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Arbor Chatter Multifamily Research 2018 Q1

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In Arbor Chatter's latest Multifamily Research, the Arbor team presents research on various multifamily market trends and news. The research covers everything from how apartment community size affects unity and neighborhood ratings to the role of public transportation in suburban apartment areas. In researching small apartment buildings, research found that near 65% of occupants rated their units more favorably than those occupants of large buildings. Occupants in smaller buildings rated the schools in their area more favorably than those in larger buildings but rated their public transportation options as lower than those inhabiting large buildings.

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Arbor Chatter Multifamily Research 2018 Q1

  1. 1. ARBOR.COM | 800.ARBOR.10 Arbor Chatter Multifamily Research Q1 2018
  2. 2. Arbor Chatter Multifamily Research 1ARBOR.COM • 800.ARBOR.10 2. Climate Resiliency Can Further Reduce Flood Risk Impacts on Multifamily Rents 5. How Apartment Community Size Impacts Unit and Neighborhood Ratings 9. Small Buildings Still Dominate Apartment Renter Shares 13. Small Building Renters Are Growing in a Handful of Regional Markets Amidst General Decline 17. Are Baby Boomers the New Millennials in Multifamily? 20. Single-Family Homes Play a Bigger Role in the Rental Market 24. Top Reasons Why Renters Move into Small Apartment Buildings 27. How Do Small Building Renters Find Their Apartments? 31. Suburban Apartment Renters Shifting Slightly Away from Vehicle Ownership 34. Public Transportation Picking Up Among Suburban Apartment Renters 37. Need for Higher Speeds: An Updated Look at Internet Usage in Small Apartment Buildings Table of Contents
  3. 3. Climate Resiliency Can Further Reduce Flood Risk Impacts on Multifamily Rents March 21, 2018 ARBOR.COM • 1.800.ARBOR.10
  4. 4. Arbor Chatter Multifamily Research 3ARBOR.COM • 800.ARBOR.10 With a lower share of inventory located in flood-prone areas, small buildings are more conservative in their risk profile and offer value for investment across the apartment market. Around 8% of all small apartment building units in the United States were located within areas assessed with a high risk of flooding. In large buildings the share was slightly larger at 10%. The risk assessment for apartment buildings and their units varies greatly across metro areas. The data indicates that small buildings displayed a tighter spread around the national average compared to large buildings. An indication of the preference for scenic, albeit riskier, locations characterize the latter group. Apartment Inventory Located in Flood Risk Areas Units Assessed at Flood Risk per Resident Response as Share of Total Asset Class Inventory Climate Resiliency Can Further Reduce Flood Risk Impacts on Multifamily Rents 0% 8% 16% 24% 32% Atlanta Boston Chicago Dallas Detroit Houston Los Angeles Miami New York Philadelphia Phoenix Riverside San Francisco Seattle Washington DC United States Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/climate-resilience-support-flood-risk-rents/
  5. 5. Arbor Chatter Multifamily Research 4ARBOR.COM • 800.ARBOR.10 Data also shows partial support for the counter-intuitive location and price relationship mentioned earlier. When indexed to the area-wide average rents within asset class, apartment rents in flood-prone areas are higher in the coastal metros, consistently for large buildings, and with qualification for small buildings. While large properties take on more risk for amenities, small properties appear to have more conservative risk profiles of long-term returns for investors. Unit Rents of At-Flood Risk Inventory Relative to Area Average Rents Monthly Rent Levels of At-Risk Units Indexed to the Average Rents within Asset Class Climate Resiliency Can Further Reduce Flood Risk Impacts on Multifamily Rents 0.0 0.4 0.8 1.2 1.6 Atlanta Boston Chicago Dallas Detroit Houston Los Angeles Miami New York Philadelphia Phoenix Riverside San Francisco Seattle Washington DC United States Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/climate-resilience-support-flood-risk-rents/
