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Predict the Future of Your Business: 2016 Apartment Market Trends

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While no one can predict exactly what the future holds, the power of market research offers us a sneak peek into what’s possible and probable. Equipping yourself with a thorough knowledge of your industry’s past and present trends is the best way to help secure your company’s future.

Check out these slides to learn about:
-National effective rent trends and top regions for growth
-Top markets for job growth and demographic impact
-The best areas for new construction
-The urban vs. suburban debate--who is outperforming whom?
-3 and 5 year forecasts to help you model your business for the future
...and more!

Published in: Real Estate
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Predict the Future of Your Business: 2016 Apartment Market Trends

  1. 1. 2016 © AppFolio, Inc. @AppFolio #AppFolioChat
  2. 2. 2016 © AppFolio, Inc. Predict the Future of Your Business: 2016 Apartment Market Trends presented by:
  3. 3. 2016 © AppFolio, Inc. Join Us Online - #AppFolioChat facebook.com/AppFolio Follow Us pFolio Follow Us ppFolio
  4. 4. 2016 © AppFolio, Inc. • Property management and accounting • Online rent collection (free) • Prospect / guest card tracking • Vacancy Marketing • Websites • Online applications & leases • Resident Screening • Mobile Inspections … So You Run A More Successful Business Web-Based Property Management Software @AppFolio #AppFolioChat AppFolio
  5. 5. 2016 © AppFolio, Inc. Hello!Our Speaker Today: Rick Wilson Real Estate Analyst, Axiometrics
  6. 6. 2016 © AppFolio, Inc. The leader in Apartment Market and Student Housing Research and Analysis • Axiometrics’ sole focus is monitoring the apartment and student housing sectors, thus pinpointing the market’s true volatility and leading to intelligent – and profitable – decisions. • Axiometrics’ superior and timely market research and analytics begin with the floor-plan analysis of a single property, then extends to competitive properties, submarkets, metropolitan areas, regions, portfolios and companies. • Metrics are reported monthly or more frequently, to better depict trends in the markets. • Our frequent data collection combined with in-depth and intelligent analysis – along with unparalleled access – allows you to improve property and portfolio performance, and helps you identify markets, submarkets and specific sites for apartment and student housing acquisitions and development. • In addition to the numbers, Axiometrics provides narratives on 120 markets and their submarkets.
  7. 7. 2016 © AppFolio, Inc. Agenda •Current National Apartment Market Conditions •Apartment Demand Drivers •Apartment Market Performance •New Construction •Urban vs Suburban Submarkets •Forecast
  8. 8. 2016 © AppFolio, Inc. National Year-to-Date Effective Rent Growth 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 2011 2012 2013 2014 2015 2014 2010 2015 2011 2012 2013 • Last year was one of the best starts Axio has ever recorded for the apartment market. • There was more “seasonality” in 4Q than in other years. Some of it was actual slowing and not seasonally related. • The SF Bay Area, Denver and Houston are among those that slowed. • Other markets maintained or improved rent growth. Source: Axiometrics
  9. 9. 2016 © AppFolio, Inc. National Year-to-Date Effective Rent Growth 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 2011 2012 2013 2014 2015 2016 2014 2010 2015 2011 2012 2013 • The beginning of 2016 had a slower start to the year than previous years • Expect 2016 to finish somewhere between 2012 and 2013. Source: Axiometrics 2016
  10. 10. 2016 © AppFolio, Inc. Apartment Demand Drivers
  11. 11. 2016 © AppFolio, Inc. U.S. Population by Age Group (in Millions) 12 14 16 18 20 22 24 20 to 24 Years 25 to 29 Years 30 to 34 Years 35 to 39 Years 40 to 44 Years 45 to 49 Years 50 to 54 Years 55 to 59 Years 60 to 64 Years Millions 2014 Population 2005 Population Prime Renter Age Group Baby boomers and empty-nesters Sources: Axiometrics, Census
  12. 12. 2016 © AppFolio, Inc. U.S. Homeownership Rate Remains Below Long-Term Average Sources: Axiometrics, Census 61.0% 62.0% 63.0% 64.0% 65.0% 66.0% 67.0% 68.0% 69.0% 70.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 U.S. HO Rate (%) 1994-2015 Avg
  13. 13. 2016 © AppFolio, Inc. Polling Question We have seen moderating rent growth in the San Francisco Bay Area, Denver and Houston. What do you think is the main reason for this? •Increase in New Supply •Slowing Job Growth •Single Family Recovery
  14. 14. 2016 © AppFolio, Inc. Rent Growth and Job Growth Some moderation in job growth expected through 2018 Sources: Axiometrics, BLS -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2019F Job Growth Annual Effective Rent Growth
  15. 15. 2016 © AppFolio, Inc. Apartment Market Performance
  16. 16. 2016 © AppFolio, Inc. Top MSAs* by Annual Effective Rent Growth 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Portland,OR Sacramento,CA SaltLakeCity,UT Seattle,WA Riverside,CA Oakland,CA Phoenix,AZ Atlanta,GA Orlando,FL Tampa,FL Nashville,TN LosAngeles,CA FortWorth,TX WestPalmBeach,FL LasVegas,NV SanDiego,CA National Feb-16 Feb-15 Source: Axiometrics *Highest rent growth out of Axio’s top 50.
