20
5
$3,976.93
95
3
AvalonBay
Arlington, VA
$208.88
5
$7,273.52
125
4
CC&F
Boston, MA
$207.72
1
$528.24
14
5
Gables Residential
Atlanta, GA
$200.56
3
$5,178.01
121
6
Canyon Partners
Los Angeles, CA
$197.00
1
$2,713.24
51
7
Praedium Group
New York, NY
$190.80
4
$6,554.34
491
8
TGM Associates
New York, NY
$152.25
3
$1,705.45
61
9
Lincoln Property Co
Dallas, TX
$150.00
1
$9,305.96
273
10
Mount Vernon Co
Boston, MA
$147.00
3
$201.72
11
Volume
actual
chg vs prior
T12 Vol.
$2,642.46
55%
Q3 '15
$660.12
3%
# Trades
T12 Vol.
Q3 '15
20
-5%
Units
T12 Vol.
10,794
19%
2,158
-15%
$/unit
T12 Vol.
$253,493.40
25%
Q3 '15
$308,085.51
9%
Q3 '15
Avg. Cap
105
40%
T12 Vol.
5.10%
0%
Q3 '15
4.71%
-16%
HFF | 19
CHARLOTTE, NORTH CAROLINA
Occupancy
Forecast
Long-Term Average
96%
95%
OCCUPANCY
94%
93%
92%
91%
90%
89%
88%
87%
2009
2010
HFF | 20
2018
2016
2017
2018
Forecast
Rent/Unit/Mo.
$400
2009
2011
2012
2013
2014
Forecast
2015
Long-Term Average
6%
YoY Change (%)
2010
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
9,000
8,000
7,000
6,000
Units
Apartments in Charlotte achieved an average annual effective rent growth rate of
6.1% in the third quarter. The year is expected to have ended at 5.5%, well above the
long-term average of 1.0%. Excluding negative rent growth years, Charlotte
achieved an average rent-growth rate of 3.8% from 1997-2014. Annual effective
rent growth in the three-year outlook is expected to average 4.1%, close to the
growth-year average.
Rental Rates
2017
8%
5,000
4,000
3,000
2,000
1,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
80
60
YoY Change (%)
Almost 3,000 units were absorbed in the third quarter, outpacing supply by some
500 units. The year 2015 was expected to end at 8,500 units absorbed, staying
close to equilibrium with apartment supply. Charlotte’s long-term absorption has
averaged about 4,000 units – in balance with supply. Absorption is expected to
average 4,600 units per year in the three-year outlook.
2016
$600
$0
Charlotte’s apartments achieved an average occupancy rate of 95.7% in the third
quarter and are expected to have finished 2015 with a rate of 95.2%. The metro’s
1997-2014 average occupancy rate was 92.7%, and it is forecast to average 95.1%
in the three-year outlook.
2015
$800
Some 2,300 new apartment units were delivered to Charlotte in the third quarter of
2015. The annual total was expected to be about 8,500 units, more than twice the
long-term average of 4,000 units annually.
2014
$200
Development
The metro is forecast to average nearly 5,000 units annually from 2016-2018,
with supply levels gradually moderating until 2018 before picking up past the
outlook period.
2013
$1,000
RENTAL RATES
Job growth in Charlotte was 3.6% (on an annual basis) in the third quarter of 2015,
as employers added 38,400 jobs. The third-quarter rate was strong compared to
the metro’s 1997-2014 average of 1.6%. Excluding negative job-growth years, the
long-term average was 3.2%. The metro is expected to have ended 2015 with job
growth of 3.0% and average 2.1% in the three-year outlook.
2012
$1,200
Overview
2011
40
20
0
-20
-40
-60
-80
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$2,000
Year
T12 Vol.
Qtr. Vol.
2007
$911.90
$405.92
5.93%
$1,003.26
$278.67
6.17%
$1,600
$1,400
Volume ($MM)
$1,800
2008
$1,200
$1,000
$800
2009
$600
$400
$200
$0
2010
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$1,600
2012
$1,200
Volume ($MM)
REAL-TIME SNAPSHOT
$1,400
$1,000
2013
Avg. Cap
$1,219.93
$404.45
6.18%
$1,346.47
$257.42
5.98%
$1,098.93
$158.39
6.03%
$863.72
$43.47
5.65%
$502.23
$42.96
5.65%
$273.15
$28.34
6.49%
$114.77
$0.00
0.00%
$79.20
$7.90
0.00%
$36.24
$0.00
0.00%
$62.98
$55.08
0.00%
$62.98
$0.00
0.00%
$133.88
$78.80
0.00%
$146.33
$12.45
0.00%
$239.18
$147.93
6.31%
$408.04
$168.86
6.76%
$442.00
$112.77
7.01%
$615.15
$185.60
6.66%
$572.67
$105.45
6.60%
$626.17
$222.36
6.44%
$683.10
$169.70
6.23%
$693.83
$196.33
6.21%
$919.52
$331.13
6.05%
$1,083.06
$385.91
6.00%
$800
$1,008.67
$95.30
6.20%
$988.68
$176.34
6.34%
$600
$1,359.67
$702.12
6.75%
2014
$400
$200
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
CHA Acq # Props Global Acq # Props
1
Cortland Partners
Atlanta, GA
$321.10
10
$2,445.03
87
2
Greenwich, CT
$203.26
8
$35,786.85
1,499
3
Atlanta, GA
$195.75
5
$1,869.14
61
4
Milestone APTS REIT
Dallas, TX
$150.33
5
$1,187.37
33
5
Lone Star
Dallas, TX
$138.08
6
$28,905.95
1,566
6
UBS
Zurich, Switzerland
$115.23
2
$27,129.97
534
7
Berkshire Property Advisors
Boston, MA
$115.23
2
$4,502.20
124
8
The Connor Group
Dayton, OH
$112.95
3
$2,489.23
99
9
TriBridge Residential
Atlanta, GA
$109.27
2
$2,011.29
72
10
Associated Estates
Cleveland, OH
$98.38
3
$1,468.67
43
Top Sellers
Rank Buyer
$1,235.33
$261.57
7.06%
$1,278.31
$138.27
6.78%
$1,335.66
$233.70
6.85%
$1,254.70
$621.16
6.55%
$1,380.97
$387.84
6.02%
$1,556.67
$313.98
6.03%
$1,899.35
$576.37
6.06%
Approaching the $2 billion mark, trailing 12 month volumes in Charlotte
are at a record high. This city has become a major U.S. financial center,
boasting the largest banking center in the U.S. after New York City.
Industry diversification coupled with its low cost of doing business drives
many companies to move and expand here. Private investors made
up 49% of all acquisitions in the first nine months of the year, while the
less active Institutions made up 18% of the buyer pool. Canadian and
Swiss seem eager for a Charlotte footprint and have together invested
$240 million during the first nine months of 2015. As Charlotte remains an
attractive destination for young professionals, demand for apartments
remains high, triggering rent growth and new developments.
Location
CHA Acq # Props Global Acq # Props
1
Landmark ATA
Tampa, FL
$251.17
9
$2,126.23
86
2
McDowell Properties
San Francisco, CA
$233.38
9
$1,294.97
61
3
Bell Partners
Greensboro, NC
$187.58
7
$6,118.14
250
4
Crescent Communities
Charlotte, NC
$167.48
3
$3,053.48
119
5
JLB Partners
Dallas, TX
$147.27
2
$844.01
14
6
Charter Properties
Charlotte, NC
$143.50
4
$321.05
12
7
DRA Advisors
New York, NY
$138.08
6
$17,102.36
712
8
Northwood Investors
New York, NY
$98.38
3
$2,407.30
33
9
Ravin Partners
Charlotte, NC
$98.38
3
$363.11
8
10
Associated Estates
Cleveland, OH
$98.13
3
$3,619.71
117
actual
Volume
# Trades
chg vs prior
T12 Vol.
$1,899.35
42%
Q3 '15
$576.37
84%
T12 Vol.
75
-12%
Q3 '15
19
27%
T12 Vol.
18,579
0%
Q3 '15
4,159
4%
$/unit
T12 Vol.
$98,626.66
13%
Q3 '15
$126,285.93
Avg. Cap
T12 Vol.
6.06%
-79
Q3 '15
6.47%
38
Units
58%
HFF | 21
CHICAGO, ILLINOIS
Occupancy
Forecast
Long-Term Average
96%
OCCUPANCY
95%
94%
93%
92%
91%
90%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$1,800
2015
$1,600
Axiometrics expects job growth to have finished 2015 at 1.3%, moderating slightly
from 2014’s 1.4% growth. Job growth is expected to rebound in the outlook,
increasing to 1.6% and 1.8% in 2016 and 2017, respectively. The healthy job growth will
help fuel Chicago’s occupancy, pushing it to remain above 95% during the
short-term outlook.
Rent/Unit/Mo.
Chicago’s job growth remained relatively unchanged in the third quarter of 2015,
adding 40,233 jobs over the past four quarters, for a job-growth rate of 1.1%.
$1,400
RENTAL RATES
Overview
$1,200
$1,000
$800
$600
$400
$200
$0
2009
2010
2011
2012
2013
2014
2015
Absorption outpaced new supply by more than double in 2014. However,
absorption moderated in 2015 and was fairly even with new supply through the
third quarter. Looking ahead, absorption is expected to outpace new supply
through 2016. While job growth is expected to be strong in 2017, absorption will
slow due to occupancy moderating from the peak.
Rental Rate
Annual effective rent growth bounced back to 3.9% in the third quarter of 2015,
improving from 2.3% in 2014. Going forward, Chicago’s annual effective rent
should maintain a pace close to 4.0% through 2017, and then slow a bit in 2018 as
supply catches up with demand.
HFF | 22
Long-Term Average
YoY Change (%)
6%
4%
2%
0%
-2%
-4%
-6%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
16,000
14,000
12,000
Units
Despite the increase in new supply, Chicago occupancy remained above 95% in
the third quarter of 2015. The rate is expected to remain strong during the forecast
period due to an improvement in job growth. Occupancy in the next three years is
expected to average 95.2%, well above the long-term average of 93.8%.
Forecast
8%
10,000
8,000
6,000
4,000
2,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
100
50
YoY Change (%)
The urban core has averaged close to 1,800 units delivered per year from 20132015. Expect closer to 3,000 units to be delivered in the urban core in 2016, with
another 1,600 already under way for 2017 delivery.
The 7,000-plus units expected to deliver during 2015 represent a significant
increase from the 4,581 that came to market in 2014. New supply is expected to
average 7,536 units per year over the next three years.
Development
0
-50
-100
-150
-200
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$4,000
Year
T12 Vol.
Qtr. Vol.
2007
$3,024.80
$1,368.83
6.22%
$2,850.59
$357.70
6.16%
$3,000
$2,500
Volume ($MM)
$3,500
2008
$2,000
$1,500
2009
$1,000
$500
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$3,000
2012
$2,000
Volume ($MM)
REAL-TIME SNAPSHOT
$2,500
2013
$1,500
$1,000
2014
$500
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
CHI Acq # Props Global Acq # Props
1
Lone Star
Dallas, TX
$512.80
9
$28,971.26
2
Crescent Heights
Miami, FL
$382.00
3
$5,227.22
74
3
Heitman
Chicago, IL
$328.23
1
$12,705.34
298
4
Georgetown Company
New York, NY
$214.25
1
$726.98
10
5
Investcorp
Manama, Bahrain
$197.41
4
$8,177.13
207
6
Invesco RE
Atlanta, GA
$188.35
2
$27,248.90
564
7
Home Properties
Rochester, NY
$158.00
3
$3,378.79
93
8
Planned Realty Group
Chicago, IL
$152.50
2
$152.50
2
9
F&F Realty Ltd
Skokie, IL
$151.09
2
$295.99
7
10
Hometown AM
Chicago, IL
$130.00
1
$502.51
20
Top Sellers
Rank Buyer
1,566
Avg. Cap
$3,260.66
$903.40
6.18%
$3,067.55
$437.61
6.50%
$2,304.97
$606.26
6.50%
$2,147.61
$200.33
6.56%
$1,358.27
$114.07
6.75%
$1,100.05
$179.39
6.83%
$608.06
$114.27
6.87%
$544.34
$136.61
7.13%
$474.88
$44.60
7.22%
$497.26
$201.78
6.78%
$442.50
$59.51
6.90%
$368.55
$62.67
7.02%
$709.97
$386.02
6.56%
$864.11
$355.91
6.68%
$1,089.44
$284.83
6.51%
$1,725.27
$698.50
6.36%
$1,754.33
$415.08
6.51%
$2,269.18
$870.76
6.47%
$2,472.40
$488.06
6.45%
$2,220.02
$446.11
6.53%
$2,074.39
$269.45
6.43%
$2,196.98
$993.35
6.38%
$2,214.35
$505.43
6.51%
$2,311.52
$543.29
6.52%
$2,561.40
$519.33
6.64%
$2,331.50
$763.45
6.54%
$2,440.05
$613.99
6.32%
$2,297.88
$401.12
6.30%
$2,482.06
$703.51
6.18%
$2,724.28
$1,005.67
6.23%
$3,143.12
$1,032.83
6.35%
$3,443.98
$701.97
6.21%
$3,492.94
$752.47
6.11%
Chicago’s multi-housing market is benefitting from unprecedented
liquidity given trailing twelve month volumes are registering an all-time
high. Institutions represent the highest composition of buyers, accounting
for 55% of all acquisitions during the first three quarters of 2015.
Private buyers represented 38% of the buyer pool and were net sellers
during this time. Despite a development boom earlier in 2015, the vacancy
rate remains under 5%, as demographics continue to work in the market’s
favor. With Motorola and fellow big tech names now well established
downtown, expect the influx of young workers to continue as long as the
roster of these companies expands.
Location
CHI Acq # Props Global Acq # Props
1
Home Properties
Rochester, NY
$562.10
10
$10,666.45
238
2
Related Companies
New York, NY
$333.93
2
$7,251.68
136
3
Marquette Cos
Naperville, IL
$237.06
4
$363.94
9
4
Fifield Realty Corp
Chicago, IL
$214.25
1
$1,581.65
19
5
Wood Partners
Marietta, GA
$214.25
1
$3,976.93
95
6
ASB Capital
Bethesda, MD
$197.15
3
$1,496.07
39
7
Waterton Associates
Chicago, IL
$181.05
4
$2,542.51
77
8
Morgan Stanley
New York, NY
$179.35
3
$68,884.75
1,641
9
JP Morgan
New York, NY
$179.02
2
$30,396.12
706
10
Golub & Co
Chicago, IL
$162.10
3
$1,491.91
34
Volume
# Trades
Units
actual
chg vs prior
T12 Vol.
$3,492.94
41%
Q3 '15
$752.47
7%
T12 Vol.
172
8%
Q3 '15
37
-33%
T12 Vol.
21,415
11%
Q3 '15
4,158
2%
$/unit
T12 Vol.
$165,424.27
28%
Q3 '15
$185,198.99
10%
Avg. Cap
T12 Vol.
6.11%
-7
Q3'15
5.56%
-51
HFF | 23
DALLAS/FORT WORTH, TEXAS
Occupancy
Forecast
Long-Term Average
96%
95%
OCCUPANCY
94%
93%
92%
91%
90%
89%
88%
2009
2010
Absorption has consistently outpaced new supply since 2010. While absorption
is expected to have outpaced new supply by about 2,000 in 2015, the trend is
expected to change course in 2016 with supply outpacing demand for the first
time in seven years. The two numbers are expected to be back in balance in 2017.
2016
2017
2018
Forecast
2009
2011
2012
2013
2014
2015
Forecast
Rent/Unit/Mo.
Long-Term Average
6%
YoY Change (%)
2010
8%
4%
2%
0%
-2%
-4%
-6%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
25,000
20,000
15,000
10,000
5,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
250
200
YoY Change (%)
HFF | 24
2018
$600
Rental Rates
Annual effective rent growth during the third quarter was 6.3%. By the end of
2015, Dallas/Fort Worth’s annual effective rent level was expected to be $1,023
per unit per month, 6.0% growth over 2014. Axiometrics forecasts annual effective
rent growth to average 4.1% over the next three years.
2017
$800
$0
Units
DFW apartments were 95.7% occupied during the third quarter of 2015. The metro’s
high job growth has kept occupancy above the historical average of 92.9%. Going
forward, occupancy is expected to average 94.6% over the next three years.
2016
$200
2015
$1,000
Development
The urban-core submarket in Dallas, Oak Lawn, has received a large percentage
of the new supply, delivering 2,863 units in 2014 and another 2,467 units in 2015,
according to Axiometrics’ identified supply. Though deliveries will persist in the
urban core (3,000 more in 2016), they have started to ramp up in the suburban
submarkets as well. The Plano/Allen/McKinney submarket will receive 2,656 new
units in 2016, and the Richardson and North Irving submarkets will each receive
close to 1,700 new units.
