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2010 National Apartment Report

To our valued clients:

The worst-case scenario for the U.S. economy and fi nancial system was averted in the Great Recession of 2008-2009, notwithstanding its severity. The stabilization of the global fi nancial system ushered in greater appetite for risk and opportunistic buying — refl ected in the global equity market surge — much faster than the most optimistic fore-casts. Job cuts fi nally abated to reasonable levels in late 2009, and several downward revisions to prior months’ losses were characteristic of an emerging turn in the employment cycle. As we look ahead, we still face a myriad of chal-lenges, starting with high and rising unemployment, record consumer debt, and the eventual need to clean up the government balance sheet. Judging by the extended period of time required to recapture lost jobs after the last two recessions, companies are likely to enter expansion mode cautiously.

Apartment owners and investors should be prepared for tepid job creation in 2010, with the year expected to be somewhat of a staging period for an eventual acceleration in employment growth, likely in 2011-2012. Severely high unemployment among 20- to 34-year-olds will hamper renter household formation in the short term. The sheer size of the echo-boom generation, however, only moderately smaller than the 80 million baby boomers, along with a drastic pullback in housing construction, points to strong rent growth starting in 2011. It is simply a matter of time before an expanding economy releases this powerfully favorable demographic into the renter pool.

Investors began positioning ahead of this macro trend in 2009, concentrating their bets on quality assets in stronger metros and/or submarkets. A relatively brief period of rising cap rates gave way to multiple offers from credible buy-ers and cap rate compression in the upper tier of the apartment market, as positive leverage and prospects for strong income growth overtook fear. In 2010, risk tolerance should gradually spill over to the broader market as an economic recovery becomes more convincing. Nevertheless, investors will continue to demand due reward for the additional risk associated with value-add deals. Conversely, visions of quality assets coming to market at fi re-sale prices will continue to fade, and buyers and sellers will move closer to redefi ning fair value based on true assessments of quality and risk. More distress is sure to come to market, but the quality will be highly mixed as lenders avert further losses by avoiding foreclosure on performing assets and those with reasonable prospects for stabilization.

The drivers of increased sales activity began to align in 2009, but for extremely tight underwriting and limited debt availability outside of GSEs and some banks. Life insurance companies started to show renewed interest, but capacity limitations cap the potential for a 2010 surge. Assuming government-mandated changes to Fannie Mae and Freddie Mac steer clear of their multi-family lending arms, the GSEs should remain the primary sources of fi nancing for apart-ment investors. This year, more foreign investors, REITs and institutions will join private investors, who dominated acquisitions last year. Expectations for near-term weakness will be overshadowed by increased visibility on fundamen-tals, more reasonable cap rates and prospects for above-trend rent growth in the years to come.

To assist you in planning and executing a successful investment strategy, we are pleased to present our 2010 Na-tional Apartment Report. Included is our National Apartment Index (NAI), a forward-looking ranking of 44 markets based on forecast supply and demand conditions. We hope you will fi nd this report helpful, and our investment pro-fessionals look forward to assisting you in meeting your goals.

Sincerely,

Harvey E. Green Hessam NadjiPresident and Managing DirectorChief Executive Offi cer Research Services


2010 Annual Report

NATIONAL PERSPECTIVE Executive Summary .......................................................................................... 3 National Apartment Index ................................................................................ 4-5 National Economy ............................................................................................ 6 National Apartment Overview .............................................................................. 7 Capital Markets ............................................................................................... 8 Investment Outlook .......................................................................................... 9