  17. 17. 2016 © AppFolio, Inc. Top MSAs* by Occupancy Rate 93.5% 94.0% 94.5% 95.0% 95.5% 96.0% 96.5% 97.0% 97.5% Miami,FL NewYork,NY LosAngeles,CA Nassau,NY SanDiego,CA Oakland,CA Anaheim,CA Sacramento,CA Nashville,TN SaltLakeCity,UT Portland,OR Orlando,FL FortLauderdale,FL SanJose,CA Seattle,WA Tampa,FL National Feb-16 Feb-15 Source: Axiometrics *Highest rent growth out of Axio’s top 50.
  18. 18. 2016 © AppFolio, Inc. Southwest Highlights •Austin and Dallas remain strong, Houston still slowing. •Denver, like SF Bay area, saw a large drop-off in growth towards end of 2015. It also experienced a slowdown in job growth. •Sustainability is the question with some of these markets going forward. Can job growth remain robust to absorb the supply being delivered? Sources: Axiometrics, BLS Annual Effective Rent Growth Job Growth MSA 2014 2015 Feb-16 2014 2015 Jan-16 Phoenix, AZ 4.9% 6.8% 6.7% 2.3% 2.9% 3.6% Las Vegas, NV 4.0% 6.1% 6.1% 3.9% 2.9% 2.5% Dallas, TX 4.3% 5.9% 5.7% 4.0% 4.0% 4.5% Austin, TX 4.6% 4.7% 5.7% 4.1% 3.3% 4.7% Denver, CO 8.9% 9.7% 3.6% 3.7% 2.9% 2.6% Houston, TX 5.3% 3.4% 0.7% 3.4% 2.0% 0.6% Oklahoma City, OK 1.3% 1.1% -0.8% 1.6% 2.0% 0.8% US 3.7% 4.9% 4.1% 1.9% 2.1% 1.9%
  19. 19. 2016 © AppFolio, Inc. Midwest Highlights •Overall the Midwest region shows more moderate growth compared to other regions in the country. •While overall MSA rent growth is below the national average, there are submarkets within this group that display strong results. Sources: Axiometrics, BLS Annual Effective Rent Growth Job Growth MSA 2014 2015 Feb-16 2014 2015 Jan-16 Columbus, OH 2.4% 3.0% 3.8% 2.2% 2.3% 2.0% Cincinnati, OH 2.2% 2.5% 3.8% 1.7% 2.1% 1.1% Indianapolis, IN 2.3% 1.9% 2.5% 2.0% 2.9% 2.4% Chicago, IL 2.2% 3.7% 2.0% 1.5% 1.3% 1.6% Minneapolis, MN 2.3% 2.5% 1.9% 1.8% 1.9% 1.8% US 3.7% 4.9% 4.1% 1.9% 2.1% 1.9%
  20. 20. 2016 © AppFolio, Inc. Southeast Highlights •Tampa and Orlando were two of the strongest markets in 2015 •Most of these markets are experiencing job growth > 3.0%. If strong job growth continues, these markets will continue to post better growth than the LTA, but urban cores will likely be impacted by the geographic concentration of new supply at upper-tier price points. Sources: Axiometrics, BLS Annual Effective Rent Growth Job Growth MSA 2014 2015 Feb-16 2014 2015 Jan-16 Atlanta, GA 7.0% 7.0% 6.6% 3.7% 3.4% 3.5% Orlando, FL 4.7% 7.0% 6.6% 4.2% 3.9% 4.9% Tampa, FL 3.4% 6.1% 6.5% 2.7% 2.9% 3.6% Nashville, TN 5.4% 6.5% 6.4% 3.6% 3.1% 4.0% Charlotte, NC 3.4% 5.4% 6.1% 3.5% 3.5% 2.8% Raleigh, NC 2.3% 5.4% 4.8% 3.6% 2.7% 4.2% Miami, FL 6.9% 3.8% 3.1% 2.9% 2.5% 2.1% US 3.7% 4.9% 4.1% 1.9% 2.1% 1.9%
  21. 21. 2016 © AppFolio, Inc. Mid-Atlantic/Northeast Highlights •Markets in this region have tended to be below the national average for annual effective rent growth •Boston has been a bright spot •DC is on an upward trend, but a slow one. Sources: Axiometrics, BLS Annual Effective Rent Growth Job Growth MSA 2014 2015 Feb-16 2014 2015 Jan-16 Boston, MA 2.2% 4.4% 4.3% 1.5% 1.9% 1.4% Richmond, VA 2.0% 2.4% 2.6% 1.5% 0.7% 4.2% Washington, DC -0.3% 1.5% 1.8% 0.6% 1.9% 2.5% Philadelphia, PA 1.7% 3.9% 1.1% 1.5% 1.1% 1.6% New York, NY 1.9% 3.6% 1.0% 2.3% 1.9% 2.4% US 3.7% 4.9% 4.1% 1.9% 2.1% 1.9%
