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