Apartments outperform other commercial real estate property types, on both a risk-adjusted and unadjusted basis, regardless of holding period, geographic region, metro size, and growth rate according to new research from the National Multifamily Housing Council Research Foundation.
In the first work of research funded by NMHC’s Research Foundation since it was launched in late 2016, Professors Dr. Mark J. Eppli (Marquette University) and Dr. Charles C. Tu (University of San Diego) examine a wide range of property and financial market characteristics to try to determine if apartment market over-performance stands up to the test of time.
“Over the last three decades, apartments have become a desired asset class among both domestic and foreign real estate investors because of their strong returns coupled with relatively low risk,” said Mark Obrinsky, NMHC’s Chief Economist. “Despite the different characteristics of apartment, office, retail, and industrial properties, one might expect competitive markets to reduce, even eliminate, the higher risk-adjusted returns on apartments. This research finds that not to be the case, however.”
According to the authors, part of the reason that apartment returns outperform other asset classes is because investors tend to underestimate capital expenditures for both office and industrial properties.
Drs. Eppli and Tu examined a wide range of property and financial market characteristics to try to find insights into expected investment returns. One result they documented is that acquiring properties immediately after a downturn boosts returns.
“We are delighted to publish this first research report from the NMHC Research Foundation,” said NMHC President and CEO Doug Bibby. “As the multifamily industry grows in sophistication, so must the quality and breadth of our analysis. Filling that need was our goal in creating the Foundation and this paper is one of many forthcoming works that will provide leading, actionable information for the apartment market.”
Related Stories
| Apr 19, 2012
KTGY Group’s Arista Uptown Apartments in Broomfield, Colo. completed
First of eight buildings highlights unique amenities.
| Apr 6, 2012
Batson-Cook breaks ground on hotel adjacent to Infantry Museum & Fort Benning
The four-story, 65,000-ft property will feature 102 hotel rooms, including 14 studio suites.
| Mar 27, 2012
Precast concrete used for affordable, sustainable housing in New York
Largest affordable housing development in the nation will provide housing for close to 500,000 people.
| Mar 19, 2012
Mixed-use project redefines Midtown District in Plantation, Fla.
Stiles Construction is building the residential complex, which is one of Broward County’s first multifamily rental communities designed to achieve LEED certification from the USGBC.
| Mar 6, 2012
Country’s first Green House home for veterans completed
Residences at VA Danville to provide community-centered housing for military veterans.
| Mar 1, 2012
Reconstruction of L.A.’s Dunbar Hotel underway
Withee Malcolm Architects’ designs for the project include the complete renovation of the Dunbar Hotel and the Somerville Apartments I and II.
| Feb 15, 2012
NAHB sees gradual improvement in multifamily sales for boomers
However, since the conditions of the current overall housing market are limiting their ability to sell their existing homes, this market is not recovering as quickly as might have been expected.
| Feb 10, 2012
Atlanta Housing Authority taps Johnson Controls to improve public housing efficiency
Energy-efficiency program to improve 13 senior residential care facilities and save nearly $18 million.
| Feb 8, 2012
Nauset completes addition and renovation for Winchester senior living community
Theater, library, fitness center, and bistro enhance facility.
| Jan 3, 2012
Rental Renaissance, The Rebirth of the Apartment Market
Across much of the U.S., apartment rents are rising, vacancy rates are falling. In just about every major urban area, new multifamily rental projects and major renovations are coming online. It may be too soon to pronounce the rental market fully recovered, but the trend is promising.
