-2%

0%

2%

4%

6%

8%

2010

2011

2012

2013

2014

2015

2016

2017

*

3%

4%

5%

6%

7%

8%

Rent Growth Vacancy Rate

Vacan

cy R

ate

Avera

ge E

ffecti

ve R

en

t G

row

th

* Preliminary estimate through 1QSources: Marcus & Millichap Research Services, MPF Research

* Preliminary estimate through 1QSources: Marcus & Millichap Research Services, MPF Research

Nu

mb

er

of

Un

its (

00

0s

)

-50

0

50

100

150

200

2010

2011

2012

2013

2014

2015

2016

2017

*

Completions Net Absorption

Vacan

cy R

ate

2%

4%

6%

8%

10%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*

Class A Class B Class C

* Preliminary estimate through 1QTrailing 12-month averageSources: Marcus & Millichap Research Services, MPF Research

Em

plo

ym

en

t G

row

th (

Mil

lio

ns)

Net A

bso

rptio

n (0

00s)

0

1

2

3

4

2010

2011

2012

2013

2014

2015

2016

0

100

200

300

400

Employment Growth Net Absorption

Sources: Marcus & Millichap Research Services, MPF Research, BLS

Preliminary estimateSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc.

Top 10

Metros

1Q 2017

Vacancy

Y-O-Y Bps

Change

New York 2.3% 0

Minneapolis 2.7% 10

Sacramento 2.8% 30

Detroit 3.0% -30

Oakland 3.2% 40

Inland Empire 3.3% -10

Boston 3.5% 30

Los Angeles 3.5% 60

Orange County 3.5% 20

San Diego 3.5% 0

U.S. Average 4.6% 40

Bottom 10

Metros

1Q 2017

Vacancy

Y-O-Y Bps

Change

Houston 8.0% 130

Raleigh-Durham 6.9% 130

San Antonio 6.8% -30

Indianapolis 6.5% -20

Austin 5.9% 140

Denver 5.9% 90

Atlanta 5.8% -20

Nashville 5.6% 170

Chicago 5.4% 90

Fort Lauderdale 5.3% 150

U.S. Average 4.6% 40

Preliminary estimateSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc.

Top 10

Metros

1Q 2017

Average Rent

Y-O-Y

% Change

Cincinnati $918 8.3%

Sacramento $1,242 7.7%

Atlanta $1,092 7.3%

Inland Empire $1,361 7.2%

Miami $1,408 7.1%

Charlotte $1,049 7.0%

Salt Lake City $995 7.0%

Denver $1,398 6.7%

Tampa $1,099 6.7%

Chicago $1,399 6.5%

U.S. Average $1,305 3.8%

Bottom 10

Metros

1Q 2017

Average Rent

Y-O-Y

% Change

San Francisco $2,973 -2.6%

San Jose $2,505 0.1%

St. Louis $841 0.2%

Houston $1,027 0.7%

Cleveland $857 1.2%

Washington, D.C. $1,622 1.2%

New York $2,595 1.3%

Boston $1,894 1.5%

Austin $1,182 2.0%

Los Angeles $1,977 2.0%

U.S. Average $1,305 3.8%

* Preliminary estimateSources: Marcus & Millichap Research Services, MPF Research

Vacancy Construction Net Absorption Rent Growth

2015 2016 2015 2016 2015 2016 2015 2016

San Francisco 3.4% 3.7% 1,546 4,440 1,493 3,574 6.7% -0.2%

Seattle-Tacoma 3.6% 3.4% 10,081 12,128 10,774 12,002 9.1% 7.4%

2015 vs. 2016

Vacancy Construction Net Absorption Rent Growth

Quarterly Annual

San Francisco 3.7% 1,807 1,741 -0.3% -2.6%

Seattle-Tacoma 3.5% 930 490 1.3% 6.2%

1Q 2017*

Seattle – 29,098 New York – 68,320

Atlanta – 29,185

Dallas – 48,324

Source: Axiometrics

Washington, D.C. (2014) Washington, D.C. (2017)

Of the 84k units identified in planning for Feb 2014, only 25k had progressed to at least the construction stage by Feb 2017

Source: Axiometrics

Source: Axiometrics

*Other category represents properties that did not move forward as apartments and are no longer plannedNote – this only counts properties that were identified as planned during the snapshot of February 2014, and the current status of those properties. Other properties were discovered at a later point.