  22. 22. 2016 © AppFolio, Inc. Job Growth and Rent Growth Comparison 3.5% 4.0% 4.5% 5.0% 5.0% 7.0% 9.0% 11.0% 13.0% Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 San JoseRG JG Annual Effective Rent Growth Job Growth Sources: Axiometrics, BLS 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 HoustonRG JG 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 3.5% 5.5% 7.5% 9.5% 11.5% 13.5% Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 DenverRG JG 4.0% 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 San FranciscoRG JG
  23. 23. 2016 © AppFolio, Inc. New Construction
  24. 24. 2016 © AppFolio, Inc. Residential Permitting Levels Continue to Increase 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Permitting Single Family Multifamily Sources: Axiometrics, Census
  25. 25. 2016 © AppFolio, Inc. National Identified Supply by Year In units Source: Axiometrics *Delivery schedule is only based on identified properties that have started construction. The 2017 totals will be higher as planned properties begin construction. The schedule is dynamic and changes as construction timelines change on individual properties. The chart is based on data as of March, 2016. 224,487 264,919 327,469 153,341 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 2014 2015 2016 2017 And Counting….
  26. 26. 2016 © AppFolio, Inc. Identified Apartment Supply by Market *Delivery schedule is only based on identified properties that have started construction. The 2017 totals will be higher as planned properties begin construction. The schedule is dynamic and changes as construction timelines change on individual properties. The chart is based on data as of March 2016. Source: Axiometrics Units Delivered by Year MSA 2014 2015 2016 2017 New York, NY 7,962 7,146 23,661 15,674 Houston, TX 14,442 16,092 19,933 5,753 Dallas, TX 12,108 14,588 18,367 11,963 Atlanta, GA 5,714 8,862 12,725 4,659 Los Angeles, CA 6,556 6,804 11,472 7,589 Washington DC 11,344 10,343 10,119 9,460 Austin, TX 8,129 8,745 9,269 2,045 Nashville, TN 3,564 4,755 9,253 3,104 Denver, CO 6,098 9,237 8,912 4,480 Charlotte, NC 5,714 5,664 8,755 3,307 Seattle, WA 7,746 8,337 8,600 9,093 Chicago, IL 3,632 4,437 7,100 4,169 Phoenix, AZ 4,695 6,384 6,932 2,522 Orlando, FL 4,979 5,607 6,060 2,165 San Francisco, CA 2,802 1,985 5,797 2,497 National 224,487 264,919 327,469 153,341
  27. 27. 2016 © AppFolio, Inc. Identified Supply by Submarket *Delivery schedule is only based on identified properties that have started construction. The 2017 totals will be higher as planned properties begin construction. The schedule is dynamic and changes as construction timelines change on individual properties. The chart is based on data as of March 2016. Source: Axiometrics Units Delivered by Year MSA Submarket 2014 2015 2016 2017 Atlanta, GA Atlanta/Fulton 3,826 4,540 7,022 2,283 New York, NY Kings County 1,497 1,446 5,562 4,159 Houston, TX Montrose/River Oaks 4,753 3,518 4,999 3,225 Nashville, TN Downtown/West End/Green Hills 1,298 1,350 4,593 2,246 New York, NY Midtown West 892 487 3,919 2,493 Dallas, TX Oak Lawn 2,863 2,118 