  6. 6. How Apartment Community Size Impacts Unit and Neighborhood Ratings March 19, 2018 ARBOR.COM • 1.800.ARBOR.10
  7. 7. Arbor Chatter Multifamily Research 6ARBOR.COM • 800.ARBOR.10 For their relatively lower rent levels, small apartment properties are surprisingly well- rated by their occupants, both in terms of unit quality and the neighborhoods in which they are located. Despite lower rents, small buildings are competitive products in terms of units and neighborhood quality. Around 65 % of households in small buildings rated their units between 7 and 10 (on a scale of 1 to 10, with 10 being the best)— toe-to-toe with the ratings by large building renters in 2015. Rating of Housing Units in Apartment Buildings Household Response, Scale of 1 to 10, where 1 = Worst and 10 = Best How Apartment Community Size Impacts Unit and Neighborhood Ratings 5% 2% 11% 29% 37% 5% 1% 8% 22% 42% 0% 10% 20% 30% 40% 50% 1-2 3-4 5-6 7-8 9-10 Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/property-renters-units-neighborhoods/
  8. 8. Arbor Chatter Multifamily Research 7ARBOR.COM • 800.ARBOR.10 Small property households also rated their neighborhoods favorably. In fact, 62%, or the majority of responses, were in the 7 to 10 range. A slightly higher number of respondents in large buildings rated both their units and neighborhoods in the highest rating categories (9 and 10). Rating of Current Neighborhood Household Response, Scale of 1 to 10, where 1 = Worst and 10 = Best How Apartment Community Size Impacts Unit and Neighborhood Ratings 5% 3% 10% 26% 38% 5% 2% 9% 24% 39% 0% 10% 20% 30% 40% 50% 1-2 3-4 5-6 7-8 9-10 Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/property-renters-units-neighborhoods/
  9. 9. Arbor Chatter Multifamily Research 8ARBOR.COM • 800.ARBOR.10 Nearly 90% of small building renters viewed schools in their neighborhood as being ‘good,’ which was marginally higher compared to large buildings. Small building renters had a relatively lower opinion of public transportation access in their neighborhood compared to large property respondents. However, this information comes as little surprise given the latter’s concentration in the urban core. Favorable Rating of Neighborhood Amenities Household Response, Agree that Amenities are Good in the Neighborhood How Apartment Community Size Impacts Unit and Neighborhood Ratings 89% 87% 71% 85% 60% 65% 70% 75% 80% 85% 90% Small Apartment Buildings Large Apartment Buildings Schools Public Transport Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/property-renters-units-neighborhoods/
  10. 10. Small Buildings Still Dominate Apartment Renter Shares February 27, 2018 ARBOR.COM • 1.800.ARBOR.10
  11. 11. Arbor Chatter Multifamily Research 10ARBOR.COM • 800.ARBOR.10 Rental units accommodate individuals to varying degrees due to a range of unit sizes, diverse household types, and living arrangements. Multifamily properties (5+ units) accounted for 37% of the nearly 105 million U.S. renter population in 2016. This was slightly lower compared to the share of occupied unit inventory at 45%. Of this, small apartment properties made up 28% of the renter population. This share was three times that of large buildings, but lower compared to the 45% share in single- family homes. Distribution of the U.S. Renter Population Percentage Share by Asset Class Small Buildings Still Dominate Apartment Renter Shares 45% 18% 28% 9% Single-Family Units Duplex-Quadruplex Buildings (2-4 Units) Small Apartment Buildings (5-49 units) Large Apartment Buildings (50 units or More) Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/small-multifamily-dominates-apartments/
  12. 12. Arbor Chatter Multifamily Research 11ARBOR.COM • 800.ARBOR.10 The number of renters per unit decreases with building size. Single-family units, typically larger and preferred by families with children, house 3.1 persons on average. This figure can be compared to only 1.8 persons in large building units, which are more popular with single renters. Small building units, which blend apartment living with more unit space and cater to diverse household segments, come in at 2.2 persons per unit. Average Household Size by Asset Class Number of Persons per Unit 3.1 2.4 2.2 1.8 0.0 1.0 2.0 3.0 4.0 Single-Family 2-4 Units 5-49 Units 50 Units or More Small Buildings Still Dominate Apartment Renter Shares Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/small-multifamily-dominates-apartments/
