From a demographic standpoint, some markets are no-brainers.

Major metros such as New York City and Washington, D.C., exhibit a strong balance between supply and demand, making them practically impervious to the recent recession.

But most markets require a little more number crunching. So, Apartment Finance Today polled three of the industry’s top research houses—Reis, M/PF Research, and Marcus & Millichap—to identify three markets with high demographic upside, and three others that have numbers working against them.


Fort Lauderdale: Fort Lauderdale has a great long-term balance between supply and demand, perhaps the best of all the metros in Florida. According to M/PF Research, the total housing production in Fort Lauderdale over the past decade surpassed the volume that concurrent employment growth would support by about 42,000 units. To fill up that overhang, the market will need to create roughly 49,000 jobs, which is an attainable goal.

“Fort Lauderdale can burn off their excess inventory in about two years under forecasted job numbers,” says Greg Willet, vice president of research and analysis at Carrollton, Texas-based MPF Research. “It’s a huge outlier in Florida. I really like the comeback prospects for Fort Lauderdale.”

The market is forecast to see some big job gains going forward, with the employment market growing 3 percent next year, and about 4 percent in 2012—good for about 49,940 jobs. And household income growth is expected to be in the 5 percent to 6 percent range from 2011 and 2013, according to New York-based market research firm Reis.

Austin: Austin has emerged as tech-heavy, but diverse, economy—Dell, IBM, and Freescale Semiconductor (formerly Motorola) are major employers—and its large local university provides a steady stream of highly skilled employees. It also happens to be the No. 1 market in the nation in terms of household and population growth over the last year, according to New York-based market research firm KBW Research. In fact, since 2005, the metro has added more than 250,000 people, a 14 percent bump.

That pace is expected to continue. The metro will see annual population gains of more than 2.5 percent, and as high as 4.6 percent, for at least the next four years, while household income is projected to grow about 3 percent annually to 2014, according to Reis. And the metro is expected to add about 22,400 jobs in the next four years.

“Austin has been the tech wonder of Texas: It’s a vibrant, diverse economy. You have the education attraction, both in terms of young people and then education and government jobs,” says Hessam Nadji, managing director of Encino, Calif.-based Marcus & Millichap’s research division “The market was overbuilt, but now that has stopped. So the pipeline is empty and the next two years will be great for Austin apartments.”

Raleigh-Durham: Like Austin, Raleigh-Durham is a tech-heavy, youth-oriented market that continues to grow in size and employment opportunities. It’s not called The Research Triangle for nothing—Duke University, North Carolina State University, and the University of North Carolina at Chapel Hill anchor the area, and many tech and life sciences companies have big presences.

Since 2007, the area has added about 50,000 households, and is projected to add another 75,000 in the next four years. And from 2011 to 2014, the metro is expected to add about 94, 380 jobs, growing about 3 percent annually.

Rent growth resumed in the second quarter, and in the third quarter, effective rents grew by about 1.3 percent. But that’s just the tip of the iceberg. According to Reis, rents will rise about 2.6 percent annually in 2011 and 2012, then 3.4 percent and 4.2 percent in 2012 and 2013. Investors have certainly noticed—cap rates have fallen almost 200 basis points over the last year in the area.


Atlanta: While Atlanta continues to attract investment interest, there are also reasons for pause. Atlanta has an excess total housing supply of nearly 500,000 units, yet the job growth forecasts don’t suggest quick absorption, according to MPF Research. “You’ll need 700,000 jobs to absorb all of that, and that takes a decade,” Willet says.

That’s not to say there isn’t job growth in Atlanta; it’s just a slow climb. This year, the area will see job growth of 0.5 percent, and Reis forecasts 1 percent growth next year, good for about 33,000 jobs. That should help push the metrowide vacancy rate down 100 basis points, from 10.5 percent, currently to 9.5 percent by the end of 2011, according to Reis.

In 2007, there were about 2.45 million jobs in the metro area, a figure the area won’t reach again until at least 2013, according to Reis.

Tampa, Fla.: The effects of the condo craze that characterized this area during the last boom period continue to be felt. Tampa has some of the worst vacant unit-to-job growth numbers in the state of Florida.

The excess housing production relative to job growth over the past decade was about 230,000 units. So the market needs to add approximately 260,000 jobs to deal with that overhang. That probably won’t happen until the 2018 to 2019 timeframe, according to M/PF Research.

The condo craze reached its zenith as the employment market tumbled. The Tampa-St. Petersburg metro area had a job market totaling about 1.25 million in 2006. But from 2007 through the first quarter of this year, the area continued to shed jobs: In 2009 alone, the area lost more than 5 percent of its job market. The area isn’t expected to reclaim that 1.25 million mark again until well the end of 2013, according to Reis.

Inland Empire: The Inland Empire of Southern California—anchored by the cities of Riverside and San Bernardino—became an overheated speculative housing market in the last boom period for single-family housing.
“The areas that concern me the most are the ones that benefited by how expensive other neighboring metro areas became, and Riverside/San Bernardino is a good example of that,” says Ryan Severino, an economist at Reis. “It seemed liked every one buying up those houses during the last boom were investors.”

Riverside/San Bernardino was hammered by the recession. Last year alone, the cities and their submarkets lost about 88,000 jobs, 7.4 percent of the total market. And this year, the market will lose another 0.6 percent of its employment market. The last year this market saw job growth was 2006, when the employment market reached 1.26 million. That figure won’t be reached again until at least 2015, probably 2016, according to Reis.