2014
$400
Population growth also has been robust. Over the past four years, the market’s
population has grown by an average of 2.0% annually, compared to the national
average of 0.8%.
Developers have delivered almost 15,000 new units to Dallas-Fort Worth in each
of the past two years, above the long-term average. Another 19,500 units are
expected to have delivered during 2015. While Axiometrics forecasts deliveries
to moderate to an average of 12,200 per year, don’t be surprised to see more
apartment units on the way to keep pace with demand.
2013
$1,200
RENTAL RATES
Dallas-Fort Worth experienced phenomenal job growth last year, adding more
than 100,000 jobs. The market’s job-growth was 3.2% in the third quarter of
2015, and the market is expected to have added 110,000 jobs for the year. With
the addition of State Farm and Toyota to the Metroplex, annual job gains are not
expected to fall below their historical average of 51,000 jobs anytime soon.
2012
$1,400
Overview
2011
150
100
50
0
-50
-100
-150
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$8,000
Year
T12 Vol.
Qtr. Vol.
2007
$4,674.32
$1,142.08
7.11%
$4,339.76
$912.52
7.14%
$6,000
$5,000
Volume ($MM)
$7,000
2008
$4,000
$3,000
2009
$2,000
$1,000
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$7,000
2012
$5,000
Volume ($MM)
REAL-TIME SNAPSHOT
$6,000
$4,000
2013
$3,000
2014
$2,000
$1,000
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
Blackstone
$527.79
18
$191,599.69
2
Highland Capital Management Dallas, TX
$328.08
16
$970.99
47
3
Invesco RE
Atlanta, GA
$304.96
5
$27,248.90
564
4
Brookfield AM
Toronto, Canada
$283.95
6
$53,757.11
1,142
5
CAF Capital Partners
Frisco, TX
$270.15
7
$390.70
11
6
BH Mgmt Services
Des Moines, IA
$245.68
13
$2,511.31
121
7
Knightvest Capital
Dallas, TX
$244.40
14
$635.60
40
8
Steadfast Apartment REIT
Irvine, CA
$230.00
5
$973.60
9
Lone Star
Dallas, TX
$229.33
7
$28,971.26
1,566
10
Harbor Group Int'l
Norfolk, VA
$228.56
10
$6,068.76
221
Top Sellers
Rank Buyer
New York, NY
DFW Acq # Props Global Acq # Props
1
6,868
Avg. Cap
$4,249.97
$1,065.55
7.15%
$4,137.20
$1,017.05
7.14%
$3,840.54
$845.42
7.09%
$3,651.07
$723.05
7.31%
$2,870.67
$285.15
7.68%
$2,145.79
$292.17
8.07%
$1,453.27
$152.90
8.14%
$937.19
$206.97
8.01%
$857.51
$205.47
7.52%
$776.73
$211.40
7.25%
$781.42
$157.59
7.37%
$906.11
$331.66
6.71%
$1,250.28
$549.64
6.92%
$1,735.35
$696.46
6.71%
$2,030.17
$452.42
6.54%
$2,358.05
$659.53
6.86%
$2,670.67
$862.27
6.54%
$2,778.14
$803.92
6.47%
$2,729.26
$403.54
6.55%
$2,903.26
$833.52
6.42%
$3,337.46
$1,296.47
6.50%
$3,610.06
$1,076.52
6.52%
$3,919.62
$713.10
6.45%
$4,227.74
$1,141.64
6.52%
$4,428.61
$1,497.35
6.73%
$5,447.44
$2,095.35
6.83%
$5,857.37
$1,123.02
6.83%
$5,869.04
$1,153.31
6.91%
$5,834.38
$1,462.69
6.85%
$6,013.14
$2,274.12
6.80%
$6,567.49
$1,677.37
6.89%
$6,647.54
$1,233.37
6.84%
$7,201.83
$2,016.97
6.74%
DFW’s multi-housing market registered remarkable trailing twelve month
volumes of over $7 billion. Private investors accounted for 57% of all
acquisitions during the first three quarters of 2015. At 21%, Institutions
represented less than a fourth of the buyer pool. Through 3Q2015,
Canadian and British firms have together invested over $830 million. The
region continues to draw major corporate relocations to its brandished
northern suburbs. While the Dallas area apartment market is in the midst
of an extraordinary development boom, absorption of new supply appears
to be keeping up. The persistent tightness stands as a strong testament to
the strength of the market.
25
Location
DFW Acq # Props Global Acq # Props
1
McDowell Properties
San Francisco, CA
$393.64
16
$1,294.97
61
2
Wood Partners
Marietta, GA
$313.65
8
$3,976.93
95
3
Ares Management
Los Angeles, CA
$297.65
7
$7,553.04
1,044
4
Associated Estates
Cleveland, OH
$283.95
6
$3,619.71
117
5
Columbus Realty Partners LTD Dallas, TX
$257.71
4
$257.71
4
6
Bell Partners
Greensboro, NC
$253.57
8
$6,118.14
250
7
DRA Advisors
New York, NY
$229.33
7
$17,082.61
711
8
England Group
Vancouver, Canada
$228.56
10
$477.26
14
9
Walton Street Capital
Chicago, IL
$208.80
4
$13,918.49
233
10
Charleston, SC
$208.64
4
$3,346.12
90
actual
Volume
# Trades
Units
$/unit
Avg. Cap
chg vs prior
T12 Vol.
$7,201.83
23%
Q3 '15
$2,016.97
64%
T12 Vol.
349
-1%
Q3 '15
93
39%
T12 Vol.
86,371
-5%
Q3 '15
21,198
29%
T12 Vol.
$93,539.96
7%
Q3 '15
$98,730.19
T12 Vol.
6.74%
-12
Q3 '15
6.23%
-59
6%
HFF | 25
DENVER, COLORADO
Occupancy
Forecast
Long-Term Average
97%
96%
OCCUPANCY
95%
94%
93%
92%
91%
90%
89%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$1,800
2015
$1,600
Rent/Unit/Mo.
Employers are expected to have added 43,110 jobs in 2015, a 3.2% growth rate over
2014, and well above the market’s historical average of 1.5%. Looking forward, job
growth is expected to average 2.1% annually during the next three years (20162018).
$1,400
RENTAL RATES
Overview
$1,200
$1,000
$800
$600
$400
$200
Denver population has increased by a healthy 2.0% over the past two years.
The population is expected to have risen by 66,000 people in 2015, drawing more
demand for apartments. Axiometrics forecasts population growth to average
2.4% between 2016 and 2018.
$0
2009
Much like in other markets, a large percentage of new supply has been delivered
to the urban core submarket. Some 2,612 of the 9,829 units expected to deliver in
2015 are earmarked for the Downtown Denver submarket. On top of that, more
than 5,000 units are already under construction for delivery in 2016 and 2017.
2011
2012
2013
2014
Forecast
12%
2015
Long-Term Average
10%
8%
YoY Change (%)
An average of about 7,000 units per year have been delivered to the market the
past two years, roughly 2,500 units above the historical average. New supply is
expected to have peaked in 2015, with just less than 10,000 units being delivered
to the market. New supply is expected to moderate during the outlook, averaging
6,417 units annually.
Development
2010
6%
4%
2%
0%
-2%
-4%
-6%
-8%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Rental Rate
While Denver has been one of the strongest markets for rent growth the past
five years, expectations are that 2015 was its best year yet. Annual effective rent
growth is expected to have ended the year at 10.2%, up from an impressive 8.9%
growth rate in 2014. Annual effective rent growth is expected to moderate in the
outlook as new supply starts to settle in, averaging 4.6% over the next three years.
While that pace is slower compared to the current results, Denver is expected to
remain one of the top markets in the country for rent growth.
HFF | 26
12,000
10,000
Units
8,000
6,000
4,000
2,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
100
80
YoY Change (%)
The market’s occupancy rate has approached 96% due to absorption outpacing
supply for six consecutive years. Absorption will remain robust, but the streak
will likely be broken through 2016. Still, Denver will likely have some of the largest
absolute absorption totals in the country the next three years.
Occupancy has been above 95% the past two years, reaching its highest rate
in 2014 (95.8%) and maintaining close to that level since then. Looking ahead,
occupancy is forecast to average 95.2% over the next three years, despite the
elevated supply levels.
60
40
20
0
-20
-40
-60
-80
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$5,000
Year
T12 Vol.
Qtr. Vol.
2007
$1,824.08
$336.22
5.90%
$1,709.40
$339.92
5.83%
$4,000
$3,500
Volume ($MM)
$4,500
2008
$3,000
$2,500
$2,000
2009
$1,500
$1,000
$500
$0
2010
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$4,000
2012
$3,000
Volume ($MM)
REAL-TIME SNAPSHOT
$3,500
$2,500
2013
Avg. Cap
$1,885.89
$850.98
5.76%
$1,909.59
$382.47
6.20%
$1,767.71
$194.34
6.41%
$1,569.81
$142.02
6.89%
$965.75
$246.92
7.01%
$654.64
$71.36
6.89%
$489.38
$29.08
6.95%
$475.20
$127.84
6.81%
$312.07
$83.79
7.03%
$359.17
$118.46
7.21%
$428.84
$98.75
7.25%
$398.92
$97.92
7.24%
$511.28
$196.16
6.89%
$632.16
$239.33
6.41%
$780.28
$246.87
6.20%
$1,079.34
$396.98
5.98%
$1,073.55
$190.37
6.12%
$1,861.51
$1,027.30
6.13%
$1,939.91
$325.27
6.24%
$1,961.90
$418.97
6.34%
$2,652.55
$881.02
6.10%
$2,684.54
$1,059.29
6.00%
$2,929.75
$570.49
5.99%
$2,000
$2,998.09
$487.30
5.94%
$2,656.05
$538.98
6.03%
$1,500
$2,242.10
$645.34
6.26%
2014
$1,000
$500
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
DEN Acq # Props Global Acq # Props
1
Guardian Life Insurance Co
New York, NY
$293.00
4
$3,379.19
2
TruAmerica Multi-housing
Los Angeles, CA
$293.00
4
$2,356.02
79
49
3
Bell Partners
Greensboro, NC
$251.67
1
$6,248.03
264
76
4
Jackson Square
San Francisco, CA
$219.45
7
$2,134.28
5
Griffis Group
Denver, CO
$170.43
4
$1,179.18
45
6
Inland Real Estate Group
Oak Brook, IL
$170.31
5
$18,974.35
999
7
BMC Investments
Denver, CO
$169.00
4
$282.97
14
8
Advenir Inc
Miami, FL
$168.64
4
$1,186.47
50
9
Allstate
Northbrook, IL
$167.00
2
$2,142.70
45
10
Benedict Canyon Equities Inc Los Angeles, CA
$165.80
3
$627.15
28
Top Sellers
Rank Buyer
Location
1
Holland Partners
Vancouver, WA
$313.05
7
$2,120.43
50
2
Simpson Housing LLLP
Denver, CO
$272.24
3
$1,634.87
61
3
Carmel Partners
San Francisco, CA
$271.21
6
$4,127.88
99
4
Fairfield Residential
San Diego, CA
$241.88
6
$12,464.56
348
5
GE Capital
Norwalk, CT
$227.28
4
$56,242.32
3,402
6
Wood Partners
Marietta, GA
$200.54
3
$3,976.93
95
7
Bascom Group
Irvine, CA
$182.87
6
$3,621.04
166
8
DiNapoli Capital Partners
Walnut Creek, CA
$172.70
4
$1,105.41
19
9
Boston, MA
$167.00
2
$2,392.97
78
10
Embrey Development
San Antonio, TX
$164.38
3
$987.02
27
$2,373.89
$702.28
6.22%
$2,528.09
$641.49
6.04%
$2,954.19
$965.08
5.87%
$3,629.29
$1,320.44
5.80%
$3,958.13
$1,031.12
5.88%
$4,314.49
$997.85
6.11%
$4,300.13
$950.72
6.22%
Denver’s multi-housing market remains highly liquid, with trailing twelve
month volumes well above $4 billion. Private investors are dominating
the acquisition side, accounting for 78% of all purchases year-todate. Institutions have been net sellers in this time period. Canadian
and Swiss firms remain hungry for a Denver presence and spent over
$115 million dollars during the first three quarters of 2015 in a combined
five properties. Energy sector worries aside, Denver continues to display
strong economic trends. Its diversification has made it less vulnerable
to trends in the energy sector than it was in the past. An under supplied
housing market paired with above-average job growth and strong
population growth should benefit the metro.
Volume
actual
chg vs prior
T12 Vol.
$4,300.13
46%
Q3 '15
$950.72
-5%
# Trades
T12 Vol.
Q3 '15
61
61%
Units
T12 Vol.
28,733
43%
Q3 '15
5,990
-5%
$/unit
T12 Vol.
$151,662.16
3%
Q3 '15
$164,005.14
T12 Vol.
6.22%
35
Q3 '15
6.05%
-82
Avg. Cap
186
49%
4%
HFF | 27
HOUSTON, TEXAS
Occupancy
Forecast
Long-Term Average
96%
95%
OCCUPANCY
94%
93%
92%
91%
90%
89%
88%
87%
2009
2010
As of the third quarter of 2015, Houston’s occupancy rate was still 94.6%,
a slight improvement from the 2014 rate of 94.4%. As more supply delivers and
absorption slows, the occupancy rate is forecast to moderate to close to 94.0%
in 2016 and 2017.
Rental Rates
As job growth slowed, rent growth followed. The third quarter saw 3.3%
year-over-year annual effective rent growth. That rate was 5.3% at the same
point in 2014.
While the metro overall has slowed, that’s not true for all parts of the market.
Submarkets in the south and east parts of the Houston market, extending toward
the Gulf of Mexico, are experiencing rent growth above 5%.
Growth also varies among asset classes in the Houston metro. Class A properties,
which includes most new supply, have stagnant annual effective growth of 0.1%
as of the current data. Classes B and C, which are less impacted by new supply,
are posting healthy growth rates of 4.3% and 7.1%, respectively.
Looking ahead, Axiometrics forecasts full-year growth to be 2.4% in 2016 and 2.8%
in 2017, with a continued trend upward into 2018.
HFF | 28
2017
2018
2016
2017
2018
Forecast
Rent/Unit/Mo.
RENTAL RATES
$800
$600
2009
2010
2011
2012
2013
2014
Forecast
2015
Long-Term Average
8%
6%
YoY Change (%)
2016
$1,000
$0
4%
2%
0%
-2%
-4%
-6%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
20,000
15,000
10,000
Units
More than 17,000 units are expected to have been delivered to the Houston metro
in 2015 -- an increase of almost 3,000 units from 2014’s total. Many projects in the
pipeline were at a point of no return as oil prices began to drop during the last half
of 2014. Axiometrics forecasts new development to slow, but deliveries won’t see
a significant slowdown until at least 2017 due to construction already in progress.
Completions should be in the range of 14,000 units in 2016.
2015
$200
Development
2014
$400
5,000
0
-5,000
-10,000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
200
150
YoY Change (%)
But when oil prices fell dramatically in 2014 and 2015, it was inevitable that the
Houston economy would be affected, but to what extent was the question. Given
the concerns of the local economy and the amount of supply to be delivered,
Houston’s apartment performance has been solid given historical standards.
Annual rent growth remained above 3% through the third quarter of 2015, and the
occupancy rate held steady, even though the market is not experiencing the same
level of job growth.
2013
$1,200
The Houston apartment market had been one of the strongest in the country. The
booming job market, with the energy industry as one of the cornerstones, played
no small part in that performance.
2012
$1,400
Overview
2011
100
50
0
-50
-100
-150
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$5,000
Year
T12 Vol.
Qtr. Vol.