  13. 13. Arbor Chatter Multifamily Research 12ARBOR.COM • 800.ARBOR.10 The growth and shift in renter demand broadly mirrors the underlying supply-side trends. The small property renter base declined at an annual rate of 1.6% over 2015-16, in contrast to an increase of 2.3% over the previous year. This decline comes in the context of a large property inventory supply glut across the largest U.S. metros, which has helped fuel a renter population growth of 5.6% in this asset class over 2015-16 — nearly double the rate from last year. Population Growth by Asset Class Year-Over-Year, Annual Growth Rate 0.3% 2.3% 3.1% 0.8% 0.1% -1.6% 5.6% 0.5% -2.0% 0.0% 2.0% 4.0% 6.0% Single-Family 5-49 Units 50 Units or More U.S. Overall 2014-15 2015-16 Small Buildings Still Dominate Apartment Renter Shares Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/small-multifamily-dominates-apartments/
  14. 14. Small Building Renters Are Growing in a Handful of Regional Markets Amidst General Decline February 26, 2018 ARBOR.COM • 1.800.ARBOR.10
  15. 15. Arbor Chatter Multifamily Research 14ARBOR.COM • 800.ARBOR.10 While apartment renting remains a predominantly urban affair across both the downtown and suburban areas of large U.S. metros, renting activity is expanding into smaller cities and new property types. Nearly 70% of the nation’s small building renters lived in the 50 largest metro areas, with 28% just in the five largest. Urban orientation is even more pronounced for large apartment buildings. Nearly 80% of all renters in this asset class lived in the Top 50 metro areas, and close to 40% lived in the Top 5. In stark contrast, nearly 50% of all single- family home renters lived outside the largest 50 metro areas. Distribution of Renters by Asset Class across Metro Segments Metro Segment Percentage Share of Asset Class, U.S. Total Small Building Renters Growing in a Handful of Regional Markets Amidst General Decline 14% 28% 39% 20% 23% 27% 19% 18% 14% 0% 10% 20% 30% 40% 50% Single-Family Units Small Apartment Buildings (5-49 units) Large Apartment Buildings (50 units or More) Top 5 Metros Next 15 Metros Next 30 Metros Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/small-building-renters-growing-regional-markets/
  16. 16. Arbor Chatter Multifamily Research 15ARBOR.COM • 800.ARBOR.10 Mirroring inventory growth, renter population has declined in small asset properties across all metro market segments between 2015 and 2016. In contrast, renter population in large buildings soared across the board, at an annual rate of 9.0% in secondary markets, and 4.5% in smaller regional markets. Single-family renters also grew over this period, but at a more modest rate, keeping pace with overall U.S. population growth. Renter Growth by Metro Segments Year-Over-Year, Annual Growth Rate, 2015-2016 Small Building Renters Growing in a Handful of Regional Markets Amidst General Decline 0.7% -1.4% 3.0% 0.6% -2.3% 9.0% 0.8% -1.2% 4.5% -5.0% 0.0% 5.0% 10.0% Single-Family Units Small Apartment Buildings (5-49 units) Large Apartment Buildings (50 units or More) Top 5 Metros Next 15 Metros Next 30 Metros Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/small-building-renters-growing-regional-markets/
  17. 17. Arbor Chatter Multifamily Research 16ARBOR.COM • 800.ARBOR.10 Standing out from this overall decline, small building renters grew in 17 of the Top 50 metro areas. These areas mostly included smaller secondary and regional metros, except for large cities such as Dallas, Boston, Philadelphia, Seattle and San Diego. While these shifts may be partially explained by renter preference, the overhanging supply glut in large buildings — combined with the emergence of single- family renting — is exerting downward pressure on small property renter growth. Metros with the Fastest and Slowest Growing Small Building Renter Populations Year-Over-Year, Annual Growth Rate, Top 50 Metros by Size, 2015-2016 -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% Richmond Orlando Virginia Beach Madison Louisville Birmingham Denver Tampa Jacksonville Chicago ... Memphis Portland Cleveland Kansas City San Antonio Sacramento Oklahoma Providence St.Louis Hartford Small Building Renters Growing in a Handful of Regional Markets Amidst General Decline Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/small-building-renters-growing-regional-markets/
