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SECTION 1 | MARKET PERFORAMANCE<br />
Metro Investment Ramifications (continued)<br />
<strong>to</strong> produce above average rent growth and <strong>to</strong>tal returns.<br />
The Midwest as a group continues <strong>to</strong> offer better than average<br />
<strong>to</strong>tal returns with considerably lower than average return<br />
volatility. The size weighted average ETR of the ten Midwest<br />
markets we cover is 7.33%, 33bps above the peer group mean.<br />
Only Columbus, Indianapolis and Saint Louis fail <strong>to</strong> breech the<br />
7% threshold. Group rent is expected <strong>to</strong> grow at a compound<br />
annual rate of 2.82%, and the average RAI is 5.12, easily highest<br />
among regions.<br />
past Columbus, which tanked due the impact of rapid home<br />
price appreciation on projected rents and ETRs, Indianapolis<br />
and Suburban Maryland.<br />
The lowest places in the RAI ranks were filled with metros near<br />
the <strong>to</strong>p of the ETR league table. First ETR ranked Los Angeles<br />
placed only 23rd in this table due <strong>to</strong> rent volatility. Denver (ETR<br />
#23) was last, preceded in the rankings by New York (ETR #14)<br />
and Austin (ETR #22).<br />
Metro rankings by Expected Total Returns and Risk-adjusted<br />
Indices are displayed in Tables I and II. The mix includes some<br />
institutional favorites and overlooked gems. Among the former<br />
are Los Angeles, now group Number One and San Francisco,<br />
which moved from fourth <strong>to</strong> fifth spot. The latter group<br />
includes several low volatility, high-yield markets: Milwaukee<br />
(#4), Cleveland (#6) and Pittsburgh (#8). Former Number One<br />
Salt Lake slipped <strong>to</strong> #2, and former #2-ranked Sacramen<strong>to</strong><br />
(#23), like Denver (#24), tumbled out of the Top Ten al<strong>to</strong>gether,<br />
the first due <strong>to</strong> a sharp deceleration of 2H<strong>17</strong> rent growth, the<br />
other due <strong>to</strong> stronger than expected home price appreciation.<br />
Chicago was a beneficiary of a material upward rent revision,<br />
propelling it from twentieth position in the MY20<strong>17</strong> GTM <strong>to</strong><br />
third. Likewise, Cincinnati rent trends received a moderate<br />
shot in the arm, which, in conjunction with receding supply<br />
pressures, raised the metro’s standing from 49th <strong>to</strong> 21st.<br />
Austin and Dallas fell out of the Top Ten, felled by modestly<br />
slower rent growth expectations and lower cap rates.<br />
Portland also dropped in the ranks, slipping from third <strong>to</strong><br />
twenty-second by virtue of supply-driven declines in rent<br />
growth and occupancy.<br />
South and Central Florida markets continued <strong>to</strong> record<br />
mediocre <strong>to</strong> soft ETR results. Fort Lauderdale, Palm Beach and<br />
Tampa rankings fell in<strong>to</strong> the lowest quintile, and Orlando slipped<br />
from 24th <strong>to</strong> 30th. Jacksonville (12th) and Miami (19th) were the<br />
positive Florida outliers.<br />
As for the risk-adjusted return rankings, only two constituents<br />
of the Top Ten fell from the <strong>to</strong>p ranks. Mid-year leader Salt Lake<br />
dropped <strong>to</strong> seventeenth and Baltimore dropped from third<br />
<strong>to</strong> sixteenth, in each case after soft 2H<strong>17</strong> rent growth metrics<br />
trimmed ETRs. Kansas City and Fort Worth assumed their Top<br />
Ten spots.<br />
One of three Midwest markets <strong>to</strong> figure in both Top Ten lists<br />
– Cleveland – held fast <strong>to</strong> its number one position in the RAI<br />
standings. Another – Milwaukee – moved in<strong>to</strong> third spot, while<br />
the third – Chicago – moved <strong>to</strong> the tenth rank spot.<br />
Dallas fell from second <strong>to</strong> fourth in the RAI rankings, switching<br />
places with Philadelphia. Saint Louis remained in fifth, leaping<br />
14