MARKET OVERVIEWS Atlanta ........................................................................................................ 10 Austin ......................................................................................................... 11 Boston ......................................................................................................... 12 Charlotte ..................................................................................................... 13 Chicago ....................................................................................................... 14 Cincinnati..................................................................................................... 15 Cleveland ..................................................................................................... 16 Columbus ..................................................................................................... 17 Dallas/Fort Worth ........................................................................................... 18 Denver ........................................................................................................ 19 Detroit ........................................................................................................ 20 Fort Lauderdale ............................................................................................. 21 Houston ....................................................................................................... 22 Indianapolis .................................................................................................. 23 Jacksonville .................................................................................................. 24 Kansas City ................................................................................................... 25 Las Vegas ..................................................................................................... 26 Los Angeles ................................................................................................... 27 Louisville ..................................................................................................... 28 Miami .......................................................................................................... 29 Milwaukee .................................................................................................... 30 Minneapolis-St. Paul ........................................................................................ 31 Statistical Summary Table ............................................................................. 32-33 New Haven ................................................................................................... 34 New Jersey ................................................................................................... 35 New York City ................................................................................................ 36 Oakland ....................................................................................................... 37 Orange County ............................................................................................... 38 Orlando ....................................................................................................... 39 Philadelphia .................................................................................................. 40 Phoenix ....................................................................................................... 41 Portland ....................................................................................................... 42 Riverside-San Bernardino .................................................................................. 43 Sacramento .................................................................................................. 44 Salt Lake City ................................................................................................ 45 San Antonio ................................................................................................... 46 San Diego ..................................................................................................... 47 San Francisco ................................................................................................ 48 San Jose ...................................................................................................... 49 Seattle ........................................................................................................ 50 St. Louis ...................................................................................................... 51 Tampa ......................................................................................................... 52 Tucson ......................................................................................................... 53 Washington, D.C. ............................................................................................ 54 West Palm Beach ............................................................................................ 55

CLIENT SERVICES National Multi Housing Group (NMHG) ................................................................... 56 Marcus & Millichap Capital Corporation ................................................................. 57 Research Services ........................................................................................... 58 Contacts, Sources and Defi nitions ........................................................................ 59 Offi ce Locations ......................................................................................... 60-61

Written by John Chang, National Research Manager, and edited by Hessam Nadji, Managing Director. The Capital Markets section was co-authored by William E. Hughes, Managing Director, Marcus & Millichap Capital Corporation. Additional contributions were made by Marcus & Millichap market analysts and investment brokerage professionals nationwide.


2010 Annual Report page 3

Executive SummaryNational Apartment Index (NAI)◆ Washington, D.C., retained the top spot in the NAI for the second consecutive year, as ongoing government spending intend-

ed to spur the economy will fuel metrowide hiring and apartment demand. San Diego (#2) rose four places in the ranking due to expectations for resumed employment and household growth, which will support low vacancy and slightly rising rents.

◆ Many Midwestern markets performed well in the ranking in recent years due to relatively stable vacancies and rents; how-ever, these metro areas are expected to lag as the economy recovers. Chicago (#20) fell nine spots in this year’s ranking while Kansas City (#24), Cincinnati (#30) and Columbus (#31) each tumbled eight spots in the index.

◆ Markets hardest hit by the housing bubble began to rebound in the index, moving up a few spots due to anticipated stabiliza-tion in 2010. Seattle (#22), Miami (#25), and Phoenix (#34) rose three, three and seven spots, respectively, in the NAI.

National Economy◆ After shedding nearly 7.2 million jobs since the onset of the recession, the U.S. employment market is expected to expand

slowly in 2010. While modest losses are likely in the fi rst quarter, employers are projected to add nearly 1 million workers this year, a 0.75 uptick in payrolls. Unemployment, which averaged 10 percent in the fourth quarter of 2009, is forecast to remain in the double digits through the end of 2010 as a resumption of hiring drives job seekers to re-enter the labor force.

◆ The economy will be buoyed by government stimulus and a weak dollar, which will support exports. GDP is expected to grow by 2.5 percent to 3.0 percent in 2010, after contracting by 2.5 percent last year. Consumer spending, which makes up approxi-mately 70 percent of GDP, is not likely to rebound signifi cantly due to persistent high unemployment hampering growth.

◆ Despite the doubling of the Fed’s balance sheet, infl ation is expected to remain fairly tame in 2010. Slack in the labor markets will limit wage pressures, and low capacity utilization should keep prices largely in check.

National Apartment Market Overview◆ The worst of the erosion of occupancies is over, and a drop in construction is setting the stage for a recovery. Developers will

complete 65,000 apartments in 2010, down from 94,000 units last year. Vacancy is expected to decrease 30 basis points this year to 7.8 percent, following a 140 basis point spike in 2009.