2007
$3,177.06
$619.92
7.16%
$2,938.84
$867.81
7.01%
$4,000
Volume ($MM)
$6,000
2008
$3,000
2009
$2,000
$1,000
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$6,000
2012
$4,000
Volume ($MM)
REAL-TIME SNAPSHOT
$5,000
2013
$3,000
$2,000
2014
$1,000
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
HOU Acq # Props Global Acq # Props
1
Gaia RE Holdings
New York, NY
$345.40
14
$1,768.77
87
2
Menora Mivtachim
Tel Aviv, Israel
$345.40
14
$1,820.08
33
3
Grand China Fund
Beijing, China
$255.40
9
$289.85
11
4
Steadfast Cos
Irvine, CA
$243.37
9
$2,418.88
106
1,566
5
Lone Star
Dallas, TX
$205.02
7
$28,971.26
6
Newport Beach, CA
$197.00
6
$2,488.91
82
7
Crow Holdings
Dallas, TX
$177.75
2
$7,340.12
379
8
Olympus Property
Arlington, TX
$161.75
3
$1,075.80
39
9
Starlight Investments
Etobicoke, Canada
$156.47
5
$3,076.79
199
10
Clarion Partners
New York, NY
$147.37
7
$27,415.19
Top Sellers
Rank Buyer
Avg. Cap
$2,778.59
$580.45
7.02%
$3,152.24
$1,084.05
6.96%
$3,382.23
$849.91
7.01%
$2,946.48
$432.06
7.42%
$2,672.84
$306.81
7.21%
$1,769.31
$180.53
7.25%
$1,037.71
$118.32
7.30%
$832.11
$226.45
7.03%
$808.50
$283.21
6.96%
$784.08
$156.10
7.28%
$1,004.55
$338.79
7.46%
$968.42
$190.32
7.74%
$964.91
$279.70
7.60%
$1,510.11
$701.30
6.67%
$1,349.65
$178.33
6.14%
$1,715.17
$555.84
6.26%
$2,211.88
$776.41
6.07%
$2,334.45
$823.86
5.99%
$2,687.93
$531.81
6.32%
$2,978.24
$846.15
6.27%
$3,194.38
$992.55
6.63%
$3,453.45
$1,082.93
6.67%
$3,621.44
$699.80
6.83%
$4,037.69
$1,262.41
6.94%
$4,034.69
$989.55
6.99%
$4,858.97
$1,907.21
7.13%
$5,108.12
$948.95
7.14%
$5,145.21
$1,299.50
7.11%
$5,668.47
$1,512.81
7.01%
$5,404.06
$1,642.81
7.03%
$5,705.12
$1,250.01
6.86%
$5,555.68
$1,150.06
6.90%
$4,851.01
$808.14
7.00%
Houston’s multi-housing market remains strong as trailing twelve
month volumes continue significantly above pre-recession peaks.
Private investors accounted for 69% of all acquisitions during the first nine
months of 2015. Comparably, Institutions and listed REITS were net sellers
in this time period. Canadian, Israeli, Mexican and Chinese firms together
invested over $400 million in the first three quarters of 2015 across twelve
properties. Due to weakness in the energy sector, Houston is leaning
on its diverse base to hold the economy afloat. Population continues to
grow close to twice the national pace, prompting demand for services like
healthcare and education, and therefore employment in those industries.
1,080
Location
HOU Acq # Props Global Acq # Props
1
DRA Advisors
New York, NY
$350.33
14
$17,082.61
711
2
Bell Partners
Greensboro, NC
$314.00
12
$6,118.14
250
3
SMC Management
Watertown, MA
$255.40
9
$276.85
12
4
Atlanta, GA
$215.76
5
$307.53
10
5
Investcorp
Manama, Bahrain
$182.50
7
$6,176.62
136
6
Carlyle Group
Washington, D.C.
$177.66
3
$36,421.78
1,029
7
Trammell Crow Residential
Dallas, TX
$161.35
7
$6,382.26
164
8
Charleston, SC
$152.97
4
$3,346.12
90
9
Gables Residential
Atlanta, GA
$147.37
7
$5,178.01
121
10
Cypress Real Estate Advisors Austin, TX
$145.72
6
$495.08
23
actual
Volume
# Trades
Units
$/unit
Avg. Cap
chg vs prior
T12 Vol.
$4,851.01
-14%
Q3 '15
$808.14
-30%
T12 Vol.
244
-19%
Q3 '15
47
-11%
T12 Vol.
66,431
-15%
Q3 '15
12,825
-25%
T12 Vol.
$89,531.36
-12%
Q3 '15
$85,667.88
T12 Vol.
7.00%
-1
Q3 '15
7.56%
36
4%
HFF | 29
LOS ANGELES, CALIFORNIA
Occupancy
Forecast
Long-Term Average
96%
96%
OCCUPANCY
95%
95%
94%
94%
93%
93%
92%
92%
91%
2009
2010
HFF | 30
2018
Forecast
Rent/Unit/Mo.
YoY Change (%)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Forecast
Long-Term Average
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
20,000
18,000
16,000
14,000
Units
Absorption averaged 8,816 units annually since 1997, outpacing the long-term
supply average of 6,997 units. However, Axiometrics expects new apartment
supply to largely outpace absorption as job growth slows down in the market.
2017
$1,000
8%
12,000
10,000
8,000
6,000
4,000
2,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
200
150
YoY Change (%)
Despite increasing levels of new supply, the metro’s occupancy rate reached
96.1% in 2015, up from 95.9% in 2014. Expect occupancy rates to remain very strong
during the outlook period, with a forecast average of 95.8% the next three years.
2016
$1,500
$0
2015
$2,000
Development
The Marina Del Rey and Westlake submarkets were forecast to see the most
new supply in 2015, receiving 2,031 and 1,096 units, respectively, according to
Axiometrics’ identified supply.
2014
$500
The Los Angeles metro’s population has grown by an average of nearly
80,000 people annually since 2010, and is expected to average close to 90,000
from 2015-2018.
Axiometrics expects a total of 9,531 units delivered for the entirety of 2015, up from
the 9,300 units that were delivered in 2014. Deliveries are expected to eclipse the
10,000 unit mark in 2016 before moderating closer to the long-term average of
approximately 7,000 units annually in 2017 and 2018.
2013
$2,500
RENTAL RATES
Though Los Angeles has been unable to repeat the exceptional job-gain numbers
of 2012 (141,600 jobs added), it has remained one of the top job producers in the
country. The market is expected to have added 92,500 jobs in 2015, a growth
rate of 2.1%. Job gain is forecast to moderate to close to 61,200 per year from
2016-2018, or 1.4%.
2012
$3,000
Overview
2011
100
50
0
-50
-100
-150
-200
-250
-300
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$14,000
T12 Vol.
Qtr. Vol.
2007
$7,147.40
$1,717.83
5.27%
$6,729.83
$1,767.36
5.31%
$10,000
Volume ($MM)
$12,000
Year
2008
$8,000
$6,000
2009
$4,000
$2,000
2010
$0
2006
2007
2008
2009
2015
2010
2011
2014
2012
2013
2013
2014
2011
2012
$12,000
2012
$8,000
Volume ($MM)
REAL-TIME SNAPSHOT
$10,000
$6,000
2013
$4,000
2014
$3,000
$2,000
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
L.A. Acq # Props Global Acq # Props
1
Essex Property Trust
Palo Alto, CA
$2,560.17
37
$10,571.85
241
2
Los Angeles, CA
$655.61
12
$2,356.02
49
3
New York, NY
$655.61
12
$3,379.19
79
4
Harel Insurance Invts
Tel Aviv, Israel
$372.61
11
$3,874.73
89
5
Allstate
Northbrook, IL
$372.61
11
$2,142.70
45
6
Equity Residential
Chicago, IL
$339.50
3
$22,309.78
394
7
Clarion Partners
New York, NY
$336.34
3
$27,415.19
1,080
8
Capri
Chicago, IL
$307.00
2
$3,116.38
75
9
Pacific Urban
Encino, CA
$304.91
7
$3,397.45
137
10
Brookfield AM
Toronto, Canada
$291.92
2
$53,757.11
Top Sellers
Rank Buyer
Avg. Cap
$6,719.31
$1,735.56
5.39%
$11,098.97
$5,878.22
5.28%
$10,131.02
$749.88
5.22%
$9,020.11
$656.45
5.29%
$7,877.06
$592.51
5.30%
$2,423.44
$424.60
5.34%
$2,056.96
$383.41
5.55%
$1,967.25
$566.73
5.69%
$1,999.21
$624.47
5.89%
$2,077.12
$502.52
6.04%
$2,056.09
$362.37
6.04%
$2,203.30
$713.94
6.10%
$2,836.12
$1,257.30
5.96%
$3,749.82
$1,416.22
5.90%
$4,254.39
$866.94
5.85%
$4,915.35
$1,374.90
5.81%
$5,197.26
$1,539.20
5.72%
$5,270.23
$1,489.19
5.72%
$5,482.80
$1,079.51
5.67%
$5,223.65
$1,115.75
5.59%
$7,199.46
$3,515.01
5.56%
$8,647.55
$2,937.28
5.41%
$12,029.89
$4,461.85
5.45%
$12,623.05
$1,708.91
5.43%
$10,817.89
$1,709.86
5.45%
$9,786.27
$1,905.65
5.41%
$6,782.31
$1,457.89
5.36%
$8,415.27
$3,341.88
5.25%
$9,675.13
$2,969.71
5.12%
$9,538.15
$1,768.68
5.05%
$10,728.21
$2,647.95
5.00%
$10,159.88
$2,773.54
4.97%
$9,777.51
$2,587.33
4.91%
Los Angeles surpassed its all-time high for non-farm employment levels
in late 2014. In the 12 months ending August 2015, it ranked second in
the nation in terms of absolute growth. Private investors made up 64%
of all acquisitions in the first three quarters of 2015, while Institutions
made up 22%. Underscoring the growing influence of Asian capital in the
Los Angeles market, nearly $1.2 billion has been spent in land development
deals during the past 24 months. Fundamentals remain strong across the
board with a 3.9% vacancy rate as of the third quarter of 2015, highlighting
just how tight this market is.
1,142
Location
L.A. Acq # Props Global Acq # Props
1
BRE Properties
San Francisco, CA
$2,071.22
32
$6,108.34
135
2
JH Real Estate Partners
Newport Beach, CA
$387.86
13
$756.76
24
3
AvalonBay
Arlington, VA
$330.30
6
$7,273.52
125
4
Casden Properties
Beverly Hills, CA
$300.00
1
$1,668.87
119
5
CPP Investment Board
Toronto, Canada
$300.00
1
$8,383.36
53
6
Wood Partners
Marietta, GA
$295.00
2
$3,976.93
95
7
Associated Estates
Cleveland, OH
$291.92
2
$3,619.71
117
8
Washington Capital Mgmt
Seattle, WA
$283.00
1
$566.12
17
9
JH Snyder
Los Angeles, CA
$283.00
1
$1,605.63
22
10
Wolff Company
Scottsdale, AZ
$267.57
4
$1,489.14
50
actual
Volume
# Trades
Units
$/unit
Avg. Cap
chg vs prior
T12 Vol.
$9,777.51
1%
Q3 '15
$2,587.33
-7%
T12 Vol.
876
16%
Q3 '15
253
13%
T12 Vol.
48,168
0%
Q3 '15
11,571
-14%
T12 Vol.
$209,532.84
Q3 '15
$213,813.76
4%
0%
T12 Vol.
4.91%
-21
Q3 '15
4.74%
-11
HFF | 31
MIAMI, FLORIDA
Occupancy
Forecast
Long-Term Average
97.0%
96.5%
OCCUPANCY
96.0%
95.5%
95.0%
94.5%
94.0%
93.5%
93.0%
92.5%
92.0%
2009
2010
2011
2012
2013
$2,000
2014
2015
2016
2017
2018
2016
2017
2018
Forecast
$1,800
Rent/Unit/Mo.
A year ago, Miami was one of the hottest apartment markets in the country.
Today, Orlando and Tampa would be the Florida markets more likely to be in that
discussion. Even though rent growth is less robust, job growth has remained
steady and is expected to have ended 2015 with 3.0% growth, above the national
average of 2.1%. The Miami metro continues to see healthy fundamentals, even
though rent growth is less robust than it was in 2014.
$1,600
RENTAL RATES
Overview
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
2009
2010
2011
2012
2013
2014
2015
Rental Rates
Coming off of a strong year of 6.9% annual effective rent growth in 2014, Miami
has cooled off to an extent. Third quarter 2015 year-over-year growth showed the
metro with a growth rate of 3.5%.
Because of the amount of new supply that has entered the market, it’s no surprise
that Class A properties have the lowest annual effective growth rate of all asset
classes, at 2.2% in the third quarter -- although the latest data suggests Class
A has begun to rebound. Class B and C had growth rates of 3.9% and 5.3%,
respectively, in the third quarter.
4%
2%
0%
-2%
-4%
-6%
-8%
2010
2011
2012
2013
2014
2015
2016
2017
2018
12,000
10,000
8,000
6,000
4,000
2,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
200
150
YoY Change (%)
2009
Axiometrics forecasts rent growth to average 3.8% during the next three years,
just above the metro’s long-term average of 3.4%.
HFF | 32
Long-Term Average
6%
YoY Change (%)
Miami apartments were 96.8% occupied in the third quarter of 2015, some 120
basis points above the long term average (LTA) of 95.6%. Occupancy is expected
to be at or above the LTA from 2016-2018, averaging 96.0% over that period.
Absorption levels have remained in line with new supply, indicating a healthy
balance between the two. In the three-year outlook, absorption is expected to
average about 3,000 units per year, while new supply is forecast at an average of
4,000 units per year.
Forecast
8%
Units
Developers were expected to deliver 4,600 new units to the Miami metro in 2015,
on top of the 7,000 that came to market in 2014. New supply in 2015 is in line with
the long-term average for the metro, which is about 5,000 units delivered per year
going back to 1997. New supply is expected to average about 4,000 new units from
2016-2018.
Development
100
50
0
-50
-100
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$9,000
Year
T12 Vol.
Qtr. Vol.
2007
$2,656.33
$498.68
6.24%
$2,515.78
$578.48
6.24%
$7,000
$6,000
Volume ($MM)
$8,000
2008
$5,000
$4,000
2009
$3,000
$2,000
$1,000
$0
2010
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$3,500
2012
$2,500
Volume ($MM)
REAL-TIME SNAPSHOT
$3,000
$2,000
2013
$1,500
2014
$1,000
$500
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
SOFLA Acq # Props Global Acq # Props
1
Clarion Partners
New York, NY
$418.25
10
$27,415.19
1,080
2
Morgan Stanley
New York, NY
$322.80
4
$81,168.83
1,464
3
AVR Realty
Yonkers, NY
$314.19
4
$2,805.45
41
4
TIAA-CREF
New York, NY
$290.85
3
$33,062.09
550
5
Brookfield AM
Toronto, Canada
$220.64
4
$53,757.11
1,142
6
Atlanta, GA
$183.86
3
$2,213.58
60
7
Northland
Newton, MA
$157.15
4
$1,715.81
63
8
BC Property Investments
Miami, FL
$155.05
2
$560.29
9
Lone Star
Dallas, TX
$149.83
1
$28,971.26
10
BlueMountain Capital
New York, NY
$112.00
1
$453.87
Top Sellers
Rank Buyer
Avg. Cap
$2,175.68
$272.91
6.34%
$2,044.35
$694.27
6.43%
$1,661.59
$115.93
6.12%
$1,269.91
$186.80
6.31%
$1,144.16
$147.17
7.35%
$552.01
$102.12
7.31%
$604.71
$168.63
6.95%
$522.93
$105.02
8.14%
$533.24
$157.48
7.51%
$707.23
$276.10
7.69%
$929.69
$391.09
8.01%
$1,148.32
$323.66
7.53%
$1,627.28
$636.44
7.41%
$2,236.32
$885.14
6.84%
$2,023.28
$178.05
6.74%
$2,053.29
$353.66
6.51%
$1,641.54
$224.69
6.35%
$1,289.99
$533.59
6.31%
$1,468.85
$356.91
6.23%
$1,546.72
$431.53
6.28%
$1,914.13
$592.09
6.16%
$2,296.80
$916.26
6.00%
$2,613.06
$673.18
6.02%
$2,653.18
$471.65
5.95%
$2,413.64
$352.55
6.04%
$1,949.44
$452.06
6.15%
$1,645.78
$369.51
6.13%
$1,610.39
$436.27
5.96%
$1,665.64
$407.81
6.09%
$1,925.73
$712.14
6.05%
$2,664.07
$1,107.85
5.76%
$3,122.27
$894.47
5.68%
$3,768.71
$1,054.25
5.60%
South Florida’s multi-housing market remains enviable with trailing
twelve month volumes approaching $4 billion. During the first three
quarters of the 2015, private investors made up nearly half of the buyer
pool, accounting for 44% of all purchases. The equally ardent Institutions
followed closely behind, accounting for 43% of all acquisitions.
Private investors and listed REITs have been net sellers in this time
period. South Florida continues to exhibit fervent signs of popularity
among foreign investors, who have injected over $380 million this year
alone. Expect the economy to continue benefiting from its tourism, port
and logistics industries.
10
1,566
25
Location
SOFLA Acq # Props Global Acq # Props
1
Gables Residential
Atlanta, GA
$390.49
10
$5,178.01
121
2
Mill Creek Residential
Dallas, TX
$333.00
4
$922.09
15
3
Associated Estates
Cleveland, OH
$264.89
5
$3,619.71
117
4
Ares Management
Los Angeles, CA
$218.30
3
$7,553.04
1,044
5
Altman Companies
Boca Raton, FL
$197.60
4
$1,134.03
28
6
Related Companies
New York, NY
$163.79
2
$7,251.68
136
7
TGM Associates
New York, NY
$158.00
2
$1,705.45
61
8
AEW Capital
Boston, MA
$156.13
2
$22,396.81
691
9
UBS
Zurich, Switzerland
$152.50
2
$19,079.38
503
10
Home Properties
Rochester, NY
$149.83
1
$10,666.45
238
actual
chg vs prior
T12 Vol.