  18. 18. Are Baby Boomers the New Millennials in Multifamily? February 23, 2018 ARBOR.COM • 1.800.ARBOR.10
  19. 19. Arbor Chatter Multifamily Research 18ARBOR.COM • 800.ARBOR.10 Apartment buildings have a significantly larger share of younger renters. As shown below, individuals in the 20-39 year old age group represented a 43% share of all renters in small apartment buildings by the end of 2016. This is a larger share compared to all other adult renter categories in this asset class. In contrast, the share of older renters was 15 percentage points higher in large apartment buildings, which were still dominated by 20 to 39-year-olds. Looking at the rental market as a whole, single-family units included the highest share of individuals below 20 years old. This information indicates the presence of younger families with children. Distribution of Renters by Age and Average Age within Asset Class Percentage of All Renters within Asset Class Are Baby Boomers the New Millennials in Multifamily? 34% 25% 16% 34% 43% 38% 22% 20% 20% 8% 10% 17% 1% 2% 10% 0 10 20 30 40 50 0% 10% 20% 30% 40% 50% Single-Family Small Apartment Buildings Large Apartment Buildings Less than 20 years 20-39 years 40-59 years 60-79 years 80 years and Over Average Age (Years) Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/baby-boomers-millennials-multifmaily/
  20. 20. Arbor Chatter Multifamily Research 19ARBOR.COM • 800.ARBOR.10 Baby Boomer renters grew at a more robust annual rate of 5.4% in small apartment buildings and 4.9% in single- family homes. As noted in a recent blog, these asset classes served nearly 70% of all U.S. renters in 2016. Baby Boomer growth in large, amenity-rich apartment buildings comes in a shade below the Millennials, but with an impressive overall tally of 4.5% growth over 2014-16. Renter Growth by Age Segments within Asset Class Average Annual Growth Rate, 2014-2016 Are Baby Boomers the New Millennials in Multifamily? -0.4% -1.1% 2.9% -0.2% 0.4% 6.0% -0.2% -0.3% 3.2% 4.9% 5.4% 3.8% 3.5% 1.4% 3.4% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Single-Family Small Apartment Buildings Large Apartment Buildings Less than 20 years 20-39 years 40-59 years 60-79 years 80 years and Over Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/baby-boomers-millennials-multifmaily/
  21. 21. Single-Family Homes Play a Bigger Role in the Rental Market February 22, 2018 ARBOR.COM • 1.800.ARBOR.10
  22. 22. Arbor Chatter Multifamily Research 21ARBOR.COM • 800.ARBOR.10 There were nearly 42 million rental units in the United States at the end of 2016. These rental units accounted for about 35% of the overall U.S. housing inventory. Of these, multifamily buildings (5+ units) taken together constituted 45% of all rental units. This was followed by single-family homes at 36%, and duplex-quadruplex units at 19%. Units in small apartment buildings (5-49 units) comprised 32% of the overall U.S. rental inventory. Large buildings (50 units or more) formed a share of 13%. Distribution of U.S. Rental Units Occupied Rental Housing Units by Asset Class Single-Family Homes Play a Bigger Role in the Rental Market 36% 19% 32% 13% Single-Family Units Duplex-Quadruplex Buildings (2-4 Units) Small Apartment Buildings (5-49 Units) Large Apartment Buildings (50 Units or More) Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/multifamily-single-family-rentals/
  23. 23. Arbor Chatter Multifamily Research 22ARBOR.COM • 800.ARBOR.10 The 2015-16 year-over-year percent growth for multifamily units at 1.0% was double that of single-family rental homes, while duplex-quadraplex units shrank further. At the same time, the 2015-16 percent growth for multifamily units was significantly slower compared to the previous year (2014-15) at 2.3%, while being faster for single-family rental homes. Growth of Rental Units by Asset Class Year-Over-Year, Annual Growth Rate 0.0% -0.2% 2.3% 0.5% -0.5% 1.0% -1.0% 0.0% 1.0% 2.0% 3.0% Single-Family Duplex-Quadruplex Buildings (2-4 Units) Multifamily Units 2014-15 2015-16 Single-Family Homes Play a Bigger Role in the Rental Market Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/multifamily-single-family-rentals/