San Francisco Bay Area (2014) San Francisco Bay Area (2017)

Source: Axiometrics

Nashville (2014) Nashville (2017)

Source: Axiometrics

3.4%

24.8%

13.0%

59.7%

6.2%

32.9%

15.0%

46.3%

10.4%

38.6%

11.5%

40.6%

0%

10%

20%

30%

40%

50%

60%

More than 8 Weeks 4 to 8 Weeks Less than 4 Weeks Marginal/None

2015 2016 2017

Source: Axiometrics

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Se

p-1

4

No

v-1

4

Ja

n-1

5

Ma

r-1

5

Ma

y-1

5

Ju

l-1

5

Se

p-1

5

No

v-1

5

Ja

n-1

6

Ma

r-1

6

Ma

y-1

6

Ju

l-1

6

Se

p-1

6

No

v-1

6

Ja

n-1

7

Ma

r-1

7

Concessions Increasing Significantly

Houston San Francisco New York San Jose

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Se

p-1

4

No

v-1

4

Ja

n-1

5

Ma

r-1

5

Ma

y-1

5

Ju

l-1

5

Se

p-1

5

No

v-1

5

Ja

n-1

6

Ma

r-1

6

Ma

y-1

6

Ju

l-1

6

Se

p-1

6

No

v-1

6

Ja

n-1

7

Ma

r-1

7

Stable Concessions

Atlanta Dallas Seattle DC

Source: Axiometrics

Source: Axiometrics

0%

2%

4%

6%

8%

10%

12%

14%

16%

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oct-

13

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

Oct-

14

Ja

n-1

5

Ap

r-1

5

Ju

l-1

5

Oct-

15

Ja

n-1

6

Ap

r-1

6

Ju

l-1

6

Oct-

16

Ja

n-1

7

Nashville

Nashville (Excluding Downtown) Downtown/West End/Green Hills

0%

2%

4%

6%

8%

10%

12%

14%

16%

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oct-

13

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

Oct-

14

Ja

n-1

5

Ap

r-1

5

Ju

l-1

5

Oct-

15

Ja

n-1

6

Ap

r-1

6

Ju

l-1

6

Oct-

16

Ja

n-1

7

Seattle

Seattle (Exlcuding Downtown) Downtown/Capitol Hill/Queen Anne

-1%

1%

3%

5%

7%

9%

11%

Apr-

09

Ju

l-0

9

Oct-

09

Ja

n-1

0

Apr-

10

Ju

l-1

0

Oct-

10

Ja

n-1

1

Apr-

11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Apr-

12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Apr-

13

Ju

l-1

3

Oct-

13

Ja

n-1

4

Apr-

14

Ju

l-1

4

Oct-

14

Ja

n-1

5

Apr-

15

Ju

l-1

5

Oct-

15

Ja

n-1

6

Apr-

16

Ju

l-1

6

Oct-

16

Ja

n-1

7

HOU NY SFR WASH-DC National

One month free on a 12 month lease

Concession values are increasing, but most markets are still well below levels from 2009.

Source: Axiometrics

CONSTRUCTION ACTIVITY PEAKING (BUT, NOT DELIVERIES…)

Total Units Under Construction

Note: Starts are assumed based on year-ahead delivereies and historic average construction times.

Source: CoStar Portfolio Strategy As of 16Q4

0

50

100

150

200

250

300

350

400

450

500

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Units (Thousands)

SUPPLY IS NOT EVENLY DISTRIBUTED ACROSS METROS

Growth In Inventory By Metro Through 2018Q4 (14Q4-18Q4)

Rank

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Source: CoStar Portfolio Strategy As of Mar 2017

0%

5%

10%

15%

20%

25%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Ne

w Y

ork

Da

llas

Ho

usto

n

Washin

gto

n, D

C

Los A

ngele

s

Sea

ttle

Atlan

ta

De

nver

Ch

icago

Bosto

n

Austin

Pho

enix

Ch

arlotte

San

An

tonio

Na

shvill

e

Orlando

Port

land,

OR

Mia

mi

Ora

ng

e C

ounty

San

Jose

Min

nea

polis

Kan

sas C

ity

Phila

delp

hia

Tam

pa

Co

lum

bus

Units (Greater Than 10% Inventory Growth) Units (Less Than 10% Inventory Growth)

