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
| May 12, 2014
The best of affordable housing: 4 projects honored with 2014 AIA/HUD Secretary Awards [slideshow]
The winners include two dramatic conversions of historic YMCA buildings into modern, affordable multifamily complexes.
| May 11, 2014
Final call for entries: 2014 Giants 300 survey
BD+C's 2014 Giants 300 survey forms are due Wednesday, May 21. Survey results will be published in our July 2014 issue. The annual Giants 300 Report ranks the top AEC firms in commercial construction, by revenue.
| May 5, 2014
Toronto residential tower to feature drawer-like facade scheme
Some of the apartments in the new River City development will protrude from the building at different lengths, creating a drawer-like "push-pull" effect.
| May 2, 2014
Norwegian modular project set to be world's tallest timber-frame apartment building [slideshow]
A 14-story luxury apartment block in central Bergen, Norway, will be the world's tallest timber-framed multifamily project, at 49 meters (160 feet).
| May 1, 2014
Tight on space for multifamily? Check out this modular kitchen tower
The Clei Ecooking kitchen, recently rolled out at Milan's Salone de Mobile furniture fair, squeezes multiple appliances into a tiny footprint.
| Apr 30, 2014
Visiting Beijing's massive Chaoyang Park Plaza will be like 'moving through a urban forest'
Construction work has begun on the 120,000-sm mixed-use development, which was envisioned by MAD architects as a modern, urban forest.
| Apr 29, 2014
Best of Canada: 12 projects nab nation's top architectural prize [slideshow]
The conversion of a Mies van der Rohe-designed gas station and North Vancouver City Hall are among the recently completed projects to win the 2014 Governor General's Medal in Architecture.
| Apr 29, 2014
USGBC launches real-time green building data dashboard
The online data visualization resource highlights green building data for each state and Washington, D.C.
| Apr 23, 2014
Developers change gears at Atlantic Yards after high-rise modular proves difficult
At 32 stories, the B2 residential tower at Atlantic Yards has been widely lauded as a bellwether for modular construction. But only five floors have been completed in 18 months.
| Apr 17, 2014
Online mapping tool helps teams determine multifamily project tax credit eligibility
Accounting and advisory firm Baker Tilly has launched a new, interactive online mapping tool that helps users determine if a business or development project may qualify for the New Markets Tax Credit or Low-Income Housing Tax Credit program.