◆ Asking rents will decline 1.7 percent in 2010, and operators will continue to trim effective rents, as the moderate drop in va-cancy will not translate into pricing power yet. Effective rents are forecast to retreat 3 percent, and concessions will reach 9 percent of asking rents, compared with an average of approximately 5 percent of asking rents from 2005 to 2008.

◆ Unemployment among 20- to 34-year-olds started 2010 more than 200 basis points higher than the overall unemployment rate and the highest fi gure on record since the early 1980s. As the economy slowly gains steam, younger workers and recent graduates, many of whom moved in with friends and family, could begin to enter the rental market.

Capital Markets◆ While many regional banks have sharply pulled back commercial real estate lending volume, the apartment market has been

supported by lending by Fannie Mae and Freddie Mac. The agencies’ commercial loans have been among the best performing assets in their portfolios, and the GSEs are expected to continue to be a primary lending source in 2010.

◆ Many upside-down owners remain unable to refi nance maturing debt, even for assets generating healthy cash fl ows; howev-er, lenders are increasingly willing to extend or modify loans. Even properties with insuffi cient cash fl ows may be candidates for modifi cations, though additional equity contributions typically are required.

◆ The lending climate for apartments will remain constrained, and underwriting standards will be conservative in 2010. Inves-tors should expect LTVs to stay within the 55 percent to 75 percent range.

Investment Outlook◆ After dropping approximately 70 percent from the peak, investment activity began to revive modestly in the second half of

2009 and should improve further in 2010. Local, private buyers account for the bulk of activity, but institutions and REITs that have accumulated capital are expected to target large properties in primary markets this year.

◆ The weakness of the U.S. dollar is attracting foreign buyers. In the fourth quarter of 2009, for example, the Kuwait Finance House announced plans to buy $450 million of apartment properties in the United States.

◆ Softening operating conditions contributed to stalled transaction activity through much of 2009, as buyers and lenders were unsure how far property fundamentals and NOIs would slip. With the economy entering a modest recovery and most perfor-mance measurements expected to stabilize in 2010, investors have more confi dence in their forecasts and underwriting.

National Apartment Index

page 4 2010 Annual Report

Vaca

ncy

Rate

Markets with the GreatestExpected 2010 Employment Losses

Nonfarm Employment (Y-O-Y Change)

Markets with the LowestExpected 2009 Vacancy Rates

New Yo

rk C

ity

New H

aven

Minne

apoli

s-St.

Paul

New Je

rsey

San

Diego

San

Fran

cisco

Milwau

kee

San

Jose

Los A

ngele

s

Washi

ngto

n, D

.C.

Unite

d Sta

tes

Markets with the HighestExpected 2010 Employment Growth

Nonfarm Employment (Y-O-Y Change)

0% 0.7% 1.4% 2.1% 2.8%United States

DenverWashington, D.C.

Minneapolis-St. PaulPortland

SeattleSalt Lake City

HoustonDallas/Fort Worth

AustinSan Antonio

-1.0% -0.5% 0% 0.5% 1.0%United States

SacramentoOaklandAtlanta

ClevelandMiami

Fort LauderdaleTampa

West Palm BeachJacksonville

Detroit

2%

4%

6%

8%

10%

Vaca

ncy

Rate

Markets with the HighestExpected 2010 Vacancy Rates

Jack

sonv

ille

Tucs

on

Housto

n

Phoe

nix

Las V

egas

Atlan

ta

Char

lotte

Orland

o

Tampa

Austi

n

Unite

d Sta

tes

6%

9%

12%

15%

18%

Markets with the HighestExpected 2010 Completions

Uni

ts (

thou

sand

s)

Dalla

s/For

t Wor

th

Housto

n

Washi

ngto

n, D

.C.

New Yo

rk C

ity

Seat

tle

Austi

n

New Je

rsey

Denve

r

San A

nton

io

Phoe

nix

0

2

4

6

8

2010 National Apartment Index

Marcus & Millichap is pleased to present the 2010 edition of the National Apartment Index (NAI). The NAI is a snapshot analysis that ranks 44 apartment markets based on a series of 12-month

forward-looking supply and demand indicators. Markets are ranked based on their cumulative weighted-average scores for various indica-tors, including forecast employment change, vacancy, construction, housing affordability and rents. Taking into account both the predicted level and degree of change over the forecast period, the index is designed to indicate relative supply and demand conditions at the market level.

