If you own or manage multifamily properties in Texas, consider yourself lucky. Metros in the Lonestar State occupy an unprecedented 11 of the top 25 spots—and half of the top 10 spots—in Milken Institute’s 2010 Best-Performing Cities Index, an annual ranking based mainly on employment and salary growth.
At the top of the list? The Killeen-Temple-Fort Hood region, followed by Austin-Round Rock with the No. 2 spot. (Austin was No. 1 last year.)
“Texas was able to avoid the large housing bubble and, as a result, the subsequent bust that ensued,” says Armen Bedroussian, research economist at the Santa Monica, Calif.-based independent think tank Milken Institute. “We also saw a lot of Defense Base Closure and Realignment [BRAC]-related employment in Texas which, in particular, helped Killeen move up the list.”
The index, which ranks 379 metros, is based on a variety of factors including both long-term and short-term measurements of employment and salary growth, and four measurements of technology output growth due to technology’s role in creating strong jobs and driving regional economies.
The top 10 rankings didn’t surprise Keith Oden, president of Houston-based REIT Camden Property Trust, which has large apartment portfolios in four of the markets—Austin, Texas; the Washington, D.C., metro area; Raleigh, N.C.; and Houston-Sugar Land-Baytown, Texas. “I looked at our ranking of those four markets relative to the positioning in the top 10 list, and there was a one-on-one correlation,” Oden says. Through the third quarter of 2010, new rental lease rates went up 7 percent in Austin; 3.5 percent in the D.C., metro; 2 percent in Raleigh; and down 1 percent in Houston. “This confirms what we have always used as our No. 1 indicator when we think about what markets we want to be in—projected job and employment growth.” Looking ahead to 2011, Oden would also add South Florida and Denver to his list of top picks for Camden’s best-performing cities. “Both of those markets have been really strong in 2010, and they are on par with Austin in terms of rent growth year-to-date.”