The market rate multifamily industry emerged from the first leg of the late-cycle supply boom relatively unscathed. Occupancy declined marginally in 2017, but not enough to materially impact investment returns. Rent growth was moderately slower but gains were impressive nevertheless, particularly in the second half. And, net operating income growth was quite robust, supporting constructive asset appreciation and attractive portfolio investment returns. Overall, RED Capital Research’s (“RCR”) mathematically-derived forecasting equations proved highly reliable in projecting the rent and occupancy performance of the 49 metro markets (the “RED 49”) we econometrically model and forecast. Inputting actual supply figures into the model, our group forecast for year-end 2017 occupancy was within 0.1% of the realized result, and our effective rent growth forecast was essentially equal to the group’s 4Q17 year-on-year advance.
In this Guide to Markets, RCR seeks to refine its analysis and employ its statistically unbiased modeling techniques to the task of forecasting large metro performance and investment returns. We hope the results will prove beneficial for investors seeking to navigate markets at this late stage of the current economic and real estate cycles.
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RED Capital Group is a wholly owned subsidiary of ORIX USA Corp.