  24. 24. Arbor Chatter Multifamily Research 23ARBOR.COM • 800.ARBOR.10 The recent relative slowing down of the multifamily segment is due to the ongoing shift toward large apartment buildings and away from smaller properties. While inventory in large buildings grew by 5.4% over 2015-16, small buildings showed a slight decline of 0.7% over this time. Growth of Rental Units within the Multifamily Segment Year-Over-Year, Annual Growth Rate 1.9% 3.3% -0.7% 5.4% -1.5% 0.0% 1.5% 3.0% 4.5% 6.0% Small Apartment Buildings (5-49 Units) Large Apartment Buildings (50 Units or More) 2014-15 2015-16 Single-Family Homes Play a Bigger Role in the Rental Market Source: Arbor Chatter, Chandan Economics, American Community Survey, 2016 https://arbor.com/blog/multifamily-single-family-rentals/
  25. 25. Top Reasons Why Renters Move into Small Apartment Buildings February 6, 2018 ARBOR.COM • 1.800.ARBOR.10
  26. 26. Arbor Chatter Multifamily Research 25ARBOR.COM • 800.ARBOR.10 The share of residents in small buildings who moved over the previous year decreased from 34% in 2010 to 29% by 2015. In comparison, recent movers comprised a 26% share of the all residents in large buildings in 2015, down from 29% in 2010. This can be compared to the overall population moving rates of around 15% over this period (including all movers from outside the U.S. into the US). New Movers in Apartment Buildings Individuals Who Moved Within the Last Year, Including Immigrants Top Reasons Why Renters Move into Small Apartment Buildings 34% 29% 15% 29% 26% 15% 0% 10% 20% 30% 40% Small Apartment Buildings Large Apartment Buildings U.S. Overall 2010 2015 Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/reasons-renters-move-small-apartment-buildings/
  27. 27. Arbor Chatter Multifamily Research 26ARBOR.COM • 800.ARBOR.10 The top three reasons for recent movers (within two years) in small apartment buildings included ‘Forming Own Household’ (33%), ‘For a Better Neighborhood’ (27%), and ‘For a Better Home’ (25%). Note that these reasons are not mutually exclusive. In contrast, the top reasons for recent movers in large buildings include ‘For a Better Neighborhood’ (29%), followed by an even 25% choice of ‘For a Better Home’, ‘To be Close to Family’, ‘For a New Job or Transfer’ and ‘Forming own Household’. Interestingly, commuting does not show up as one of the top reasons for moves. Reasons for Moving into Present Unit Survey Respondent who Moved within the Last Two Years Top Reasons Why Renters Move into Small Apartment Buildings 23% 33% 21% 18% 25% 20% 27% 25% 25% 25% 17% 25% 19% 29% 0% 10% 20% 30% 40% For New Job or Transfer Forming Own Household To be Close to Family Reduce Commute Time For Better Home Reduce Housing Costs For Better Neighborhood Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/reasons-renters-move-small-apartment-buildings/
  28. 28. How Do Small Building Renters Find Their Apartments? January 25, 2018 ARBOR.COM • 1.800.ARBOR.10
  29. 29. Arbor Chatter Multifamily Research 28ARBOR.COM • 800.ARBOR.10 The most popular search modes employed by new small building renters (who moved within the previous two years) included ‘Word of Mouth’ (39%). This was followed by the Internet (37%), and to a much smaller extent, ‘Sign Outside Building’ (15%). New large building renters employed similar search modes while utilizing real estate agents to a slightly higher degree. Large buildings seem to benefit more from personal recommendations compared to Internet searches (10% spread) compared to small buildings (2% spread). This is likely due to the aggressive referral programs in place with existing renters. Mode of Apartment Search of New Movers Individuals Who Moved within the Last Two Years How Do Small Building Renters Find Their Apartments? 39% 37% 7% 5% 9% 15% 41% 31% 5% 8% 10% 14% 0% 10% 20% 30% 40% 50% Word of Mouth Internet Newspaper or Publication Real Estate Agent Rental Agency Listing Sign Outside Building Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/small-building-renters-find-apartments/