$3,768.71
126%
Q3 '15
$1,054.25
18%
T12 Vol.
206
43%
Q3 '15
57
-3%
Units
T12 Vol.
24,940
77%
7,048
23%
$/unit
T12 Vol.
$159,620.94
29%
Q3 '15
$150,729.22
-12%
Volume
# Trades
Q3 '15
Avg. Cap
T12 Vol.
5.60%
-50
Q3 '15
5.98%
51
HFF | 33
MINNEAPOLIS, MINNESOTA
Occupancy
OCCUPANCY
97.0%
96.5%
96.0%
95.5%
95.0%
94.5%
94.0%
93.5%
93.0%
92.5%
92.0%
91.5%
2009
2010
2011
Forecast
2012
2013
Long-Term Average
2014
2016
2017
2018
Forecast
$1,600
2015
$1,400
Rent/Unit/Mo.
The Minneapolis-St. Paul metro finished the third quarter of 2015 with annual
job gains of 37,600, a 2.0% annual growth rate. Axiometrics forecasts annual job
growth to have ended 2015 at 1.9%, some 20 basis points (bps) above the long-term
growth-year rate. The three-year outlook through 2018 calls for average annual job
gains to slow slightly to 29,000 jobs per year, with average annual growth of 1.5%.
$1,200
RENTAL RATES
Overview
$1,000
$800
$600
$400
$200
$0
Development
2009
Rental Rates
Annual effective rent growth was 2.6% in the third quarter, up from 2.3% at the end
of 2014 but slightly below the long-term average of 3.0% during growth years since
1997. Axiometrics forecasts annual effective rent growth to increase gradually,
peaking at 3.9% in 2018 and averaging 3.5% over the three-year forecast period.
HFF | 34
2012
2013
2014
Forecast
2015
2016
2017
2018
Long-Term Average
YoY Change (%)
4%
2%
0%
-2%
-4%
-6%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
12,000
10,000
8,000
Units
Minneapolis’ annual absorption was about 3,800 units in the third quarter and
has generally been balanced with supply since the end of the Great Recession.
Absorption is forecast to outpace supply in 2016 and average about 2,140 units
over the three-year outlook.
Third-quarter 2015 occupancy stood at 96.6%, and the year is forecast to have
ended at 96.4%. This would be the highest recorded annual average occupancy
rate since at least 1997. Occupancy is forecast to remain high, averaging 96.2%
through 2018, more than 180 bps higher than the long-term average of 94.4%.
2011
6%
6,000
4,000
2,000
0
-2,000
-4,000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
60
40
YoY Change (%)
Axiometrics forecasts development to slow slightly over the three-year forecast
period, with an annual average of about 3,000 units each year through 2018.
Construction is occurring in eight of the metro’s nine submarkets, with the highest
concentrations in the Minneapolis, West and St. Paul submarkets.
After reaching a nadir of just 871 units in 2010, apartment deliveries ramped up to
5,100 units by 2013. Since then, the pace of new supply dropped. New deliveries
totaled 4,100 units in 2014 and just below 3,500 units as of the third quarter of 2015.
2010
20
0
-20
-40
-60
-80
-100
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$1,600
Year
T12 Vol.
Qtr. Vol.
2007
$694.96
$152.51
6.49%
$673.90
$151.64
6.45%
$1,200
$1,000
Volume ($MM)
$1,400
2008
$800
$600
2009
$400
$200
2010
$0
2006
2007
2008
2009
2015
2010
2011
2014
2012
2013
2013
2014
2011
2012
$11.45
6.57%
$50.35
6.45%
$279.62
$66.18
6.55%
$212.90
$84.93
7.06%
$397.32
$195.87
7.07%
$350.40
$3.42
7.08%
$381.92
$97.70
6.92%
$299.73
$2.74
6.85%
$136.36
$32.50
0.00%
$139.27
$6.34
7.16%
$54.39
$12.81
7.54%
$93.65
$42.00
7.33%
$218.78
$157.63
7.17%
$260.85
$48.41
6.91%
$333.81
$85.77
6.80%
$347.82
$56.01
6.56%
$247.71
$57.52
6.49%
$900
$364.90
$165.60
6.34%
2012
$700
Volume ($MM)
$584.71
$365.95
$1,000
$800
REAL-TIME SNAPSHOT
Avg. Cap
$600
2013
$500
$400
$300
2014
$200
$100
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
Kirkland, WA
MIN Acq # Props Global Acq # Props
1
Weidner Apt Homes
$348.58
9
$2,493.04
2
Sterling Real Estate Trust Fargo, ND
$103.50
7
$175.12
3
AEW Capital
$100.00
1
$33,564.90
Boston, MA
131
11
1,768
4
University Communities LLC Denver, CO
$83.50
4
$346.63
5
Clarion Partners
New York, NY
$69.48
2
$27,415.19
22
6
Sidal Realty
Minneapolis, MN
$64.28
3
$74.49
4
7
White Oak Partners
Westerville, OH
$58.00
1
$333.83
14
274
1,080
8
Equus Capital Partners
Morrisville, PA
$57.80
2
$5,757.60
9
Marquette Cos
Naperville, IL
$54.25
1
$656.29
22
10
JP Morgan
New York, NY
$53.75
1
$47,407.98
628
Top Sellers
Rank Buyer
$330.08
$50.95
6.28%
$361.93
$87.86
6.30%
$433.45
$129.03
6.26%
$450.15
$182.30
6.66%
$614.63
$215.44
6.72%
$574.04
$47.27
6.80%
$498.05
$53.04
6.98%
$580.31
$264.56
6.47%
$450.17
$85.29
6.41%
$528.88
$125.98
6.52%
$574.06
$98.23
6.43%
$937.24
$627.74
6.48%
$1,109.82
$257.87
6.34%
$1,263.83
$279.99
6.17%
$1,353.03
$187.42
6.10%
Despite its “frostbelt” location, population growth in Minneapolis is
above-average, according to Moody’s. At nearly $1.4 billion, Minneapolis’s
trailing twelve month volumes have reached a record high. During the
first nine months of 2015 private investors were incredibly active, both as
net sellers while also seizing 72% of all acquisitions, leaving Institutions
the remaining 28%. Recent years of robust employment growth are
resulting in strong demand for apartments, keeping developers busy.
With a robust vacancy rate of 3.4% during 3Q strong demand levels in
the multi-housing sector should prevail as the labor market continues
to improve.
Location
MIN Acq # Props Global Acq # Props
1
Opus
Hopkins, MN
$130.79
2
$7,486.16
305
2
Filister Properties
Minneapolis, MN
$120.50
9
$120.50
3
Henderson Global
London, United Kingdom
$115.80
3
$11,824.07
435
4
Invesco RE
Atlanta, GA
$109.00
1
$17,035.80
482
9
5
Excelsior Group
Eden Prairie, MN
$109.00
1
$139.90
8
6
Ryan Companies
Minneapolis, MN
$109.00
1
$2,264.92
94
7
Doran Companies
Minneapolis, MN
$83.50
4
$104.51
5
8
Waterton Associates
Chicago, IL
$81.40
2
$2,542.51
77
9
Walton Street Capital
Chicago, IL
$78.13
3
$13,918.49
233
10
CalPERS
Sacramento, CA
$78.13
3
$26,896.18
989
Volume
# Trades
Units
$/unit
Avg. Cap
actual
chg vs prior
T12 Vol.
$1,353.03
136%
Q3 '15
$187.42
-33%
T12 Vol.
78
53%
Q3 '15
21
110%
T12 Vol.
9,861
76%
Q3 '15
1,928
21%
T12 Vol.
$127,226.75
24%
Q3 '15
$97,209.78
-45%
T12 Vol.
6.10%
-33
Q3 '15
5.83%
-15
HFF | 35
NEW YORK CITY, NEW YORK
Occupancy
Forecast
Long-Term Average
97.5%
97.0%
OCCUPANCY
96.5%
96.0%
95.5%
95.0%
94.5%
94.0%
93.5%
2009
2010
Rental Rates
New York’s annual effective rent growth was 4.1% in the third quarter, up from
1.9% at the end of 2014 and well above the long-term average of 2.4% since 2000.
Axiometrics forecasts an annual average of 3.3% effective rent growth over the
three-year forecast period.
HFF | 36
2017
2018
2016
2017
2018
Forecast
Rent/Unit/Mo.
$2,000
$1,500
2010
2011
2012
2013
2014
Forecast
2015
Long-Term Average
4%
YoY Change (%)
2009
6%
2%
0%
-2%
-4%
-6%
-8%
-10%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
40,000
35,000
30,000
Units
Annual absorption topped 26,000 units in the third quarter, far exceeding
supply. Demand is forecast to average more than 21,100 units over the
three-year outlook, slightly less than average annual supply, but with little effect on
forecast occupancy.
New York maintains a perpetually high occupancy rate, with a long-term average
of 96.3%. Third quarter 2015 occupancy stood at 97.0% and is forecast to have
ended the year at 96.9%. Despite increasing new development, occupancy is
forecast to remain near the long-term average over the next three years.
2016
$2,500
$0
25,000
20,000
15,000
10,000
5,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
200
150
YoY Change (%)
2015
$500
Axiometrics reported almost 21,900 units delivered in 2014 and close to 20,000
for the year ending third quarter 2015. The three-year outlook calls for an annual
average of 26,500 units to enter the market. Deliveries remain concentrated in
Brooklyn and Queens.
2014
$1,000
Development
New York’s apartment deliveries appeared to be ramping up sharply from 20102014, but the severity of the Great Recession pushed new development down
to critically low levels for the size of the market. From 2006-2009, apartment
development averaged more than 28,500 units annually.
2013
$3,000
RENTAL RATES
As the financial capital of the nation, New York led the country in job creation.
More than 116,000 jobs were added year-over year for the third quarter of 2015.
During growth years, annual job growth in this large market has averaged 1.9%
per year since 1997 and closed the third quarter at 1.8%. Job growth is forecast
to average 1.2% through 2018, with annual average gains of about 80,000 jobs.
2012
$3,500
Overview
2011
100
50
0
-50
-100
-150
-200
-250
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
Year
T12 Vol.
Qtr. Vol.
2007
$15,100.27
$2,926.60
5.78%
$16,322.51
$3,854.25
5.73%
$20,000
Volume ($MM)
$25,000
2008
$15,000
$10,000
2009
$5,000
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$4,305.34
5.75%
$4,145.41
5.66%
$14,577.98
$2,272.99
5.65%
$12,434.01
$1,710.28
5.81%
$10,182.42
$2,053.74
5.86%
$6,617.58
$580.57
6.06%
$4,821.89
$477.30
6.29%
$3,664.96
$553.35
6.57%
$1,996.47
$385.26
6.64%
$2,162.34
$746.43
6.53%
$2,859.69
$1,174.65
6.40%
$3,338.15
$1,031.81
6.47%
$3,961.07
$1,008.18
6.56%
$5,350.42
$2,135.79
6.33%
$5,870.93
$1,695.16
6.27%
$6,078.17
$1,239.05
5.94%
$8,220.09
$3,150.09
5.87%
$18,000
$7,899.16
$1,814.86
5.82%
2012
$14,000
Volume ($MM)
$18,536.37
$15,231.59
$20,000
$16,000
REAL-TIME SNAPSHOT
Avg. Cap
$12,000
2013
$10,000
$8,000
$6,000
2014
$4,000
$2,000
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
NYC Acq # Props Global Acq # Props
1
Lone Star
Dallas, TX
$1,579.64
29
$28,971.26
1,566
2
A&E Real Estate
New York, NY
$1,337.92
67
$1,717.34
85
3
HFZ Capital Group
New York, NY
$1,113.40
5
$2,895.21
22
4
Brookfield AM
Toronto, Canada
$917.34
5
$53,757.11
1,142
215
5
Galil Management
Brooklyn, NY
$799.29
84
$1,604.10
6
Stellar Management
New York, NY
$780.91
17
$4,786.88
75
7
Kushner Companies
New York, NY
$756.52
28
$5,198.25
145
8
Blackstone
New York, NY
$688.68
23
$191,599.69
9
Fairstead Capital
New York, NY
$688.68
23
$688.68
23
10
L&M Development Partners
Larchmont, NY
$667.10
24
$1,346.32
43
Top Sellers
Rank Buyer
6,868
$9,132.58
$2,928.58
5.75%
$10,192.99
$2,299.46
5.82%
$10,574.92
$3,532.02
5.80%
$14,251.58
$5,491.53
5.78%
$15,448.71
$4,125.71
5.72%
$15,742.80
$2,593.55
5.52%
$14,596.96
$2,386.18
5.26%
$14,990.17
$5,884.74
4.89%
$14,091.57
$3,227.10
4.83%
$14,549.57
$3,051.55
4.84%
$18,457.11
$6,293.73
4.76%
$17,254.51
$4,682.14
4.91%
$19,127.12
$5,099.71
4.99%
$19,846.41
$3,770.84
4.95%
$17,473.51
$3,920.83
5.02%
The flood of young new citizens and improving incomes in New York City
continues to spur the economy and real estate to record highs. Private
investors comprised 65% of all acquisitions in the first nine months of
2015, while listed REITs were net sellers in this time period. Foreign
capital continues to seek the relative safety in gateway markets of this
area injecting nearly $1.1 billion into multi-housing assets in 2015. Despite
modest job gains, NYC is experiencing a development boom, particularly
in Brooklyn and Queens. Foreign investors are participating in this vein
as well. Rent gains have curbed, but still remain well above the rate of
inflation and are forecasted to have grown 4.2% in 4Q2015, according to
Axiometrics.
Location
NYC Acq # Props Global Acq # Props
Rochester, NY
1
Home Properties
$1,579.64
29
$10,666.45
238
2
Urban American Management Corp West New York, NJ $1,462.93
51
$1,944.72
116
3
AvalonBay
Arlington, VA
$1,027.13
8
$7,273.52
125
4
Fannie Mae
Washington, D.C.
$969.33
10
$3,514.58
380
5
City Investment Fund
New York, NY
$917.34
5
$1,351.96
12
6
Westbrook Partners
New York, NY
$721.51
35
$12,899.14
239
7
Bettina Equities
New York, NY
$688.68
23
$863.61
25
8
AREA Property Ptnrs
New York, NY
$664.17
34
$13,348.56
327
9
CalPERS
Sacramento, CA
$649.00
3
$26,896.18
989
10
Extell
New York, NY
$575.00
1
$7,301.33
133
actual
Volume
chg vs prior
T12 Vol.
$17,473.51
Q3 '15
$3,920.83
4%
# Trades
T12 Vol.
1,105
-9%
Q3 '15
245
-6%
Units
T12 Vol.
60,130
-16%
11,909
-10%
$/unit
T12 Vol.
$312,498.93
Q3 '15
$321,467.31
Q3 '15
Avg. Cap
-5%
17%
4%
T12 Vol.
5.02%
26
Q3 '15
4.61%
-31
HFF | 37
NORTHERN NEW JERSEY
Occupancy
Forecast
Long-Term Average
97.5%
97.0%
OCCUPANCY
96.5%
96.0%
95.5%
95.0%
94.5%
94.0%
93.5%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$2,000
2015
$1,800
Rent/Unit/Mo.
Verizon Communications and Prudential Financial are among the many large
corporations that anchor the employment base in Newark, which is home to a
highly-skilled labor pool. Job growth was 1.2% in 2014, or just less than 14,000
added jobs, and is expected to have landed at 1.0% in 2015. While not as robust
as 2014, that growth remains an improvement from the average of 0.6% seen from
2011-2013. Along with an improved job market, the apartment sector has started
to see some positive momentum. Expect that momentum to continue through the
2016-2018 forecast period.
$1,600
RENTAL RATES
Overview
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
2009
Newark’s annual effective rent growth was 3.1% in the third quarter 2015. Fullyear growth for 2015 is expected to have been 2.9%, an improvement over 2014’s
2.2%.
The strongest growth rates are being seen in Class B properties, which recorded
3.8% growth in the third quarter. While Class A had a more modest 2.2% growth,
it marked an improvement over the past three quarters, when annual growth had
been either flat or negative. Class C growth was healthy at 3.3%
Effective rent growth is expected to continue improving through the forecast
period, averaging 3.8%.
HFF | 38
2012
2013
2014
2015
Forecast
Long-Term Average
YoY Change (%)
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
6,000
5,000
4,000
Units
Rental Rates
Newark is a high-occupancy market, with average occupancy exceeding 96%.