3,218 1,476 Denver, CO Denver-Downtown 1,271 2,725 3,086 2,498 Seattle, WA Downtown/Capitol Hill/Queen Anne 3,465 2,422 3,016 6,115 San Francisco, CA South of Market 1,722 988 2,980 1,548 New York, NY Hudson Waterfront 698 1,053 2,850 1,452 Dallas, TX Plano/Allen/McKinney 1,670 1,605 2,723 1,113 Houston, TX Far NW/Montgomery County 2,884 2,465 2,674 752 Los Angeles, CA Westlake/Downtown/Silver Lake 1,447 933 2,585 1,022 Portland, OR Northwest 429 771 2,326 323 Dallas, TX Richardson 405 1,552 2,187 679
  28. 28. 2016 © AppFolio, Inc. Polling Question •What unit mix is more prominent in new construction properties? •Studio and 1 Bedroom •2 Bedroom •3 Bedroom
  29. 29. 2016 © AppFolio, Inc. Average Unit mix of Apartment Properties New Construction has been weighted towards smaller bedrooms types 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Studio and 1 BR 2 BR 3+ BR Existing New Note – “New” properties are those that delivered units between 2012 and current. Based on all markets tracked by Axiometrics. Data as of March 2016.
  30. 30. 2016 © AppFolio, Inc. Urban vs Suburban
  31. 31. 2016 © AppFolio, Inc. Polling Question Are suburban submarkets still outperforming the urban core submarkets Nationally? •True •False
  32. 32. 2016 © AppFolio, Inc. Where is rent growth stronger? 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 National Effective Rent Growth Urban Suburban Source: Axiometrics
  33. 33. 2016 © AppFolio, Inc. Urban vs Suburban 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 Atlanta -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 Chicago -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 Dallas -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 Denver Source: Axiometrics
  34. 34. 2016 © AppFolio, Inc. Urban vs Suburban -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 Los Angeles 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 San Francisco 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 Seattle -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 Washington DC Source: Axiometrics
  35. 35. 2016 © AppFolio, Inc. Urban vs Suburban Heat Map February 2016 annual effective rent growth Seattle, WADenver, CODallas, TX Source: Axiometrics
  36. 36. 2016 © AppFolio, Inc. Forecast
  37. 37. 2016 © AppFolio, Inc. Rent Growth and Occupancy Forecast 90.0% 91.0% 92.0% 93.0% 94.0% 95.0% 96.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F Annual Avg Effective Rent Growth (LHS) Occupancy (RHS) Source: Axiometrics Forecast average for 2016-2018 Annual Rent Growth: 3.4% Occupancy Rate: 94.8%. Averages from 2010-2015 Annual Rent Growth: 3.6% Occupancy Rate: 94.3%. Forecast average 2016-2020 Annual Rent Growth: 3.5% Occupancy Rate: 94.9%.
  38. 38. 2016 © AppFolio, Inc. Average Occupancy and Rent Growth for 2016 Source: Axiometrics
  39. 39. 2016 © AppFolio, Inc. Average Occupancy and Rent Growth for 2016 Job Growth Range Color 3.0% to 4.0% 1.6% to 2.9% 1.0% to 1.5% Sources: Axiometrics, BLS
  40. 40. 2016 © AppFolio, Inc. ThanksQuestions or Comments? Rick Wilson Real Estate Analyst, Axiometrics Inc. Tweet: @AppFolio #AppFolioChat

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