  30. 30. Arbor Chatter Multifamily Research 29ARBOR.COM • 800.ARBOR.10 While small and large buildings follow similar search mode preferences in the aggregate, the story is more nuanced when examining the purpose behind the move. The Internet is by far the most popular search mode among renters following new jobs or transfers. This data makes sense considering the short time spans, lack of personal networks in new locations, and higher use of real estate agents in large buildings with deeper commissions. Apartment Search Modes of Those Moving for Jobs Individuals Who Moved within the Last Two Years How Do Small Building Renters Find Their Apartments? 23% 45% 3% 4% 10% 15% 22% 39% 0% 11% 11% 16% 0% 10% 20% 30% 40% 50% Word of Mouth Internet Newspaper or Publication Real Estate Agent Rental Agency Listing Sign Outside Building Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/small-building-renters-find-apartments/
  31. 31. Arbor Chatter Multifamily Research 30ARBOR.COM • 800.ARBOR.10 Renters who seek to move close to family rely heavily on referrals across apartment building type. This is most likely based on leads from other family members and friends in the neighborhood. Small building operators can leverage multiple avenues to attract new renters. Strategies to prioritize should include effective referral initiatives and better use of Internet rental listing services. Apartment Search Modes of Those Moving to Be Close to Family Individuals Who Moved within the Last Two Years How Do Small Building Renters Find Their Apartments? 40% 26% 6% 2% 8% 18% 48% 12% 8% 6% 9% 16% 0% 10% 20% 30% 40% 50% 60% Word of Mouth Internet Newspaper or Publication Real Estate Agent Rental Agency Listing Sign Outside Building Small Apartment Buildings Large Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/small-building-renters-find-apartments/
  32. 32. Suburban Apartment Renters Shifting Slightly Away from Vehicle Ownership January 8, 2018 ARBOR.COM • 1.800.ARBOR.10
  33. 33. Arbor Chatter Multifamily Research 32ARBOR.COM • 800.ARBOR.10 The recent interest in apartment development has focused on areas in close proximity to existing and expanding regional public transportation hubs (transit- oriented development). This means that suburban apartment renters are also likely to own fewer cars going forward. Nearly 85% of all households in suburban areas owned a vehicle in 2015. Nearly 30% owned two or more cars. Car ownership was only about 66% in urban areas. Vehicle ownership rates are skewed to more cars across all households. For homeowners with driveways and garages, there are fewer hindrances to car ownership. 53% of all households in the Top 15 metros had two or more cars. Car Ownership of Small Apartment Households For Top 15 Metros, Distribution of All Housheolds by Location Suburban Apartment Renters Shifting Slightly Away from Vehicle Ownership 33% 15% 13% 46% 55% 34% 21% 29% 53% 0% 10% 20% 30% 40% 50% 60% In Urban Locations In Suburban Locations All MSA Households (Owner and Renter) No Car One Car Two Cars or More Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/suburban-apartment-renters-away-vehicle-ownership/
  34. 34. Arbor Chatter Multifamily Research 33ARBOR.COM • 800.ARBOR.10 While car ownership rates are relatively higher in suburban areas, these locations are also witnessing an increase in households not owning vehicles at an annual rate of 1.0%. In urban areas, the reverse was surprisingly true. The data also shows that households owning just one car grew at a lower annual rate of 3.7% in suburban areas, compared to 5.4% in the urban core. However, suburban areas are also witnessing an increase in households with two or more vehicles, keeping consistent with the historical norm. Growth in Car Ownership of Small Apartment Households For Top 15 Metros, Distribution of All Housheolds by Location Suburban Apartment Renters Shifting Slightly Away from Vehicle Ownership -1.4% 1.0% 5.4% 3.7%3.8% 7.5% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Urban Locations Suburban Locations No Car One Car Two Cars or More Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/suburban-apartment-renters-away-vehicle-ownership/
  35. 35. Public Transportation Picking Up Among Suburban Apartment Renters January 4, 2018 ARBOR.COM • 1.800.ARBOR.10
