A HEADLINE IN A RECENT issue of Forbes screamed “America's Fastest Dying Cities.” Guess what? Six of the top 10 were located in the Midwest—four in Ohio (Youngstown, Canton, Dayton, and Cleveland) and two in Michigan (Detroit and Flint). The story said these cities face “fleeing populations, painful waves of unemployment and barely growing economies.” One might naturally conclude that multifamily investors are leaving the Midwest for greener pastures—except they're not. In fact, local and regional multifamily investors are still investing their money in America's heartland—even in Detroit and Cleveland. What could they be thinking, especially when almost all apartment REITs have exited these markets? (Equity Office, Archstone, and AMLI Residential have all left the smaller markets.)
“When it comes to the Midwest, a lot of people are throwing the baby out with the bathwater,” says Albert Berriz, CEO of McKinley, an Ann Arbor, Mich.-based multifamily owner and developer. “People who are not knowledgeable about specific markets may discount the entire region, even though there are parts of the Midwest that are fabulous.”
But the Midwest isn't for everyone, says Bob Bach, an economist with Grubb & Ellis. “Midwest markets are not as well suited for big investors searching for appreciation,” he warns. “They're more suited for local and regional investors who take a more hands-on approach.”
The Midwest appeals to investors who are in it for the long-run, says J o n a t h a n Holtzman, CEO of Village Green Cos., a Farmington Hills, Mich.-based apartment developer and owner with more than 35,000 units in five markets throughout the Midwest. “The apartment business in the Midwest is slow and steady, so you have to ask yourself [whether you are] a day trader or like Warren Buffet,” he says.
While it's true that several Midwestern markets are struggling, there are quite a few that are posting strong apartment occupancy and positive rental rate growth. Faced with two sides of the coin, MULTIFAMILY-EXECUTIVE went on a fact-finding mission to identify a handful of Midwest markets that illustrate what's good—and what's not so good—in this unpredictable region of the country. While each city has its own distinct story to tell, the common thread that weaves among them all is this: Although pronounced dead by many, the Midwest still has a lot of life left in it.
COLUMBUS AND CINCINNATI As the state capital of Ohio and home to Ohio State University, Columbus continues to add jobs and new residents. According to the Columbus Chamber of Commerce, the area's employment growth for 2008 is likely to be 0.6 percent, ahead of the state and national averages. The city's population has grown at least 1 percent annually for the past eight years.