Completions As A % Of Inventory

New Supply (As % of Inventory)New Supply (14Q4-18Q4; Units)

MORE PROPERTIES ARE TAKING LONGER TO STABILIZE

Percentage Of Buildings With High Vacancy One Year After Delivery

To Update :

Graph131415

Source: CoStar Portfolio Strategy As of Mar 2017

23.5%

29.1%

38.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

13 14 15

Year Built

Percentage Of Buildings By Year Built >10% Vacant After One Year

NEW CONSTRUCTION REQUIRES HEFTY SALARIES…

Estimated Income Required To Rent

Source: CoStar Portfolio Strategy As of March '17

*Assumes 20% of income needed

35%

76%

83%

17%

43%

57%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

All Apartments Built Since 2013 Under Construction

Requiring Income of > $75,000 Requiring Income of >$100,000

Percentage of Units

ESPECIALLY IN THE CORE

Estimated Income Required To Rent

Source: CoStar Portfolio Strategy As of March '17

*Assumes 20% of income needed

65%

94%96%

47%

68%

77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

All Apartments Built Since 2013 Under Construction

Requiring Income of > $75,000 Requiring Income of > $100,000

Percentage of Units In CBDs

WHAT DOES IT COST TO RENT A NEW UNIT?

Income Requirements and Median Income By Submarket

Rank4

242

1310121517

523

316

7169

25212019111822

814

Source: CoStar Portfolio Strategy As of March '17

Downtown/Midtown

Sandy Springs/Dunwoody

Downtown Chicago

North Lakefront

Frisco/Prosper

Plano

Uptown/Park Cities

East Dallas

Downtown/Cherry Creek

CBD/Country Club Plaza

Downtown Los Angeles

Brickell/Downtown Miami

West End/CBD

Long Island City

Williamsburg/Greenpoint/Navy Yard DUMBO/Downtown Brooklyn

Chelsea/Far West Side

Northwest Side

Downtown

Downtown

Lake Union

South Tampa

Southwest/Navy Yard H Street/NoMa

$50

$100

$150

$200

$250

$30 $50 $70 $90 $110 $130

Atlanta Chicago Dallas - Fort Worth Denver

Kansas City Los Angeles Miami Nashville

New York San Antonio San Diego Seattle

Tampa Washington - NoVA - MD

Expected Income For UC Properties (000s)

Current Median Income For Submarket (000s)

64% OF RENTERS EARN LESS THAN $50,000

United States Renter Households By Household Income In 2015

$100,000+

$100,000+

0K-5K

5K-10K

10K-15K

15K-20K

Sources: U.S. Census ACS Survey; CoStar Portfolio Strategy As of 16Q4

*American Community Survey Data Through 2015

28.0 Million64%

7.2 Million16.5%

3.8 Million8.6%

4.8 Million11%

$0 - $50,000

$50,000 - $75,000

$75,000 - $100,000

$100,000+

Renter Households (Millions)

MAJORITY OF RENTERS LIVE IN THE SUBURBS

Inventory By Submarket Type

CBDSecondary CoreUrbanPrime SuburbanSuburban

ATLAATLAATLAATLAATLAATLAATLAATLAATLAATLAATLAATLAATLAATLAATLAATLA

Source: CoStar Portfolio Strategy As of Mar 2017

8%

12%

21%

19%

40%

CBD

Secondary Core

Urban

Prime Suburban

Suburban

Current Inventory Levels

PRESSURE ON THE CORE IS MOUNTING

Vacancy By Submarket District Type

Stock

Vacancy

Vacancy %

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

ATLA

Source: CoStar Portfolio Strategy As of Mar 2017

*Analysis limited to 54 major U.S. metros

0%

2%

4%

6%

8%

10%

12%

14%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

CBD Secondary Core Urban Prime Suburban Suburban

Vacancy % % UC of Inventory

Vacancy % UC of Inventory

SUBURBAN PRODUCT HAS HANDLED MOST NEW SUPPLY

Inventory Increase & Vacancy Change From 2013 - 16Q4

123

37711378023789437986380773816838260383523844238533386253871738807388983899039082

Source: CoStar Portfolio Strategy As of Mar 2017

Tier 1

Tier 2

Tier 3

Tier 1

Tier 2

Tier 3

(1.0%)