  36. 36. Arbor Chatter Multifamily Research 35ARBOR.COM • 800.ARBOR.10 Commute Choice of Renters Top 15 Metros, Working Renters, 16 years or Older Public Transportation Picking Up Among Suburban Apartment Renters 59% 27% 7% 2% 5% 81% 10% 4% 0% 5% 0% 25% 50% 75% 100% Drove Public Transport Walked Biked All Other Urban Locations Suburban Locations Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/public-transportation-suburban-renters/ Given the concentration of the largest apartment developments in expensive and transit rich locations, small building renters have comparatively higher rates of driving to work – 12% higher in urban locations and 5% higher in suburban areas compared to larger buildings. Also shown in the data is that public transportation remains crucial for apartment renters living in urban locations across both small and large buildings, with more than twice as many individuals relying on public transit that what is seen in the suburbs. Small Buildings 47% 33% 12% 1% 7% 76% 13% 4% 1% 6% 0% 25% 50% 75% 100% Drove Public Transport Walked Biked All Other Urban Locations Suburban Locations Large Buildings
  37. 37. Arbor Chatter Multifamily Research 36ARBOR.COM • 800.ARBOR.10 Suburban areas are also showing signs of departure from historical trends, as more renters now appear amenable to public transportation. Small building renters choosing public transportation in suburban areas grew at an annual rate of 16% between 2014 and 2015, compared to only 3% for driving. Walking to work also grew faster at an annual rate of 7%. Growth in Commute Choice of Renters in Small Buildings Top 15 Metros, Average Annual Growth Rate, Working Renters, 16 years or Older 6% 1% 5% 3% 16% 7% 0% 5% 10% 15% 20% Drove Public Transport Walked Urban Locations Suburban Locations Public Transportation Picking Up Among Suburban Apartment Renters Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/public-transportation-suburban-renters/
  38. 38. Need for Higher Speeds: An Updated Look at Internet Usage in Small Apartment Buildings January 2, 2018 ARBOR.COM • 1.800.ARBOR.10
  39. 39. Arbor Chatter Multifamily Research 38ARBOR.COM • 800.ARBOR.10 While Internet access makes steady inroads in small apartment buildings, renter preference for faster connectivity is shifting access to newer technologies. Data for end-year 2015 shows that about 76% of all households in small apartment buildings reported some form of access to the Internet (paid and unpaid), up 3% since 2014, as shown below. In comparison, large apartment buildings had slightly lower levels of connectivity with a 70% share of all households having Internet access. This is explained by a mix of market-rate and non-market-rate units. Level of Internet Access by Building Size Percentage of Housheolds within Asset Class 73% 67% 76% 70% 60% 64% 68% 72% 76% 80% Small Apartment Buildings Large Apartment Buildings 2014 2015 Need for Higher Speeds: An Updated Look at Internet Usage in Small Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/internet-usage-small-apartment/
  40. 40. Arbor Chatter Multifamily Research 39ARBOR.COM • 800.ARBOR.10 While levels of access are on the rise across the apartment sector, faster speeds are more sought after, as reflected in the type of paid access. Cable internet was the most popular mode of connectivity in small buildings, with a presence in 70% of all households. This was followed by mobile broadband at 50% – levels that are similar in large buildings. Fiber optic currently serves only 9% of all small apartment building households. This figure can be compared to 12% in large buildings. Type of Access with Subscription Percentage of Households with Paid Access, Overlap between Fixed and Mobile Internet 9% 69% 15% 3% 50% 2% 12% 70% 15% 3% 48% 2% 0% 20% 40% 60% 80% Fiber Optic Cable Internet DSL Satellite Mobile Internet Dial-Up Service Small Apartment Buildings Large Apartment Buildings Need for Higher Speeds: An Updated Look at Internet Usage in Small Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/internet-usage-small-apartment/