Users of the index are cautioned to keep a few important points in mind. First, the NAI is not designed to predict the performance of indi-vidual investments. A carefully chosen investment in the bottom-ranked apartment market could easily outperform a poor choice in the top-ranked market. Second, the NAI is geared toward a short-term time ho-rizon. Third, a market’s ranking in the index can improve from one year to the next, even if its fundamentals are weakening. This is especially evident during shifts in the real estate cycle. For example, a number of markets that rose in the index will record modest vacancy increases this year, but the forecast vacancy rate in many of these areas remains well below the national average.

It is also important to note that because the NAI is an ordinal index, differences in specifi c rankings should not be misinterpreted. For example, the top-ranked market in the index is not necessarily twice as good as the second-ranked market, nor is it 10 times better than the 10th-ranked market.

Low Vacancy Markets Once Again Rise to the Top

During the past two years of job cuts, apartment fundamentals have generally performed best in established metro areas known for stabil-ity rather than rapid growth. Midwestern markets, in particular, were among those impacted the least during the recession. Some markets with traditionally high occupancy, on the other hand, fell dramatically in the 2009 ranking, as concentrated job losses among professional and fi nan-cial fi rms caused vacancy rates to nearly double in some instances while pressing signifi cant rent declines. As renter demand fi rms in 2010, metro areas that feature structurally low vacancy rates are expected to stabi-lize; these markets rose in the NAI. While forecasts for job growth caused markets such as Seattle, Denver and Phoenix to improve in this year’s ranking, supply overhangs persist in these areas, and extended periods of household expansion will be required for the markets hardest hit by the recession to recover fully.

National Apartment Index


Washington, D.C., Retains the Top Spot; San Diego Rises to #2

Fueled by government spending, Washington, D.C., will be among the fi rst metro areas to emerge from the recession, allowing the nation’s capital to maintain the top spot in this year’s NAI. Despite continued in-ventory growth, healthy demand drivers will increase absorption, driv-ing vacancy lower and fueling limited rent growth. San Diego (#2) rose four places in the ranking due to expectations for comparatively low va-cancy and rents that will rise slightly, unlike virtually all other markets. New York City, which ended 2009 as the tightest apartment market in the country, will record modest vacancy improvement this year as profes-sional and fi nancial services fi rms resume hiring. The metro jumped fi ve places in the index to #3. Despite tight vacancy, rents in Minneapolis-St. Paul (#4) continue to contract, causing the market to slip one spot this year. Job growth in Philadelphia will lag the nation in 2010, easing down the market three places to round out the top fi ve.

New Jersey ticked down one spot to #6 this year, as accelerating con-struction will outpace job growth, pushing vacancy higher. Payrolls in Orange County (#7) will expand for the fi rst time since 2006 and delivery of new units will slow, supporting the area’s six-spot improvement in the ranking. Expectations for a vacancy uptick and further rent declines pushed down Boston four places to #8, while San Francisco advanced eight spots to #9, as relatively low housing affordability keeps its vacancy rate among the tightest nationwide. Limited additions to inventory and a forecast resumption of job growth will drive down vacancy in San Jose (#10) this year, supporting the metro’s eight-spot rise in the 2010 NAI.

Many Midwestern markets performed well in the ranking in recent years due to relatively stable vacancies and rents. Most of these metros are expected to lag as the economy recovers and therefore fell in the NAI. Chicago (#20) dropped nine spots in this year’s ranking, while Kansas City (#24), Cincinnati (#30) and Columbus (#31) each tumbled eight spots. The Texas markets are forecast to lead the country in job growth in 2010, but developers will continue to deliver new units, and vacancy will remain above-average. Each of the Texas markets rose in the index, with San Antonio (#12) the top-ranked metro area in the state.

While a modest recovery will take hold throughout much of the country this year, Florida’s economy will remain soft, and major metro areas in the state comprise much of the bottom of the index. Steep rent declines are forecast for Fort Lauderdale (#39), West Palm Beach (#41) and Jacksonville (#44). These markets will not show a recovery in 2010; however, properties in these areas could offer strong upside for less risk-averse investors who acquire assets this year.