The occupancy rate remained high at 97.5% in the third quarter of 2015 and is
expected to average 96.4% from 2016-2018. Absorption is relatively in line with
new development and is expected to average 700 units annually from 20162018. As long as job growth remains at or exceeds current levels, apartment
fundamentals should remain healthy.
2011
6%
3,000
2,000
1,000
0
-1,000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
140
120
YoY Change (%)
Developers are expected to have delivered close to 1,700 new units to the Newark
market in 2015, down from the 3,000 new units delivered in 2014. New development is
expected to average 1,100 new units per year from 2016-2018, below the
long-term-average of 1,450.
Development
2010
100
80
60
40
20
0
-20
-40
-60
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
Year
T12 Vol.
Qtr. Vol.
2007
$853.89
$123.08
6.94%
$859.43
$336.12
6.80%
$1,911.16
$1,231.50
6.73%
$2,138.77
$448.07
6.40%
$2,000
Volume ($MM)
$2,500
2008
$1,500
$1,000
2009
$500
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$1,800
2012
$1,400
$1,200
Volume ($MM)
REAL-TIME SNAPSHOT
$1,600
2013
$1,000
$800
$600
$2,243.65
$227.96
6.48%
$2,070.75
$163.22
6.70%
$994.74
$155.49
6.88%
$690.10
$143.43
6.52%
$556.85
$94.72
6.56%
$442.04
$48.41
6.50%
$385.31
$98.77
6.54%
$312.41
$70.53
6.60%
$262.49
$44.80
6.60%
$278.96
$64.87
6.67%
$344.97
$164.78
6.36%
$940.49
$666.04
6.19%
$1,224.98
$329.29
6.22%
$1,333.99
$173.88
6.15%
$1,749.19
$579.98
6.36%
$1,322.39
$239.24
6.41%
$1,243.45
$250.34
6.30%
$1,257.46
$187.90
6.21%
$996.24
$318.76
6.07%
$1,113.47
$356.47
6.04%
$1,427.66
$564.53
5.72%
$1,342.16
$102.39
5.93%
$1,201.08
$177.68
6.02%
$1,289.75
$445.14
5.87%
$1,089.20
$363.99
6.01%
$400
$1,273.16
$286.35
6.00%
$200
$1,506.68
$411.21
5.85%
$1,558.05
$496.52
5.80%
$0
2014
Avg. Cap
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
NNJ Acq # Props Global Acq # Props
1
Lone Star
Dallas, TX
$777.34
14
$28,971.26
1,566
2
Kushner Companies
New York, NY
$222.16
6
$5,198.25
145
3
Extell
New York, NY
$165.66
2
$5,297.07
169
4
Cammeby's
New York, NY
$136.00
1
$3,224.42
101
5
Fieldstone Properties
Parsippany, NJ
$134.15
2
$953.44
21
6
Mesirow Financial
Chicago, IL
$133.25
2
$2,107.61
36
7
JP Morgan
New York, NY
$125.50
1
$47,407.98
628
8
Cornerstone RE Advisers
Hartford, CT
$120.25
1
$9,842.20
225
9
Pantzer Properties
New York, NY
$120.00
1
$1,565.18
26
10
DSF Advisors
Waltham, MA
$110.03
1
$852.97
15
Top Sellers
Rank Buyer
$1,482.83
$288.76
6.22%
$1,517.80
$321.32
6.09%
$1,330.24
$223.65
6.04%
Institutions and private investors have remained extremely active in NNJ’s
multi-housing market during the first three quarters of 2015, accounting
for 50% and 47% of all acquisitions, respectively. Meanwhile, listed REITs
were net sellers. Powered by growth in the tech industry paired with
profitability on Wall Street should continue to spur demand in the Northern
New Jersey much more afforable multi-housing sector. Deliveries in 2015
are expected to be nearly half of 2014’s total. Fundamentals remain strong
as residents are lured to New Jersey’s Gold Coast and train stations.
Vacancy rate stood at 3.1% during the third quarter of 2015.
Location
NNJ Acq # Props Global Acq # Props
1
Home Properties
Rochester, NY
$777.34
14
$10,666.45
238
2
AvalonBay
Arlington, VA
$250.25
3
$7,273.52
125
3
Ironstate Development
Hoboken, NJ
$206.65
4
$816.19
15
4
Garden Homes
New York, NY
$151.00
2
$389.56
11
5
AFL-CIO
Washington, D.C.
$125.50
1
$1,640.77
58
6
Daibes Enterprises
Edgewater, NJ
$120.25
1
$273.50
7
7
Capri
Chicago, IL
$120.00
1
$2,550.90
60
8
CBRE Global Investors
Los Angeles, CA
$110.03
1
$30,970.51
902
9
Greenfield Partners
Westport, CT
$104.00
1
$2,693.06
145
10
Prism Capital Partners
Bloomfield, NJ
$104.00
1
$281.88
12
actual
Volume
# Trades
Units
$/unit
Avg. Cap
chg vs prior
T12 Vol.
$1,330.24
-12%
Q3 '15
$223.65
-30%
T12 Vol.
64
-29%
Q3 '15
8
-62%
T12 Vol.
8,111
3%
Q3 '15
1,284
-43%
T12 Vol.
$167,842.72
-13%
Q3 '15
$174,182.24
13%
T12 Vol.
6.04%
19
Q3 '15
5.03%
-91
HFF | 39
PHILADELPHIA, PENNSYLVANIA
Occupancy
Forecast
Long-Term Average
96.0%
95.5%
OCCUPANCY
95.0%
94.5%
94.0%
93.5%
93.0%
92.5%
92.0%
91.5%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$1,800
2015
$1,600
Rent/Unit/Mo.
Philadelphia is not considered a high job-growth market, but nonetheless added
2.1% to its employment base in 2014, just slightly less than the U.S. average.
Job growth cooled to 0.5% as of the third quarter of 2015, close to the annual
growth-year average of 0.9% since 1997.
$1,400
RENTAL RATES
Overview
$1,200
$1,000
$800
$600
$400
$200
Axiometrics forecasts moderately strong job growth over the three-year forecast
period, averaging 1.5% per year through 2018, or about 14,200 new jobs annually.
$0
2009
2010
2011
2012
2013
2014
2015
Annual absorption hit just more than 3,000 units in the third quarter of 2015, close
to the 2014 annual total of 3,100. Demand is forecast to cool slightly through 2018,
with an annual average absorption of 1,900 per year.
Rental Rates
Philadelphia’s annual average effective rent growth was a strong 3.9% in the
third quarter, more than double the 1.7% rate for all of 2014. Despite occasional
negative absorption in the market, effective rent growth has remained positive
each year since 1999, save one.
Rent growth is forecast to remain strong at an annual average of 3.7% from
2016-2018, with a peak of 4.1% in 2017, well above the long-term average of 2.2%.
HFF | 40
Forecast
Long-Term Average
2014
2015 2016 2017 2018
4%
YoY Change (%)
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
2009
2010
2011
2012
2013
Units
Occupancy remains high in this market, rarely dipping below 94% on
an annual average basis since 1998 and averaging 95.6% over that
period. Third-quarter 2015 occupancy stood at the market average
of 95.7%. The average annual occupancy forecast for Philadelphia is
95.3% through 2018.
5%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
2009
2010
2011
2012
2013
2014
2015
2016
2017
40
30
YoY Change (%)
Completions are forecast to average close to 2,100 units per year through 2018,
with 2,400 units anticipated for delivery in 2016.
Annual apartment deliveries totaled just over 2,000 by the third quarter of
2015, twice the level attained in 2013 and the highest total since 2005. Deliveries
dipped to less than 200 units after the Great Recession, despite continued
population gain of more than 20,000 per year from 2011-2014.
Development
20
10
0
-10
-20
-30
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
Year
T12 Vol.
Qtr. Vol.
2007
$898.88
$182.99
6.13%
$1,165.90
$392.98
6.13%
$1,980.26
$1,076.09
6.18%
$2,093.85
$441.79
6.27%
$2,000
Volume ($MM)
$2,500
2008
$1,500
$1,000
2009
$500
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$1,600
2012
$1,200
Volume ($MM)
REAL-TIME SNAPSHOT
$1,400
$1,000
2013
Avg. Cap
$2,107.19
$196.33
6.16%
$1,937.49
$223.28
6.31%
$977.64
$116.24
6.23%
$676.26
$140.41
6.59%
$508.70
$28.77
6.88%
$318.85
$33.43
6.89%
$252.12
$49.50
7.03%
$176.11
$64.41
6.97%
$165.82
$18.49
6.99%
$149.83
$17.44
6.93%
$139.08
$38.75
7.08%
$742.79
$668.11
7.08%
$781.07
$56.77
7.02%
$1,050.52
$286.89
6.82%
$1,172.45
$160.68
6.68%
$588.71
$84.37
6.45%
$675.85
$143.91
6.36%
$595.90
$206.94
6.25%
$691.32
$256.11
6.16%
$1,111.64
$504.68
6.09%
$1,164.11
$196.38
6.21%
$800
$1,114.71
$157.53
6.42%
$1,086.32
$227.72
6.34%
$600
$1,065.26
$483.62
6.52%
2014
$400
$200
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
PHI Acq # Props Global Acq # Props
1
Lone Star
Dallas, TX
$695.55
15
$28,971.26
1,566
2
Los Angeles, CA
$213.03
2
$31,293.03
1,055
3
Lowe Enterprises
Los Angeles, CA
$161.45
3
$3,726.00
99
4
Lubert-Adler
Philadelphia, PA
$131.91
2
$4,352.70
304
628
5
JP Morgan
New York, NY
$113.00
1
$47,407.98
6
Castle Rock Equity Group
Florham Park, NJ
$112.50
1
$157.00
2
7
Lindy Property Management
Jenkintown, PA
$106.94
1
$216.17
10
8
Scully Co
Jenkintown, PA
$103.59
2
$395.25
13
9
Equus Capital Partners
Morrisville, PA
$95.30
2
$5,757.60
274
10
MRP Realty
Washington, D.C.
$95.00
3
$1,290.70
25
Top Sellers
Rank Buyer
$1,188.30
$319.42
6.44%
$1,503.27
$472.50
6.24%
$1,503.24
$227.69
6.41%
$1,474.35
$454.73
6.24%
$1,492.04
$337.11
6.31%
$1,369.25
$349.72
6.22%
$1,643.35
$501.79
6.20%
Philadelphia remains popular among Millennials, who are often lured
by its transit and pedestrian-oriented lifestyle. At 56%, Institutions
comprised over half all acquisitions during the first three quarters of 2015.
Simultaneously, private investors made up most of the balance of the buyer
pool at 34%. Canada has developed a sudden appetite for this market,
investing over $112 million during that time. Job growth in construction
is expected to return to annualized rates exceeding 5% during the next
2.5 years, as significant commercial construction projects continue to flow
through the development pipeline, particularly in Center City and University
City. Vacancy stood at 4.28% at the end of the third quarter in 2015.
Location
PHI Acq # Props Global Acq # Props
1
Home Properties
Rochester, NY
$695.55
15
$10,666.45
238
2
John Buck Co
Chicago, IL
$156.60
1
$4,179.85
31
3
San Diego, CA
$140.24
2
$12,464.56
348
4
Pearl Properties
Philadelphia, PA
$124.67
3
$164.88
10
5
Realen
Berwyn, PA
$113.00
1
$169.64
4
6
Northwestern Mutual
Milwaukee, WI
$113.00
1
$7,047.14
180
7
Federal Capital
Bethesda, MD
$112.50
1
$1,920.97
34
8
Alterra Property Group
United States
$112.50
1
$112.50
1
9
Cross Props
Philadelphia, PA
$112.50
1
$147.50
2
10
Heitman
Chicago, IL
$106.94
1
$5,188.07
132
actual
Volume
chg vs prior
T12 Vol.
$1,643.35
9%
Q3 '15
$501.79
43%
T12 Vol.
78
-5%
Q3 '15
19
Units
T12 Vol.
12,313
-16%
3,080
34%
$/unit
T12 Vol.
$142,776.35
Q3 '15
$175,212.83
# Trades
Q3 '15
Avg. Cap
6%
39%
0%
T12 Vol.
6.20%
-21
Q3 '15
6.16%
36
HFF | 41
PORTLAND, OREGON
Occupancy
Forecast
Long-Term Average
97%
OCCUPANCY
96%
95%
94%
93%
92%
91%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$1,600
2015
$1,400
The Beaverton and Northwest submarkets experienced the most new apartment
deliveries in 2015 – receiving 939 and 721 units, respectively, according to
Axiometrics’ identified supply. Beverton’s astounding 20.2% annual effective rent
growth in the third quarter outperformed all other Portland submarkets. You read
that correctly, 20.2%!
Occupancy was 96.4% in the third quarter of 2015, which was also expected
to be the full-year average, increasing from 95.8% in 2014. Axiometrics
expects occupancy to moderate to 95.3% in 2016 and stay close to 95.0% in the
three-year outlook.
Supply and absorption have been essentially in balance, with approximately
5,000 units delivered and absorbed in 2014 and 2015. Some 194 units were
absorbed in the third quarter of 2015. Though there was an imbalance between
units delivered and absorbed in the third quarter, Axiometrics expects 2015 at
5,031 units absorbed. Absorption is forecast to lag behind new supply in 2016, but
then stay in relative balance through 2018.
Rental Rates
Portland climbed to the top of the list for annual effective rent growth in 2015.
Annual effective rent growth was 14.2% in the third quarter, and the MSA was
expected to end 2015 at 12.0%. The 2014 rate was 6.7%. In the outlook, Axiometrics
expects rent growth to average 4.7% as growth rates return to more sustainable
levels, but that still puts it as one of the top markets in the country over the next
three years.
HFF | 42
2009
2010
2011
2012
2013
2014
Forecast
RENTAL RATES
Rent/Unit/Mo.
15%
2015
Long-Term Average
10%
YoY Change (%)
A total of 5,154 new apartment units were delivered to the Portland market in 2014,
well above the long-term average of 3,241 units. Some 1,122 units came to market
in the third quarter of 2015, and Axiometrics expects a total of 4,609 units to have
delivered in 2015, with another 5,411 units in 2016.
$600
$0
5%
0%
-5%
-10%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
6,000
5,000
4,000
Units
Development
$800
$200
The market remains a center of the global clean-energy economy. It has an
increasing concentration of clean technology firms, experienced manufacturers
engaged in supply chain across various sectors and international recognition
for innovative urban development. A robust entrepreneurial environment helps
foster the growth of startup companies in industries such as software and
athletics and outdoors. Axiometrics expects the metro to produce 27,000 jobs
(2.4% job growth) in 2016, outperforming the forecasted national average of 1.8%.
$1,000
$400
3,000
2,000
1,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
80
60
YoY Change (%)
Portland recorded 3.7% job growth in the third quarter of 2015 and is expected
to have averaged 3.0% (32,324 jobs added) in 2015. Portland’s long-term, growthyear average job growth since 1997 was 2.4%. The above-average job growth is
fueling the apartment market’s healthy performance.
$1,200
Overview
40
20
0
-20
-40
-60
-80
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$2,500
Year
T12 Vol.
Qtr. Vol.
2007
$551.78
$76.40
5.70%
$653.65
$271.04
5.55%
$738.86
$253.28
5.53%
$1,069.22
$468.50
5.91%
$1,434.60
$441.78
5.81%
$1,241.88
$78.31
6.05%
$1,250.09
$261.50
6.24%
$830.10
$48.51
6.26%
$416.26
$27.94
6.40%
$368.36
$30.41
6.34%
$192.79
$85.93
6.35%
$254.46
$110.18
6.59%
$239.57
$13.05
7.59%
$307.93
$98.78
7.41%
$273.74
$51.73
7.29%
$480.32
$316.76
6.67%
$544.11
$76.85
6.53%
$725.12
$279.79
6.56%
$827.25
$153.86
6.49%
$861.06
$350.57
6.47%
$1,052.08
$267.86
6.55%
$836.58
$64.29
6.48%
$847.32
$164.59
6.43%
$857.28
$360.53
6.34%
$743.38
$153.97
6.09%
$812.64
$133.55
6.16%
$847.30
$199.25
6.21%
$930.39
$443.62
6.38%
$961.62
$185.20
6.35%
$1,155.92
$327.85
6.33%
$1,457.00
$500.33
6.07%
$1,472.65
$459.27
5.82%
$1,645.57
$358.11
5.79%
$1,847.68
$529.97
5.75%
$2,062.49
$715.13
5.78%
Volume ($MM)
$2,000
2008
$1,500
$1,000
2009
$500
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$1,800
2012
$1,400
$1,200
Volume ($MM)
REAL-TIME SNAPSHOT
$1,600
2013
$1,000
$800
$600
2014
$400
$200
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
POR Acq # Props Global Acq # Props
1
Jackson Square
San Francisco, CA
$268.77
7
$2,134.28
76
2
Holland Partners
Vancouver, WA
$150.22
4
$1,864.26
91
3
New York, NY
$131.78
4
$3,379.19
79
4
Los Angeles, CA
$131.78
4
$2,356.02
49
5
Heitman
Chicago, IL
$120.85
2
$12,705.34
298
6
NBP Capital
Portland, OR
$113.45
2
$192.60
7
TIAA-CREF
New York, NY
$109.15
2
$33,062.09
8
550
8
Sequoia Equities
Walnut Creek, CA
$107.55
2
$1,507.05
33
9
Invesco RE
Atlanta, GA
$105.50
1
$27,248.90
564
10
Allstate
Northbrook, IL
$87.78
2
$2,142.70
45
Top Sellers
Rank Buyer
Avg. Cap
With trailing twelve month volumes surpassing $2 billion, Portland’s multihousing market has reached a record high. During the first three quarters
of 2015, private investors control the buyer composition, accounting for
62% of all acquisitions. While not exempt from economic cycles, Portland
maintains its allure. Recent strong job creation trends across a broad
base of industries have placed Portland in an enviable position. Its very
low energy costs and above average concentration of highly skilled
workers make it attractive for many businesses. The $1.5 billion MAX
Orange Line commuter rail system stretching from Portland to southeast
suburban Milwaukee began running in September and is expected to bring
significant economic benefits to the area.