  41. 41. Arbor Chatter Multifamily Research 40ARBOR.COM • 800.ARBOR.10 The year-over-year growth of access types indicates a preference for faster connectivity and decrease in more antiquated technologies. The household adoption of cable and mobile access grew by 2 percentage points since 2014, while fiber optics increased slightly below 1%. This is contrasted to the decline in the usage of DSL by 2 to 3% points across apartments. Note that mobile technology has moved into third place in terms of speed, behind fiber and cable. Growth in Paid Internet Access Type by Household : 2014-15 Percentage Points Change in Access Type, Fixed and Mobile Access not Mutually Exclusive 0.6% 2.1% -2.2% 2.0% 0.9% 1.2% -3.0% 1.5% -4.0% -2.0% 0.0% 2.0% 4.0% Fiber Optics Cable Internet DSL Mobile Internet Small Apartment Buildings Large Apartment Buildings Need for Higher Speeds: An Updated Look at Internet Usage in Small Apartment Buildings Source: Arbor Chatter, Chandan Economics, American Community Survey, 2015 https://arbor.com/blog/internet-usage-small-apartment/
  42. 42. ARBOR.COM | 800.ARBOR.10 About Us For over 20 years, Uniondale, NY-based Arbor Realty Trust, Inc. (NYSE: ABR) has been helping multifamily and commercial real estate clients achieve their financial goals by focusing on growing long-term relationships and conducting business as not simply another real estate lender, but a partner. We value our clients to such an extent that we’re more comfortable calling them partners, and their relationships with Arbor are the foundation of our business. Founded by Chairman and CEO Ivan Kaufman, Arbor Realty Trust, Inc. is a real estate investment trust and direct lender specializing in loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets. Arbor is a Top 10 Fannie Mae DUS® Multifamily Lender by volume and the Top Fannie Mae Small Loan Lender, a Freddie Mac Seller/Servicer and a Top Freddie Mac Small Balance Loan Lender, a Fannie Mae and Freddie Mac Seniors Housing Lender, an FHA Multifamily Accelerated Processing (MAP)/LEAN Lender, a HUD-approved LIHTC Lender as well as a CMBS, Bridge, Mezzanine and Preferred Equity lender, consistently building on its reputation for service, quality and flexibility. With a multibillion-dollar servicing portfolio, Arbor is a primary commercial loan servicer and special servicer rated by Standard & Poor’s with an Above Average rating. Arbor is also on the Standard & Poor’s Select Servicer List and is a primary commercial loan servicer and loan level special servicer rated by Fitch Ratings. The research contained in this report should not be construed as a solicitation to and/or trade. All opinions, news, research, analyses, prices or other information is provided as general market commentary and not as investment advice; all information is subject to change. Arbor, its members, shareholders, employees, agents and representatives do not warrant the completeness, accuracy or timeliness of the information supplied, and shall not be liable for any loss or damages, consequential or otherwise, which may arise from the use or reliance on the content contained herein. Past performance is not indicative of future performance. The American Community Survey (ACS) is the primary source of statistics on the nation's demographic, housing and socio-economic characteristics. Data in this annual survey is collected on a year-long basis and released through summary tabulations on the American FactFinder and the Public Use Microdata Sample (PUMS) data files in the year following the survey. The ACS differs from the Decennial Census in that it is not a total count of the entire US population, but rather a random sample of covering approximately 3.5 million households every year. At the same time, it is the only official Census program that provides detailed data on demographic, housing and socio-economic characteristics on a continuous basis, having replaced the Decennial Census long form completely. The ACS data is released in three time- period versions, including the 1-year, 3-year and 5-year estimates. Because it is a sample survey, when arriving at numbers for the total population, the ACS sample-based estimates include a margin of error (MOE) range. The Arbor- Chandan research series provides analysis of the ACS 1-yr dataset on an as-is basis for more current review of housing statistics.

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