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
Multifamily Housing | Dec 12, 2016
BIG’s first residential condominium in the U.S. completed in Miami
Two 20-story twisting towers comprise 98 units on a three-acre site near Biscayne Bay.
Multifamily Housing | Dec 1, 2016
One of Canada’s largest media companies dives into real estate development
Rogers moves forward on M City, a multi-building, multi-year project in a Toronto suburb.
Multifamily Housing | Nov 28, 2016
Axiometrics predicts apartment deliveries will peak by mid 2017
New York is projected to lead the nation next year, thanks to construction delays in 2016
Sponsored | Multifamily Housing | Nov 11, 2016
Value engineering brings Santa Barbara apartments back on track
When framing estimates for a new apartment complex in Rialto, California, came in too high, a savvy developer decided to have the project value engineered. A switch to glulam and wood-framed shear walls got the project back in the black.
Adaptive Reuse | Nov 9, 2016
Middle school transformed into affordable housing for seniors
The project received $3.8 million in public financing in exchange for constructing units for residents earning less than 60 percent of the area’s median income.
Multifamily Housing | Oct 28, 2016
Aston Martin is making a foray into real estate in Miami
The British automaker will partner with G and G Business Developments on the waterfront project.
Multifamily Housing | Oct 25, 2016
The Beacon will become the most sustainable residential tower in the world
Lumiere Developments says the building will generate enough energy to offer residents ‘Free Energy For Life.’
High-rise Construction | Sep 8, 2016
Construction on the tallest residential tower in western Europe could start early next year
China’s Greenland Group is the developer of four of the world’s 10 largest skyscrapers
High-rise Construction | Sep 6, 2016
Peddle Thorp Architects' solar-powered Melbourne high-rise looks to go off the grid
The skyscraper would be the first in Australia to incorporate solar cells in its façade.
Multifamily Housing | Aug 17, 2016
A new research platform launches for a data-deprived multifamily sector
The list of leading developers, owners, and property managers that are funding the NMHC Research Foundation speaks to the information gap it hopes to fill.