Location
POR Acq # Props Global Acq # Props
1
Holland Partners
Vancouver, WA
$335.00
8
$2,120.43
50
2
Unico Properties
Seattle, WA
$158.50
2
$1,617.48
39
3
Fowler Property Acquisitions San Francisco, CA
$130.13
7
$2,882.37
241
4
UBS
Zurich, Switzerland
$120.85
2
$19,079.38
503
5
Mill Creek Residential
Dallas, TX
$109.15
2
$922.09
6
Carlyle Group
Washington, D.C.
$107.03
2
$36,421.78
1,029
7
CIGNA
Hartford, CT
$105.50
1
$4,634.68
106
8
Cardinal Group Investments
Denver, CO
$97.20
1
$132.97
5
9
Fundamental Advisors LP
New York, NY
$97.20
1
$372.26
7
10
Invesco RE
Atlanta, GA
$90.50
2
$17,035.80
15
482
Volume
# Trades
Units
$/unit
Avg. Cap
actual
chg vs prior
T12 Vol.
$2,062.49
42%
Q3 '15
$715.13
35%
T12 Vol.
120
50%
Q3 '15
32
10%
T12 Vol.
14,132
25%
Q3 '15
4,287
12%
T12 Vol.
$152,090.09
Q3 '15
$168,460.46
15%
15%
T12 Vol.
5.78%
-29
Q3 '15
5.56%
-48
HFF | 43
SAN ANTONIO, TEXAS
Occupancy
Forecast
Long-Term Average
96%
95%
OCCUPANCY
94%
93%
92%
91%
90%
89%
88%
2009
2010
Rental Rates
San Antonio had a strong third quarter with annual effective rent growth of 3.6%.
The year is expected to have ended at 3.5%, a very strong result compared to
the market’s historical average. Annual effective rent growth for San Antonio
averaged 1.6% since 1998. When excluding negative growth-years, the long-term
average is 2.2%. Expect the market to maintain growth above the historical norm
and average 3.7% growth the next three years.
HFF | 44
2017
2018
2016
2017
2018
Forecast
Rent/Unit/Mo.
$400
YoY Change (%)
2009
2010
2011
2012
2013
2014
Forecast
2015
Long-Term Average
4%
3%
2%
1%
0%
-1%
-2%
-3%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
8,000
7,000
6,000
Units
Absorption was 2,485 units in the third quarter, outpacing supply by a few hundred
units. Axiometrics expects 7,267 units to have been absorbed during 2015. In the
three-year outlook, absorption is forecast to average close to 3,000 units annually.
San Antonio apartments were 94.5% occupied in the third quarter, with the
end-of-year forecast at 94.1%. Occupancy rates in the market have averaged
94.0% annually since 1997. In the three-year outlook, San Antonio occupancy is
expected to average 94.4%, with a peak of 94.7% in 2017.
2016
$600
5%
5,000
4,000
3,000
2,000
1,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
60
50
YoY Change (%)
2015
$800
$0
An average of 3,000 units have been delivered to the San Antonio market annually
since 1997. With the pace of new deliveries increasing during the back half of
2015, Axiometrics expected last year to end with a total of 6,308 new units in the
metro. The three-year outlook sees approximately 3,352 units delivered annually,
close to the long-term average.
2014
$200
Development
Developers delivered 2,095 new apartment units to the market just in the third
quarter of 2015. The Bexar County (547 units) and East (327 units) submarkets
received the highest number of units, but Far North Central (294 units) and Far West
(279 units) also saw a large portion, according to Axiometrics’ identified supply.
2013
$1,000
RENTAL RATES
San Antonio has seen healthy job growth since the recession, with the rate
averaging 2.9% since 2011. The metro’s job growth was 3.5% in the third quarter
of 2015, 141 basis points above the national average. San Antonio’s job growth
is forecast to remain above the national rate, averaging 2.0% in the three-year
outlook (2016-2018), compared to 1.7% nationwide.
2012
$1,200
Overview
2011
40
30
20
10
0
-10
-20
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$1,800
Year
T12 Vol.
Qtr. Vol.
Avg. Cap
2007
$620.17
$140.98
6.89%
$818.49
$304.13
6.91%
$769.63
$107.77
7.03%
$698.84
$145.96
7.31%
$713.01
$155.14
7.32%
$429.98
$21.10
7.18%
$450.81
$128.60
7.25%
$448.04
$143.19
7.39%
$297.84
$4.95
0.00%
$302.74
$26.00
0.00%
$231.75
$57.61
0.00%
$199.51
$110.96
0.00%
$194.56
$0.00
0.00%
$171.06
$2.50
0.00%
$238.54
$125.09
6.17%
$306.62
$179.04
6.22%
$357.23
$50.61
6.30%
$552.24
$197.50
5.90%
$601.75
$174.60
6.03%
$620.69
$197.97
5.72%
$713.63
$143.55
5.77%
$642.59
$126.46
5.96%
$726.44
$258.45
5.97%
$816.53
$288.07
6.21%
$931.70
$258.72
6.12%
$1,039.39
$234.15
6.18%
$1,066.60
$285.66
6.24%
$1,082.48
$303.96
6.03%
$911.15
$87.39
6.12%
$1,095.03
$418.03
6.10%
$1,219.75
$410.38
6.48%
$1,274.45
$358.65
6.50%
$1,685.64
$498.58
6.47%
$1,598.42
$330.81
6.38%
$1,555.29
$367.24
6.15%
$1,400
$1,200
Volume ($MM)
$1,600
2008
$1,000
$800
2009
$600
$400
$200
$0
2010
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$1,400
2012
$1,000
Volume ($MM)
REAL-TIME SNAPSHOT
$1,200
$800
2013
$600
2014
$400
$200
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
SNA Acq # Props Global Acq # Props
1
Blackstone
New York, NY
$199.46
5
$191,599.69
6,868
2
Intercontinental RE
Boston, MA
$105.50
1
$4,044.43
115
3
Pure Multi-Housing REIT
Vancouver, Canada
$105.25
2
$584.66
19
4
Presidium Group
Dallas, TX
$102.62
7
$299.34
26
5
Sun Holdings
Houston, TX
$96.15
2
$383.96
12
6
RailField
Bethesda, MD
$90.00
2
$90.00
2
7
Artemis RE Partners
Bethesda, MD
$90.00
2
$1,310.19
78
8
Inland Real Estate Group
Oak Brook, IL
$80.70
2
$18,974.35
999
9
Fulton Property Group
San Antonio, TX
$78.90
2
$209.38
7
10
Cottonwood Residential
Salt Lake City, UT
$68.65
2
$661.71
32
Top Sellers
Rank Buyer
Location
San Antonio’s multi-housing market remains strong with trailing twelve
month volumes exceeding $1.5 billion. Private investors accounted
for nearly two thirds of all acquisitions during the first three quarters
of 2015, while the less active Institutions made up 20% of the buyer
pool. Institutions were net sellers in this time period. Median household
income, historically around 10% below the U.S. average, reached parity
for the first time in early 2015, boosted by the surge of high-paying jobs
for healthcare professionals. With unemployment rate at a cyclical low
of 3.7% as of September 2015, expect new household formation to trigger
an increase in apartment demand.
SNA Acq # Props Global Acq # Props
1
Western Rim
Irvine, CA
$221.79
5
$1,161.88
30
2
Crow Holdings
Dallas, TX
$141.15
2
$7,470.26
501
3
Venterra Properties
Richmond Hill, Canada
$130.04
4
$576.97
26
4
Newport Beach, CA
$118.32
4
$1,063.18
32
5
Broad Street Development LLC New York, NY
$105.50
1
$1,659.44
24
6
Embrey Development
San Antonio, TX
$105.25
2
$987.02
27
7
Lynd
San Antonio, TX
$95.59
6
$1,201.50
86
8
NRP Group LLC
Cleveland, OH
$88.70
2
$213.20
4
9
Blackstone
New York, NY
$84.77
2
$117,891.34
10
AVR Realty
Yonkers, NY
$81.75
2
$2,014.91
2,500
18
Volume
# Trades
Units
$/unit
Avg. Cap
actual
chg vs prior
T12 Vol.
$1,555.29
28%
Q3 '15
$367.24
11%
T12 Vol.
70
13%
Q3 '15
19
36%
T12 Vol.
16,881
9%
Q3 '15
4,393
36%
T12 Vol.
$97,974.56
Q3 '15
$118,486.52
21%
7%
T12 Vol.
6.15%
-33
Q3 '15
0.00%
0
HFF | 45
SAN DIEGO, CALIFORNIA
Occupancy
Forecast
Long-Term Average
96.5%
96.0%
OCCUPANCY
95.5%
95.0%
94.5%
94.0%
93.5%
93.0%
92.5%
2009
2010
In the three-year outlook, job growth is expected to gradually moderate
before picking up again in 2018. The three-year average is forecast to be 1.9%,
outperforming the long-term average (1997-2014) of 1.6%.
2013
2014
2015
2016
2017
2018
2016
2017
2018
Forecast
Rent/Unit/Mo.
$2,000
RENTAL RATES
San Diego job growth was 3.4% in the third quarter of 2015, compared to
the nation’s 2.1%. The local economy was expected to end 2015 at 3.1%,
(42,343 jobs added).
2012
$2,500
Overview
2011
$1,500
$1,000
$500
$0
2009
2010
2011
2012
2013
2014
2015
Rental Rates
San Diego had a very strong third quarter, with an annual effective rent growth of
7.8%. The year was expected to end at 6.7% and average 4.0% in the three-year
outlook. The forecast three-year outlook rate is 50 basis points above the market’s
long-term average of 3.5%.
HFF | 46
Long-Term Average
YoY Change (%)
6%
4%
2%
0%
-2%
-4%
-6%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
7,000
6,000
5,000
Units
In the third quarter, 2,507 units were absorbed in San Diego. Absorption
was more than twice the amount of new supply, and Axiometrics expected
the full-year 2015 absorption count to be 3,941 units. In the three-year outlook,
absorption is expected to average 4,819 units per year, outpacing new supply
in 2017 and 2018.
San Diego’s third-quarter occupancy rate was 95.6%, and is expected to have
finished the year at 95.3%, 80 basis points above the long-term average of 94.5%.
In the three-year outlook, occupancy rates are expected to average 95.6%,
gradually increasing starting in 2016, reaching a high of 96.1% in 2018.
Forecast
8%
4,000
3,000
2,000
1,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
60
40
YoY Change (%)
San Diego received 4,818 new apartment units in 2014, the highest annual count
since 2006, and nearly 1,500 units more than the long-term average of 3,419 units.
Some 1,211 new apartment units were delivered in San Diego in the third quarter
of 2015, and the full-year count is expected to land at 3,824 units, just over the
long-term average. San Diego is expected to receive an average of 4,113 units per
year over the three-year outlook.
Development
20
0
-20
-40
-60
-80
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$2,500
Year
T12 Vol.
Qtr. Vol.
Avg. Cap
2007
$1,302.94
$376.60
5.16%
$1,500.77
$448.90
5.26%
$1,440.32
$407.60
5.38%
$2,628.63
$1,395.52
5.41%
$2,405.87
$153.85
5.62%
$2,139.37
$182.40
5.76%
$2,052.58
$320.82
5.69%
$962.34
$305.28
5.71%
$919.61
$111.11
5.66%
$874.83
$137.63
5.69%
$589.98
$35.97
5.87%
$429.76
$145.06
6.06%
$484.63
$165.98
6.14%
$436.66
$89.66
6.29%
$763.28
$362.59
6.10%
$761.56
$143.34
6.08%
$742.56
$146.98
6.00%
$828.56
$175.66
5.74%
$569.57
$103.59
5.64%
$1,115.67
$689.44
5.57%
$1,175.67
$206.98
5.59%
$1,291.96
$291.95
5.61%
$1,478.98
$290.61
5.65%
$1,196.37
$406.83
5.70%
$1,452.42
$463.02
5.60%
$1,332.70
$172.24
5.53%
$1,635.58
$593.48
5.49%
$1,948.47
$719.72
5.50%
$1,775.66
$290.22
5.60%
$2,436.29
$832.87
5.54%
$2,143.46
$300.65
5.42%
$1,782.83
$359.09
5.05%
$2,292.74
$800.13
4.95%
$1,961.73
$501.86
4.98%
$2,200.56
$539.48
4.97%
$2,000
Volume ($MM)
$3,000
2008
$1,500
2009
$1,000
$500
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$2,500
2012
Volume ($MM)
REAL-TIME SNAPSHOT
$2,000
$1,500
2013
$1,000
2014
$500
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
SND Acq # Props Global Acq # Props
1
Palo Alto, CA
$664.66
10
$10,571.85
241
2
New York, NY
$276.45
5
$3,379.19
79
3
Los Angeles, CA
$276.45
5
$2,356.02
49
4
Clarion Partners
New York, NY
$229.60
3
$27,415.19
1,080
5
Alliance Residential
Phoenix, AZ
$160.58
1
$2,822.13
135
6
Prudential RE Investors
Madison, NJ
$160.58
1
$43,844.86
1,152
7
R&V Management Corp
San Diego, CA
$150.40
4
$1,100.91
37
8
John Hancock
Boston, MA
$142.50
1
$2,573.46
29
9
Kreutzkamp 2000 RT
Chula Vista, CA
$123.30
5
$192.41
13
10
Eden Housing
Hayward, CA
$120.00
2
$175.41
8
Top Sellers
Rank Buyer
Recognized as one of the leading high-tech hubs in the U.S., San Diego’s
unique economy is moored by software industries and growing
entrepreneurial, knowledge-based companies. Buoyant incomes paired
with low energy prices have set the stage for prolonged tourism expansion.
San Diego’s multi-housing market remains sturdy and continued to post
low vacancy rates below 5%. At 61%, private investors accounted
for over half of all acquisitions during the first three quarters of 2015,
followed by the less active Institutions that made up 28% of the buyer
pool. With continuing job growth, San Diego should maintain its steady
pace of liquidity.
Location
SND Acq # Props Global Acq # Props
1
BRE Properties
San Francisco, CA
$639.09
11
$6,108.34
135
2
Gables Residential
Atlanta, GA
$229.60
3
$5,178.01
121
3
R&V Management Corp
San Diego, CA
$197.93
10
$421.51
24
873
4
LaSalle Investment
Chicago, IL
$160.58
1
$27,195.68
5
Resmark Companies
San Diego, CA
$142.50
1
$226.89
3
6
JH Real Estate Partners
Newport Beach, CA
$137.55
4
$756.76
24
902
7
Los Angeles, CA
$121.00
1
$30,970.51
8
Related California
Irvine, CA
$120.00
2
$120.00
actual
Volume
9
AvalonBay
Arlington, VA
$112.00
1
$7,273.52
125
UDR
Littleton, CO
$102.89
2
$6,278.55
289
$2,200.56
Q3 '15
$539.48
# Trades
T12 Vol.
Units
Q3 '15
$/unit
2
10
T12 Vol.
Avg. Cap
chg vs prior
3%
7%
166
41%
Q3 '15
58
61%
T12 Vol.
11,276
-9%
3,125
25%
T12 Vol.
$193,630.33
4%
Q3 '15
$178,160.25
-12%
T12 Vol.