(0.5%)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

0% 5% 10% 15% 20% 25%

CBD & Secondary Core Prime Suburban & Suburban

Vacancy Change (2013-16)

Inventory Change (2013-16)

SUBURBS HOLDING UP THE BEST

Percentage Of Submarkets Below 2000-09 Historical Average Vacancy

2012

2012

2012

2012

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016

2016

2016

2016

Source: CoStar Portfolio Strategy As of 16Q4

20%

30%

40%

50%

60%

70%

80%

90%

2012 2013 2014 2015 2016

Percentage Of Submarkets

CBD Secondary Core Urban Prime Suburban Suburban

WEST END/CBD EXPERIENCING PAIN

Nashville Apartment Vacancy

Source: CoStar Portfolio Strategy As of 16Q4

HIGH VACANCIES HURTING RENTS DOWNTOWN

Nashville YoY Apartment Rents

Source: CoStar Portfolio Strategy As of 16Q4

DECLINING AFFORDABILITY (AND SUPPLY) TAKE A TOLL DOWNTOWN

CBD And Secondary Core Annual Rent Growth By Metro

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

Source: CoStar Portfolio Strategy As of Mar 2017

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

De

troit

Las V

egas

Salt L

ake C

ity

Sacra

mento

Tam

pa

Sea

ttle

San

An

tonio

Pho

enix

Da

llas -

FW

Los A

ngele

sC

hic

ago

Min

nea

polis

Palm

Be

ach

Ra

leig

hS

an

Die

go

Atlan

taM

iam

iC

olu

mbus

Wash

ingto

n, D

CD

enver

East

Bay

No

rthern

NJ

Phila

delp

hia

Orlando

Port

land O

RC

harlotte

Ne

w Y

ork

Na

shvill

eB

osto

nS

an

Jose

Fort

Laud

erd

ale

Austin

San

Fra

ncis

co

Baltim

ore

Ho

usto

n

2016 Rent Growth 2015 Rent Growth

Y/Y Rent Growth

FINAL THOUGHT: B PROPERTIES ALSO ENJOYING BETTER RENT GAINS

Rent Growth by Market and Building Percentile Group

0-19% 20-39% 40-69% 70-89% 90-100%

Seattle 5.9% 7.6% 6.3% 4.6% 3.4%

Houston 4.3% 3.6% 0.3% -2.8% -6.6%

Los Angeles 4.3% 4.6% 5.3% 4.7% 2.0%

Orange County 3.7% 4.9% 5.8% 4.9% 2.4%

Boston 3.5% 4.4% 2.2% 1.5% -0.6%

Denver 3.2% 4.3% 2.6% 0.6% -0.7%

Washington, DC 3.0% 2.6% 1.6% 0.4% -0.2%

New York 3.0% 3.0% 2.2% 1.7% -1.6%

East Bay 2.9% 2.8% 4.3% 1.9% -0.6%

San Jose 2.2% 2.7% 1.1% -0.8% -1.9%

National* 4.0% 4.1% 3.7% 2.3% 0.5%

*National Percentile Groupings Calculated at Metro Level

Source: CoStar Portfolio Strategy As of 16Q4

Property Rent Percentile

These CoStar Portfolio Strategy materials contain financial and other information from a variety of public and proprietary

sources. CoStar Group, Inc. and its affiliates (collectively, “CoStar”) have assumed and relied upon, without independent

verification, the accuracy and completeness of such third party information in preparing these materials.

The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information

prepared by CoStar and presented herein (the “Materials”) are based on various assumptions concerning future events

and circumstances, which are speculative, uncertain and subject to change without notice. You should not rely upon the

Materials as predictions of future results or events, as actual results and events may differ materially. All Materials speak

only as of the date referenced with respect to such data and may have materially changed since such date. CoStar has no

obligation to update any of the Materials included in this document. You should not construe any of the data provided

herein as investment, tax, accounting or legal advice.

CoStar does not represent, warrant or guaranty the accuracy or completeness of the information provided herein and shall

not be held responsible for any errors in such information. Any user of the information provided herein accepts the

information “AS IS” without any warranties whatsoever. To the maximum extent permitted by law, CoStar disclaims any

and all liability in the event any information provided herein proves to be inaccurate, incomplete or unreliable.

© 2017 CoStar Realty Information, Inc. No reproduction or distribution without permission.