2010 Single-Family Housing Affordability

Most Affordable Least Affordable

Aff

orda

bility

Inde

x (U

.S.

= 10

0)

Indian

apoli

s

Clev

eland

Detro

it

Cinc

inna

ti

St. L

ouis

San

Jose

Oaklan

d

Orang

e Cou

nty

San

Fran

cisco

New Yo

rk C

ity0

75

150

225

300

Rank Rank 09-10MSA 2010 20091 Change

Washington, D.C. 1 1 ■ 0

San Diego 2 6 ▲ 4

New York City 3 8 ▲ 5

Minneapolis-St. Paul 4 3 ▼ 1

Philadelphia 5 2 ▼ 3

New Jersey 6 5 ▼ 1

Orange County 7 13 ▲ 6

Boston 8 4 ▼ 4

San Francisco 9 17 ▲ 8

San Jose 10 18 ▲ 8

Salt Lake City 11 9 ▼ 2

San Antonio 12 14 ▲ 2

Los Angeles 13 15 ▲ 2

New Haven 14 7 ▼ 7

Louisville 15 10 ▼ 5

Austin 16 20 ▲ 4

Milwaukee 17 12 ▼ 5

Oakland 18 19 ▲ 1

Portland 19 21 ▲ 2

Chicago 20 11 ▼ 9

Denver 21 27 ▲ 6

Seattle 22 25 ▲ 3

Dallas/Fort Worth 23 29 ▲ 6

Kansas City 24 16 ▼ 8

Miami 25 28 ▲ 3

St. Louis 26 24 ▼ 2

Indianapolis 27 31 ▲ 4

Houston 28 32 ▲ 4

Charlotte 29 33 ▲ 4

Cincinnati 30 22 ▼ 8

Columbus 31 23 ▼ 8

Cleveland 32 26 ▼ 6

Sacramento 33 37 ▲ 4

Phoenix 34 41 ▲ 7

Orlando 35 30 ▼ 5

Detroit 36 35 ▼ 1

Riverside-San Bernardino 37 42 ▲ 5

Tucson 38 38 ▲ 0

Fort Lauderdale 39 34 ▼ 5

Tampa 40 40 ▲ 0

West Palm Beach 41 36 ▼ 5

Atlanta 42 39 ▼ 3

Las Vegas 43 44 ▲ 1

Jacksonville 44 43 ▼ 1

1 See National Apartment Index Note on page 59.

National Economy


Year

-ove

r-Ye

ar C

hang

e (m

illio

ns)

-6

-3

0

3

6

10**09*050095908580

U.S. Employment

Ann

ualiz

ed Q

uart

erly

Cha

nge

in G

DP

-10%

-5%

0%

5%

10%

10**09*050095908580

U.S. GDP

Retail Sales and UnderemploymentUnderemployment RateRetail Sales, Excluding Auto & Gas

Und

erem

ploy

men

t Ra

te

Year-over-Year Change in Retail Sales-10%

-5%

0%

5%

10%

0%

5%

10%

15%

20%

09***080706050403020100

Dec

ade

Aver

age

Ann

ual G

row

th

GDP/Employment RatioGDP

0%

1%

2%

3%

4%

5%

2010**2000s1990s1980s1970s1960s1950s

Employment

25-Year Average GDP: 3.1%25-Year Average Employment: 1.5%

Unlike previous severe economic downturns, which were typically followed by robust growth, recovery from the Great Recession will be hampered by elevated unemployment, high consumer debt and a

corporate focus on profi t margins. Record levels of government borrowing and stimuli also are sources of concern, as they point to higher taxes and increase the threat of infl ation. These economic headwinds remain formi-dable and should not be underestimated. Apartment owners and investors should prepare for a muted recovery in 2010, particularly when it comes to job growth. A number of positive elements have emerged, however, that make a surprise to the upside more likely than the resumption of economic contraction. For starters, low capacity utilization and high unemployment should keep infl ation at bay through most, if not all, of this year, giving the Fed plenty of time before entering an aggressive tightening cycle. This should prevent a “double dip,” which in previous instances was largely at-tributable to the Fed raising interest rates too far, too fast.