4.97%
-45
Q3 '15
4.94%
-15
HFF | 47
SAN FRANCISCO, CALIFORNIA
Occupancy
Forecast
Long-Term Average
96.5%
OCCUPANCY
96.0%
95.5%
95.0%
94.5%
94.0%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$4,000
2015
Employers added 47,067 jobs in the four quarters ending with the third quarter of
2015, a job-growth rate of 4.6%. Axiometrics expects the year to have ended at a
rate of 4.0%, nearly 200 basis points above the national rate of 2.1%. In the threeyear outlook, San Francisco job growth is expected to average 2.6% as job growth
slows to a more sustainable pace in 2016 and 2017 before picking up in 2018.
$3,000
Rent/Unit/Mo.
Since the end of the recession, San Francisco has enjoyed job growth well above
its 1.0% long-term average, averaging 4.6% employment growth from 2011-2014.
RENTAL RATES
$3,500
Overview
$2,500
$2,000
$1,500
$1,000
$500
$0
2009
2010
2011
2012
2013
2014
2015
Rental Rates
San Francisco’s annual effective rent growth was 11.3% in the third quarter of
2015, the fifth highest nationwide when ranking Axiometrics’ 120 markets by
effective rent growth. The third-quarter number was more than twice the national
average (5.1%). San Francisco is also performing well relative to its long-term
average of 3.9% rent growth. Axiometrics forecasts effective rent growth to start
approaching more sustainable levels during the forecast period, but remain one
of the top markets in the country. The market’s annual rate is expected to average
5.0% in the three-year outlook, with a high of 5.8% in 2016.
HFF | 48
Long-Term Average
YoY Change (%)
10%
5%
0%
-5%
-10%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
8,000
7,000
6,000
5,000
Units
Some 2,066 units were absorbed in San Francisco during the third quarter of last
year. The supply-absorption balance was almost in equilibrium in 2014, but the
2015 forecast targets full-year absorption at 3,912 units, below the pace of new
supply. Axiometrics expects absorption to outpace supply next in 2017, and to
average 2,752 units per year in the three-year outlook.
San Francisco’s 96.5% occupancy rate in the third quarter was 130 basis points
above the market’s long-term average of 95.2% since 1997. The rate is forecasted
to have been 96.3% at the end of 2015 and average 95.7% in the three-year outlook.
Forecast
15%
4,000
3,000
2,000
1,000
0
-1,000
-2,000
2009
2010
2011
2012
2013
2014
2015 2016 2017 2018
80
60
YoY Change (%)
Developers delivered 1,188 new apartment units in the third quarter of 2015, 487
of which went to one of San Francisco’s urban submarkets, South of Market.
Axiometrics expected 5,319 units to come to market during the entirety of 2015
– the highest count since 1997. San Francisco’s long-term average is 2,106 units
annually, and the three-year outlook average is 3,414 units per year.
Development
40
20
0
-20
-40
-60
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$8,000
Year
T12 Vol.
Qtr. Vol.
Avg. Cap
2007
$3,795.07
$468.49
4.93%
$3,716.42
$967.83
4.95%
$3,437.34
$1,096.82
4.92%
$5,915.20
$3,382.05
5.00%
$5,960.22
$513.51
5.06%
$5,609.60
$617.22
5.04%
$5,157.24
$644.46
5.28%
$2,095.43
$320.24
5.30%
$1,639.37
$57.45
5.33%
$2,000
$1,313.89
$291.73
5.50%
$1,024.43
$355.00
5.55%
$1,000
$1,042.05
$337.86
6.10%
$1,133.99
$149.39
6.19%
$1,175.05
$332.80
6.27%
$1,553.98
$733.93
6.07%
$1,602.90
$386.78
5.85%
$2,305.12
$851.61
5.86%
$3,316.14
$1,343.82
5.68%
$3,110.89
$528.67
5.71%
$3,848.38
$1,124.28
5.66%
$3,682.74
$685.97
5.56%
$3,438.34
$1,099.43
5.53%
$4,818.32
$1,908.65
5.35%
$5,180.91
$1,486.86
5.24%
$7,586.47
$3,091.54
5.18%
$7,228.92
$741.87
5.11%
$6,430.55
$1,110.29
5.03%
$5,781.08
$837.39
5.01%
$3,303.74
$614.19
4.89%
$4,712.42
$2,150.55
4.74%
$5,084.12
$1,481.98
4.71%
$6,600.57
$2,353.85
4.63%
$7,089.98
$1,103.60
4.58%
$6,052.27
$1,112.84
4.59%
$5,729.26
$1,158.97
4.41%
$6,000
$5,000
Volume ($MM)
$7,000
2008
$4,000
$3,000
2009
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$7,000
2012
$5,000
Volume ($MM)
REAL-TIME SNAPSHOT
$6,000
$4,000
2013
$3,000
2014
$2,000
$1,000
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
SNF Acq # Props Global Acq # Props
1
Maximus RE Partners
San Francisco, CA
$1,605.50
4
$1,605.50
4
2
Palo Alto, CA
$1,475.52
22
$10,571.85
241
3
Rockpoint Group
Boston, MA
$623.00
3
$15,178.21
156
4
Veritas Investments
San Francisco, CA
$409.54
54
$764.54
130
5
Pacific Urban
Encino, CA
$294.47
7
$3,397.45
137
6
CPP Investment Board
Toronto, Canada
$208.10
4
$31,765.31
323
7
Los Angeles, CA
$200.10
5
$2,356.02
49
8
Guardian Life Insurance Co New York, NY
$200.10
5
$3,379.19
79
9
Carlyle Group
Washington, D.C.
$189.48
21
$20,354.96
821
10
Spieker Companies
Palo Alto, CA
$178.36
13
$405.45
44
Top Sellers
Rank Buyer
Despite mounting housing costs, people continue to flock to the West Coast
seeking employment. Ranking fourth in the nation in terms of absolute
employment growth during the last 12 months ending August 2015, San
Francisco boasted one of the strongest job markets in the country. Private
investors accounted for 68% of all acquisitions during the first three
quarters of 2015, more than double the 25% share from the Institutions.
Asian investors continue to show an affinity for this market, injecting
nearly $370 million over the past 24 months through September 2015.
With an annualized rent growth rate of over 11% during the 3Q according
to Axiometrics, tenants are not expected to experience relief anytime
soon.
Location
SNF Acq # Props Global Acq # Props
1
BRE Properties
San Francisco, CA
$1,124.79
16
$6,108.34
135
2
Rockpoint Group
Boston, MA
$1,068.50
3
$14,251.24
119
3
Fortress
New York, NY
$982.50
1
$17,715.99
1,008
4
Pacific Urban
Encino, CA
$424.25
8
$3,044.34
109
5
Principal Financial
Des Moines, IA
$410.00
1
$12,333.17
378
6
SARES-REGIS Group
Irvine, CA
$255.10
4
$3,330.13
111
7
Palo Alto, CA
$253.99
8
$3,266.86
100
8
Lyon Capital Ventures
Newport Beach, CA
$180.23
2
$1,453.87
31
9
San Diego, CA
$173.10
4
$12,464.56
348
10
Praedium Group
New York, NY
$152.22
3
$6,554.34
491
actual
Volume
T12 Vol.
$5,729.26
Q3 '15
$1,158.97
# Trades
T12 Vol.
Units
Q3 '15
$/unit
Avg. Cap
chg vs prior
13%
4%
352
-2%
Q3 '15
82
-9%
T12 Vol.
22,285
1%
3,819
-31%
T12 Vol.
$287,277.67
19%
Q3 '15
$350,023.52
62%
T12 Vol.
4.41%
-30
Q3 '15
4.10%
-43
HFF | 49
SEATTLE, WASHINGTON
Occupancy
Forecast
Long-Term Average
96.0%
95.5%
OCCUPANCY
95.0%
94.5%
94.0%
93.5%
93.0%
92.5%
92.0%
2009
2010
2011
2012
2013
$2100
2014
2015
2016
2017
2018
2016
2017
2018
Forecast
$1900
More than 9,600 units were delivered to the Seattle market last year, as of the third
quarter of 2015. Seattle is expected to have finished the year with 9,469 new units,
roughly 750 more units than 2014.
Most of the new supply has been delivered into the Downtown/ Capitol Hill/Queen
Anne submarkets, in which 2,316 units were expected to deliver, according to
Axiometrics’ identified supply. Over the next three years, new supply will average
6,980 units per year, peaking in 2016 with 8,941 units.
Seattle’s occupancy rate was above the national average of 95.3% in 3Q15. The
market’s occupancy rate remained unchanged at 95.7% from 2Q15 to 3Q15 and
was expected to finish 2015 at this same rate. In 2016, occupancy is expected
to moderate to 94.9% but remain well above 94% throughout the forecast period
(2016-2018).
As of the third quarter of 2015, Seattle absorbed 9,096 units. Through the end of
2015, absorption is expected to have increased to 9,262 units and average 6,408
units per year over the next three years.
Rent/Unit/Mo.
RENTAL RATES
$500
2011
2012
2013
2014
2015
Forecast
Long-Term Average
0%
-5%
-10%
-15%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
60
40
YoY Change (%)
HFF | 50
2010
5%
Rental Rate
Seattle has had strong rent growth, despite the increase of new supply. Seattle’s
annual rent growth rate was above the national average of 5.1%. Effective rent
increased from $1,580 in 2Q15 to $1,609 in 3Q15, which resulted in an annual
growth rate of 7.0%. Annual effective rent growth is forecast to be 4.3% in 2016,
and average 4.3% through the forecast.
2009
10%
YoY Change (%)
Development
$1100
$900
Units
Seattle is expected to have finished 2015 with an additional 50,400 jobs, a slight
increase from 2014’s 48,500 jobs. Looking forward, job gain is expected to moderate
to 42,000 jobs in 2016 and average 37,500 jobs per year through 2018.
$1500
$1300
$700
Seattle’s edge in e-commerce, data storage and cloud computing has lured a
growing roster of top tech firms to the Emerald City, cementing SEA’s status as
a global hub for information technology. Top tech, software and app developer
positions will play a key role in the area’s expansion, with tech employment
growing at nearly double the pace of total payrolls over the next two years.
Venture capital placements trail those of San Jose and San Francisco, but startup
financing is gaining momentum. Washington sprang to the fourth position among
states in venture capital financing in the second quarter of 2015, according to
PricewaterhouseCoopers.
$1700
Overview
20
0
-20
-40
-60
-80
-100
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics, REIS
Quarterly Vol.
$5,000
Year
T12 Vol.
Qtr. Vol.
2007
$2,619.40
$745.00
5.52%
$2,762.40
$747.10
5.48%
$4,000
$3,500
Volume ($MM)
$4,500
2008
$3,000
$2,500
$2,000
2009
$1,500
$1,000
$500
$0
2010
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$4,500
2012
$3,500
$3,000
Volume ($MM)
REAL-TIME SNAPSHOT
$4,000
2013
$2,500
$2,000
$1,500
$2,618.80
$392.30
5.36%
$2,999.30
$1,114.80
5.34%
$2,912.90
$658.60
5.36%
$2,573.30
$407.40
5.31%
$2,657.20
$476.30
5.43%
$1,719.10
$176.70
5.58%
$1,125.00
$64.50
5.60%
$905.00
$187.50
6.09%
$472.70
$44.00
6.18%
$408.50
$112.50
6.25%
$411.30
$67.30
6.37%
$371.90
$148.00
6.12%
$687.80
$360.00
6.21%
$947.40
$372.10
5.99%
$1,052.40
$172.30
5.93%
$1,331.80
$427.40
5.75%
$1,452.10
$480.30
5.61%
$1,395.80
$315.80
5.57%
$1,670.40
$446.90
5.48%
$1,696.70
$453.70
5.43%
$2,023.30
$806.90
5.42%
$2,825.10
$1,117.50
5.41%
$3,183.70
$805.50
5.45%
$3,255.40
$525.50
5.44%
$3,039.50
$591.00
5.40%
$2,828.80
$906.80
5.37%
$2,480.20
$456.90
5.30%
$1,000
$3,435.50
$1,480.80
5.50%
$500
$4,035.60
$1,191.20
5.50%
$4,202.60
$1,073.80
5.36%
$0
2014
Avg. Cap
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
1
San Mateo, CA
$732.80
17
$10,543.90
240
2
TruAmerica Multifamily
Los Angeles, CA
$561.90
13
$2,505.50
52
3
New York, NY
$555.70
14
$3,535.20
83
4
Greenwich, CT
$472.00
10
$36,095.80
1,527
5
Kennedy Wilson
Beverly Hills, CA
$404.80
16
$8,981.50
306
6
Heitman
Chicago, IL
$385.70
2
$12,876.40
304
7
Charleston, SC
$328.70
5
$10,386.10
256
8
Fowler Property Acquisitions San Francisco, CA
$255.10
12
$4,313.40
313
9
Equity Residential
Chicago, IL
$184.10
4
$22,583.80
404
10
Allstate
Northbrook, IL
$183.20
5
$2,142.70
45
Top Sellers
Rank Buyer
Location
1
Holland Partners
Vancouver, WA
$717.70
11
$2,120.40
50
2
Simpson Housing LLLP
Denver, CO
$583.30
12
$25,194.00
1,041
3
Carmel Partners
San Francisco, CA
$568.30
14
$6,108.30
135
4
San Diego, CA
$532.60
6
$2,690.40
21
5
GE Capital
Norwalk, CT
$338.90
8
$1,056.00
52
6
Wood Partners
Marietta, GA
$221.00
8
$48,129.80
1,299
7
Bascom Group
Irvine, CA
$221.00
8
$581.70
24
8
DiNapoli Capital Partners
Walnut Creek, CA
$193.70
4
$1,493.20
51
9
Boston, MA
$193.20
5
$17,665.00
496
10
Embrey Development
San Antonio, TX
$167.90
7
$1,493.30
52
$4,547.90
$802.20
5.28%
$4,226.80
$1,159.70
5.14%
$4,547.30
$1,511.60
5.10%
Seattle’s multi-housing market remains highly liquid, with trailing twelve
month volumes well above $4 billion. During the first three quarters of 2015,
private investors made up nearly half of the buyer pool, accounting for 47%
of all purchases. The equally ardent Institutions followed closely behind,
accounting for 45% of all acquisitions. Comparably, listed REITs were
net sellers during that time period. Underscoring the growing influence
of Canadian capital in the Seattle market, over $100 million was invested
during that time. With job growth clocking in at nearly twice the U.S. pace,
hiring has expanded across a wide range of industries. As of September
2015, high-tech employment stood at nearly 15% above its pre-recession
peak and should continue to bring high-wage earners to the local multihousing market.
actual
Volume
chg vs prior
T12 Vol.
$4,547.30
13%
Q3 '15
$1,511.60
30%
T12 Vol.
219
11%
Q3 '15
66
8%
Units
T12 Vol.
23,171
-1%
Q3 '15
7,626
13%
$/unit
T12 Vol.
$208,908
13%
Q3 '15
$208,233
T12 Vol.
5.10%
-40
Q3 '15
6.05%
-82
# Trades
Avg. Cap
7%
HFF | 51
TAMPA, FLORIDA
Occupancy
Forecast
Long-Term Average
96%
95%
OCCUPANCY
94%
93%
92%
91%
90%
89%
2009
2010
2011
2012
2013
2014
2016
2017
2018
2016
2017
2018
Forecast
$1,400
2015
Rent/Unit/Mo.
Tampa-St. Petersburg-Clearwater’s job growth of 2.5% in the third quarter of 2015
was 40 basis points (bps) higher than the national rate of 2.1% and more than
double the metro’s long-term average of 1.2%. The Tampa Bay area is expected to
have ended 2015 with 2.7% job growth, representing 33,221 added jobs.
RENTAL RATES
$1,200
Overview
$1,000
$800
$600
$400
$200
In the three-year outlook, the market’s job growth is expected to average 2.1%,
gradually slowing throughout the period. However, in 2019 -- one year past the
short-term outlook -- Axiometrics expects job growth to reaccelerate.
$0
2009
2010
2011
2012
2013
2014
2015
Rental Rates
The market’s 6.1% average annual effective rent growth in the third quarter
outpaced the national rate of 5.1%. Tampa’s year-end 2015 average was expected
to land at 5.6%, well above the long-term (1998-2014) average of 2.2%. Excluding
the years when the market’s rent growth was negative, Tampa-St. Pete recorded
a growth-year average of 4.1%. Axiometrics forecasts annual effective rent
growth to average 3.7% during the three-year outlook, with a high of 3.9% in 2017.
HFF | 52
Long-Term Average
YoY Change (%)
6%
4%
2%
0%
-2%
-4%
-6%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
7,000
6,000
5,000
Units
Some 1,312 units were absorbed in the third quarter, outpacing supply. The 2015
absorption total is expected to have been 4,809 units, a relative balance with
supply. Tampa’s long-term absorption average is 4,490 units. In the three-year
outlook, an average of 2,525 units will be absorbed.
