The Apartment Market Has Room to Run

Lesley Deutch photo

Lesley Deutch

March 8, 2011
The stars are aligning for an apartment boom. Other than housing affordability, all signs are pointing to a surge in rentals. Tighter lending standards, a shortage of consumers with a down payment, and strong demographics all point to rentals as the economy recovers.
Look at the coming surge in demographics:
  • The number of 20–24-year-olds will grow 1.2% per year through 2013, which is considerably stronger than the average growth of 0.6% per year during the last five years.

  • The number of 25–34-year-olds will grow 1.4% per year through 2015 after declining 0.8% per year from 1992 to 2001. This translates to an additional 1.3 million renter households.

  • And finally, more than 1.2 million young adults moved home with their parents from 2005 to 2010, which is huge pent-up demand for rentals.
With these thoughts in mind, we have expanded our apartment research efforts as follows:
  • Forecasts by Metro: We will now forecast rents by market as well, keeping a close eye on whether new households are electing to rent apartments or homes, or deciding to buy homes.
  • Unique REIT Analysis: Apply our conclusions to an analysis of the largest 11 apartment REIT’s and their current apartment holdings by geography, providing a unique perspective of REIT performance based on metro-level analysis.
  • Development Feasibility: A lot of money is lining up to start construction, but today’s rents don’t necessarily justify construction so rental rate growth assumptions are needed. Understanding the complicated local dynamics, especially in the aftermath of the recession, will make the difference between good returns and great returns.

The housing market and the apartment market are deeply intertwined, perhaps more so today than anytime in previous history. Please email us with questions or to discuss how you can utilize this new research.

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About The Author

Lesley Deutch photo
Lesley Deutch
Managing Principal
Lesley has more than 25 years of experience consulting with executives in the finance and real estate industries throughout North America. She works across a wide spectrum of industries including apartments, for-sale housing, high-rise development, urban projects, single-family rental, building products, and commercial developments.

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