7 months ago

RCG 17 Guide to Markets FINAL[1]


SECTION 1 | MARKET PERFORAMANCE Metro Investment Ramifications (continued) to produce above average rent growth and total returns. The Midwest as a group continues to offer better than average total returns with considerably lower than average return volatility. The size weighted average ETR of the ten Midwest markets we cover is 7.33%, 33bps above the peer group mean. Only Columbus, Indianapolis and Saint Louis fail to breech the 7% threshold. Group rent is expected to grow at a compound annual rate of 2.82%, and the average RAI is 5.12, easily highest among regions. past Columbus, which tanked due the impact of rapid home price appreciation on projected rents and ETRs, Indianapolis and Suburban Maryland. The lowest places in the RAI ranks were filled with metros near the top of the ETR league table. First ETR ranked Los Angeles placed only 23rd in this table due to rent volatility. Denver (ETR #23) was last, preceded in the rankings by New York (ETR #14) and Austin (ETR #22). Metro rankings by Expected Total Returns and Risk-adjusted Indices are displayed in Tables I and II. The mix includes some institutional favorites and overlooked gems. Among the former are Los Angeles, now group Number One and San Francisco, which moved from fourth to fifth spot. The latter group includes several low volatility, high-yield markets: Milwaukee (#4), Cleveland (#6) and Pittsburgh (#8). Former Number One Salt Lake slipped to #2, and former #2-ranked Sacramento (#23), like Denver (#24), tumbled out of the Top Ten altogether, the first due to a sharp deceleration of 2H17 rent growth, the other due to stronger than expected home price appreciation. Chicago was a beneficiary of a material upward rent revision, propelling it from twentieth position in the MY2017 GTM to third. Likewise, Cincinnati rent trends received a moderate shot in the arm, which, in conjunction with receding supply pressures, raised the metro’s standing from 49th to 21st. Austin and Dallas fell out of the Top Ten, felled by modestly slower rent growth expectations and lower cap rates. Portland also dropped in the ranks, slipping from third to twenty-second by virtue of supply-driven declines in rent growth and occupancy. South and Central Florida markets continued to record mediocre to soft ETR results. Fort Lauderdale, Palm Beach and Tampa rankings fell into the lowest quintile, and Orlando slipped from 24th to 30th. Jacksonville (12th) and Miami (19th) were the positive Florida outliers. As for the risk-adjusted return rankings, only two constituents of the Top Ten fell from the top ranks. Mid-year leader Salt Lake dropped to seventeenth and Baltimore dropped from third to sixteenth, in each case after soft 2H17 rent growth metrics trimmed ETRs. Kansas City and Fort Worth assumed their Top Ten spots. One of three Midwest markets to figure in both Top Ten lists – Cleveland – held fast to its number one position in the RAI standings. Another – Milwaukee – moved into third spot, while the third – Chicago – moved to the tenth rank spot. Dallas fell from second to fourth in the RAI rankings, switching places with Philadelphia. Saint Louis remained in fifth, leaping 14

SECTION 1 | MARKET PERFORAMANCE Conclusions Overall multifamily expected total returns were little changed in the second half 2017. The positive impact of moderately stronger expected economic growth over the forecast interval is offset by the effects of firmer forecast home prices and higher projected terminal cap rates. Still, the multifamily investment thesis remains intact. Rental space demand is robust and is projected to persist at levels sufficient to maintain overall occupancy rates above 95% for the forecast interval, barring an unforeseen recession. Rents are likely to decelerate but trends should continue to materially outpace inflation, creating the conditions for further NOI growth. Although interest rates and cap rates are likely to rise faster than we expected earlier, relative investment returns should remain attractive so long as inflation remains within the bounds observed during the modern monetary policy era dating to the early 1980’s. 15

NYCOSH Protecting Worker 1-17-14 FINAL
Quick Start Guide 1 Guide de Démarrage Rapide 17
Genesis 17:1-14
January 2008 - RCG Economics