Tampa-St. Petersburg-Clearwater’s third-quarter occupancy rate of 95.7% was
40 basis points above the national average (95.3%). The rate is expected to have
ended the year at 95.4%, well above the long-term average of 94.1%. The metro’s
occupancy rate is forecast to average 94.8% during the outlook period.
Forecast
8%
4,000
3,000
2,000
1,000
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
60
YoY Change (%)
Developers delivered 987 new apartment units to the Tampa-St. PetersburgClearwater market in the third quarter of 2015. Axiometrics expected the full-year
count to land at 4,344 units, close to the long-term average of 4,216 units per year
and a small uptick from the 4,012 units delivered in 2014. Tampa Bay is expected to
receive an average of 3,419 units per year in the three-year outlook.
Development
40
20
0
-20
-40
-60
-80
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Axiometrics
Quarterly Vol.
$4,000
Year
T12 Vol.
Qtr. Vol.
Avg. Cap
2007
$1,473.31
$269.16
6.63%
$1,159.74
$229.61
6.36%
$1,059.17
$161.98
6.49%
$958.68
$297.93
6.57%
$874.83
$185.32
6.53%
$752.28
$107.05
6.83%
$763.63
$173.32
6.79%
$559.07
$93.38
7.19%
$447.71
$73.95
7.24%
$1,000
$355.45
$14.80
7.71%
$348.38
$166.25
7.70%
$500
$371.71
$116.71
7.55%
$438.50
$140.74
7.61%
$527.82
$104.12
7.44%
$532.57
$171.00
7.50%
$674.15
$258.28
7.43%
$706.09
$172.69
7.68%
$924.39
$322.42
7.51%
$1,160.39
$407.00
7.32%
$1,142.90
$240.79
7.21%
$1,227.86
$257.65
6.61%
$1,206.34
$300.90
6.57%
$1,105.31
$305.97
6.66%
$1,302.38
$437.86
6.74%
$1,186.42
$141.68
6.94%
$1,252.59
$367.08
7.03%
$1,197.09
$250.47
7.01%
$1,310.59
$551.37
6.80%
$1,594.28
$425.36
6.89%
$1,599.86
$372.66
6.86%
$1,796.90
$447.51
6.96%
$1,706.62
$461.08
6.90%
$1,879.42
$598.16
6.82%
$2,026.27
$519.52
6.85%
$2,060.53
$481.77
6.62%
$3,000
$2,500
Volume ($MM)
$3,500
2008
$2,000
$1,500
2009
2010
$0
Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
2015
Q1
'11
Q1
'12
2014
Q1
'13
Q1
'14
2013
Q1
'15
2011
2012
$1,800
2012
$1,400
$1,200
Volume ($MM)
REAL-TIME SNAPSHOT
$1,600
2013
$1,000
$800
$600
2014
$400
$200
$0
2015
J
F
M
A
M
J
J
A
S
O
N
D
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
TAM Acq # Props Global Acq # Props
1
Atlanta, GA
$229.50
4
$2,213.58
60
2
Atlanta, GA
$142.72
4
$1,855.71
59
3
B&M Management
Montgomery, AL
$137.23
3
$1,365.61
50
4
Investors Management
Sherman Oaks, CA
$134.91
3
$2,267.21
78
5
Boston, MA
$131.87
2
$4,431.90
123
6
Cortland Partners
Atlanta, GA
$126.37
2
$2,323.13
84
7
Goldman Sachs
New York, NY
$122.50
1
$51,897.10
2,122
8
Blue Rock Partners
Tampa, FL
$121.23
6
$747.41
43
9
UBS
Zurich, Switzerland
$111.43
1
$26,864.64
523
10
Crescent Heights
Miami, FL
$98.00
1
$5,227.22
74
Top Sellers
Rank Buyer
Is the Tampa multi-housing market getting overheated? While the market’s
development boom has many investors worried, liquidity in Tampa’s
apartment market continues to grow, with trailing twelve months volumes
as of September 2015 surpassing the $2 billion mark. Large volumes of
new supply have been absorbed without provoking high vacancy or
softening rents. Private investors made up 84% of all acquisitions during
the first nine months of 2015. Institutions and listed REITs were net
sellers in this time period. Expect ongoing in-migration among retirees to
sustain strong demand levels in the multi-housing sector as many Boomers
decide to downsize.
Location
TAM Acq # Props Global Acq # Props
1
Crescent Communities
Charlotte, NC
$169.73
2
$3,053.48
119
2
Camden Property Trust
Houston, TX
$155.97
4
$3,150.42
129
3
Praedium Group
New York, NY
$145.90
4
$6,554.34
491
4
JP Morgan
New York, NY
$122.50
1
$30,396.12
706
5
Related Companies
New York, NY
$106.39
2
$7,251.68
136
6
ST Residential
Chicago, IL
$98.00
1
$1,025.84
16
7
General Services Administration
$98.00
1
$3,984.77
105
8
Covenant Capital Group
Nashville, TN
$96.35
2
$714.85
33
9
DRA Advisors
New York, NY
$88.46
3
$17,082.61
711
10
Cornerstone RE Advisers
Hartford, CT
$85.54
2
$8,753.37
201
Volume
actual
chg vs prior
T12 Vol.
$2,060.53
15%
Q3 '15
$481.77
-7%
# Trades
T12 Vol.
Units
Q3 '15
5,309
4%
$/unit
T12 Vol.
$94,242.46
7%
Q3 '15
$90,745.16
Avg. Cap
T12 Vol.
6.62%
-35
Q3 '15
6.31%
-77
106
23%
Q3 '15
25
-17%
T12 Vol.
21,711
1%
-3%
HFF | 53
WASHINGTON, D.C.
Occupancy
Forecast
Long-Term Average
96.5%
96.0%
OCCUPANCY
95.5%
95.0%
94.5%
94.0%
93.5%
93.0%
2009
2010
2011
2012
2013
2014
2017
2018
2017
2018
Forecast
$2,000
2015 2016
$1,800
However, the D.C. metro appears to have turned a corner and is forecast to have
finished 2015 with a positive annual effective rent growth rate (1.6%).
Rent/Unit/Mo.
Washington, D.C. was one of the first markets to recover after the recession, but
large amounts of new apartment supply combined with low job growth resulted in
negative rent growth in 2013 and 2014.
$1,600
RENTAL RATES
Overview
Rental Rates
After struggling with negative rent growth for two years, Washington D.C.’s
apartment market is forecast to have ended 2015 with an annual effective rent
growth rate of 1.6%. The market achieved a year-over-year growth rate of 1.8%
in the third quarter.
Washington, D.C.’s long-term average effective rent growth is 3.3%, but the
market has averaged -0.2% over the past two years. In the three-year outlook, the
metro is expected to average 3.7% annual effective rent growth, as positive job
growth will result in improved apartment performance.
HFF | 54
2010
2011
2012
2013
2014
Forecast
2015
2016
Long-Term Average
5%
YoY Change (%)
2009
6%
4%
3%
2%
1%
0%
-1%
-2%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Units
Absorption outpaced new supply by almost 500 units in the third quarter, as
3,327 units were absorbed. This trend is expected to continue with total 2015
absorption forecast at 17,105 units, 2,627 more than the number of units coming to
market. Absorption has averaged 5,928 units per year since 1997 and is forecast
to average 7,503 units absorbed annually during the three-year outlook period.
Given the perceived imbalance of supply and demand the last few years,
apartments have remained fairly full. The market’s average occupancy was 95.6%
in the third quarter of 2015, and the rate was expected to be 95.3% at year-end
2015. Washington, D.C. is in a different part of its “cycle” compared to most other
markets, and should actually see improving occupancy rates during the forecast
period. In the three-year outlook, occupancy is expected to average 95.7%.
$600
$0
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
-2,000
-4,000
2009
2010
2011
2012
2013
2014
2015 2016 2017 2018
YoY Change (%)
$800
$200
Washington, D.C. received 2,858 new apartment units in the third quarter of 2015
with 14,478 units expected for the full year. The annual 2015 delivery total is almost
2.5 times the long-term average of 5,850 new units per year. Deliveries are
expected to average 7,301 units annually during the 2016-2018 outlook.
$1,000
$400
Job growth also is picking up and is expected to have reached 1.8% in 2015.
Though that figure is 30 basis points below the forecast national average of 2.1%,
D.C. job growth is expected to outperform the national average in the three-year
outlook, averaging 1.9% compared to the nation’s 1.7%.
Development
$1,400
$1,200
160
140
120
100
80
60
40
20
0
-20
-40
-60
2009
2010
2011
2012
2013
2014
2015 2016 2017 2018
Source: Axiometrics
Year
T12 Vol.
Qtr. Vol.
Avg. Cap
2007
$3,862.22
$945.91
5.80%
$3,917.33
$718.52
5.81%
$4,702.40
$1,473.95
5.70%
$9,693.22
$6,554.83
5.75%
$9,346.70
$599.39
5.57%
$9,258.67
$630.50
5.52%
$8,604.77
$820.05
5.77%
$2,136.81
$86.88
5.60%
$1,542.82
$5.40
6.13%
$1,100.02
$187.69
6.66%
$425.79
$145.82
7.35%
$1,168.60
$829.68
7.22%
$2,124.81
$961.61
6.68%
$2,287.28
$350.16
6.69%
$3,340.23
$1,198.77
6.32%
$3,440.18
$929.63
6.12%
$3,438.60
$960.03
6.27%
$4,242.00
$1,153.57
6.12%
$4,386.04
$1,342.82
5.95%
$5,048.17
$1,591.75
5.93%
$4,581.30
$493.16
5.83%
$4,723.41
$1,295.68
5.87%
$6,399.53
$3,018.93
5.91%
$5,858.88
$1,051.11
6.00%
$11,782.78
$6,417.05
5.86%
$11,429.03
$941.93
6.05%
$9,126.50
$716.41
6.00%
$8,777.19
$701.79
5.98%
$3,376.39
$1,016.26
6.03%
$3,427.03
$992.57
5.83%
$3,721.31
$1,010.69
5.93%
$4,078.39
$1,058.87
5.86%
$4,381.48
$1,319.35
5.89%
$5,084.12
$1,695.21
5.93%
$5,326.38
$1,252.95
6.05%
2008
2009
2010
2011
2012
2013
2014
2015
MARKET PLAYERS
Top Buyers
Rank Buyer
Location
D.C. Acq # Props Global Acq # Props
1
Lone Star
Dallas, TX
$2,129.89
22
$28,971.26
1,566
2
UDR
Littleton, CO
$946.86
7
$8,911.51
198
3
TIAA-CREF
New York, NY
$662.15
4
$33,062.09
550
4
Brookfield AM
Toronto, Canada
$560.71
5
$53,757.11
1,142
5
Dweck Properties Ltd
Washington, D.C.
$447.26
4
$2,883.89
27
6
David Werner RE
New York, NY
$433.50
3
$10,461.60
122
7
Redbrick Partners
Washington, D.C.
$433.50
3
$458.60
8
Los Angeles, CA
$377.50
2
$31,293.03
1,055
9
Clarion Partners
New York, NY
$306.84
8
$27,415.19
1,080
10
Morgan Properties
King of Prussia, PA
$299.48
6
$4,341.74
206
Top Sellers
Rank Buyer
6
Washington, D.C. continues to benefit from diversified investor interest,
albeit at lower liquidity levels than in years past. Institutions comprised
41% of all acquisitions during the first three quarters of 2015. Listed REITs
were net sellers in this time period. Foreign capital is flooding this area:
firms combined invested nearly $930 million across ten properties during
that time. As the health of the local economy continues to improve, there is
great potential for the release of pent-up household formation. Washington,
D.C. continued to experience record setting Class A absorption with
almost double the region’s 10-year average units absorbed during the past
12 months ending September 2015.
Location
D.C. Acq # Props Global Acq # Props
1
Home Properties
Rochester, NY
$3,220.24
30
$10,666.45
238
2
JBG Cos
Bethesda, MD
$958.70
9
$6,030.18
92
3
Associated Estates
Cleveland, OH
$620.71
6
$3,619.71
117
4
Brookfield AM
Toronto, Canada
$505.25
4
$24,589.46
454
5
Boston, MA
$451.40
6
$2,392.97
78
6
Ross Dev & Investment
Bethesda, MD
$367.50
8
$1,016.80
29
7
Federal Capital
Bethesda, MD
$322.35
6
$1,920.97
34
8
Bainbridge Companies
Wellington, FL
$312.10
3
$1,586.47
27
9
Rockwood Capital
White Plains, NY
$301.50
7
$7,585.97
113
10
StonebridgeCarras
Bethesda, MD
$289.00
2
$638.50
5
actual
Volume
# Trades
Units
$/unit
Avg. Cap
chg vs prior
T12 Vol.
$5,326.38
43%
Q3 '15
$1,252.95
-26%
T12 Vol.
111
6%
Q3 '15
24
-33%
T12 Vol.
25,722
14%
Q3 '15
5,654
-39%
T12 Vol.
$198,355.00
20%
Q3 '15
$176,937.97
-2%
T12 Vol.
6.05%
12
Q3 '15
6.74%
59
HFF | 55
AUSTIN
(512) 532-1900
BOSTON
(617) 338-0990
CAROLINAS
(704) 526-2800
CHICAGO
(312) 528-3650
DALLAS
(214) 265-0880
DENVER
(303) 515-8000
FLORHAM PARK
(973) 549-2000
CURRENT ASSIGNMENTS
ATLANTA
(404) 832-8460
HOUSTON
(713) 852-3500
333-335 CARROLL STREET
4TH & L STREET
PALM BREEZE AT KEYS GATE
TOWNHOMES
30 Units
Class A Multi-housing
Brooklyn, NY
On The Market
133 Units
Class A Mid-rise Multi-housing
Washington, D.C.
On The Market
402 Units
Homestead, FL
On The Market
PARKSIDE AT WINDHAVEN
ELAN UNION STATION
CLUB AT FOSSIL CREEK
312 Units
Lewisville, TX
On The Market
314 Units
Luxury Class A Mid-rise
Denver, CO
On The Market
424 Units
Class A-/B+ Multi-housing
Fort Worth, TX
On The Market
EAVES CARLSBAD
THE SLADE
GREYSTAR MULTI-HOUSING PORTFOLIO
Property Sale
450 Units Multi-Housing
Carlsbad, CA
Closed: September 2015
$40,000,000 Property Sale
214-unit, Class A Multi-housing
Tampa, FL
Closed: November 2015
$2,000,000,000 Portfolio Sale
32 Properties - 10,399 Units
Multi-market
Closed: December 2015
PEAK 4420
METROPOLITAN AT LORTON STATION
COUCH 9
Floating-Rate Financing
209-unit Multi-Housing
Colorado Springs, CO
$65,200,000 Property Sale
251-unit Class A Mid-rise Multi-housing
Lorton, VA
Construction Loan
136-unit Class A High-rise Multi-housing
Portland, OR
Closed: December 2015
LOS ANGELES
(310) 407-2100
MIAMI
(305) 448-1333
NEW YORK CITY
(212) 245-2425
ORANGE COUNTY
(949) 253-8800
ORLANDO
(407) 745-3900
PHILADELPHIA
(484) 532-4200
PITTSBURGH
(412) 281-8714
PORTLAND
(503) 224-0444
SAN DIEGO
(858) 552-7690
RECENTLY CLOSED TRANSACTIONS
INDIANAPOLIS
(317) 630-3191
SAN FRANCISCO
(415) 276-6300
TAMPA
(813) 387-9900
WASHINGTON, D.C.
(202) 533-2500
hfflp.com
Visit hfflp.com to view the HFF Multi-housing Flyer and
the most current Multi-housing Financing Update.
Market data cited in this publication was derived from sources including Axiometrics, the U.S. Department of Housing and Urban Development,
the U.S. Census Bureau, Real Capital Analytics, Prequin, and HFF Research. Photo credits for Heliphoto.net for Park La Brea and balloggphoto.com for Gateway West Loop.
©2016 Holliday Fenoglio Fowler, L.P. (“HFF”) and HFF Securities L.P. (“HFFS”) are owned by HFF, Inc. (NYSE: HF). HFF operates out of 22 offices nationwide and is a leading
provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF together with its affiliate HFFS offer clients a fully integrated
national capital markets platform including debt placement, investment sales, equity placement, advisory services, loan sales and commercial loan servicing. For more
information please visit hfflp.com or follow HFF on Twitter @HFF.
Holliday Fenoglio Fowler, L.P. is acting by and through Holliday GP Corp., a real estate broker licensed with the California Department of Real Estate, License Number 01385740.

foreign capital combines with resilient fundamentals to keep

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