As the fi nancial system moves past stabilization and bank profi ts continue to improve, lending will increase. This will give consumers and small- to mid-sized businesses much-needed relief from extremely tight credit conditions. In the latter part of 2009, the percentage of banks tight-ening lending criteria slipped to the lowest point since the fi nancial crisis began. Projected GDP growth of 2.5 percent to 3.0 percent in 2010 could actually come in stronger due to export growth and improvement in the housing market. Normally, expansion in this range would translate into an employment gain of 1.5 percent; however, with corporate psychology likely to remain fi xated on cost containment, outsourcing and part-time so-lutions, job growth of 0.75 percent to 1.0 percent is the more likely scenario for 2010. At some point, most likely in 2011, the extreme job cuts of the past 18 months will result in a shortage of workers in many industries, leading to levels of job creation that resemble real economic expansion.

2010 National Economic Outlook

◆ Slow Employment Growth in 2010. The recession claimed approxi-mately 7.2 million jobs through the end of 2009, including 4.1 million last year alone. Employers will begin to rehire cautiously in 2010, creating approximately 1 million jobs. Growth will be concentrated in the educa-tion and health services and export-related industries.

◆ Federal Reserve Walking a Tightrope. Through the recession, the Fed dropped interest rates to nearly zero and committed billions of dollars in aid to provide liquidity to credit markets. This year, the central bank must determine when, and how much, support should be withdrawn to avoid infl ation or another recession.

◆ Credit Availability Crucial to Small Businesses. Historically, small businesses account for nearly two-thirds of job growth, and they remain a critical component of recovery. Initiatives have been proposed to raise the maximum size of Small Business Association loans and allow more banks to borrow at low rates from the Troubled Assets Relief Program.

◆ Commercial Mortgage Maturities a Wild Card. Banks’ deferrals of at-risk loans may be postponing inevitable writedowns as weak fundamen-tals challenge overleveraged properties. As potential losses accumulate, the risk of additional bank failures escalates, potentially diminishing credit availability as the recovery gains momentum.

Muted, Choppy Recovery Expected;Elements of Surprise to the Upside Emerging

* Estimate ** Forecast *** Through November

National Apartment Overview


Apartment Rent and Vacancy Trends

Aver

age

Effe

ctiv

e Re

nt

Vacancy Rate

Effective RentVacancy Rate

$600

$700

$800

$900

$1,000

10**09*08070605040302010%

3%

6%

9%

12%

Apartment Completions

Uni

ts C

ompl

eted

(th

ousa

nds)

Inventory as a % of Completions

Units CompletedCompletions as a Percentageof Inventory

0

125

250

375

500

10**09*0500959085800%

2%

4%

6%

8%

Unemployment in thePrime Renter Demographic

Vaca

ncy

Rate

Unemploym

ent Rate - Ages 20-34

Unemployment Rate - Ages 20-34Vacancy Rate

2%

4%

6%

8%

10%

09*08070605040302013%

6%

9%

12%

15%

Apartment Revenue and Concessions

Reve

nue

per

Uni

t

Concessions as a % of Asking Rents

Revenue per UnitConcessions as a Percentageof Asking Rents

$750

$800

$850

$900

$950

10**09*08070605040302010%

3%

6%

9%

12%

Apartment property fundamentals should stabilize this year after ab-sorbing the demand shock of 2009. Tepid job creation and elevated un-employment will hamper renter household formation through most

of 2010, delaying a more noteworthy improvement in apartment demand. Unemployment in the prime renter age cohort of 20- to 34-year-olds started the year more than 200 basis points above the overall rate and at the highest level on record since the early 1980s. Additional challenges to an apartment recovery in 2010 include competition from shadow rentals and the extended fi rst-time homebuyer tax credit. By some estimates, the latter has already resulted in 350,000 home sales that would not have occurred otherwise.

The extended forecast for apartments remains bright, supported by a pullback in construction and permitting, burn-off of excess housing invento-ry, receding homeownership rates, and favorable demographics. Apartment development in the years leading up to the recession fell short of historical norms, and tight credit markets have since cleared many planned projects from the pipeline. In 2009, multi-family permitting declined 60 percent from the previous year, and construction deferrals doubled. The lull in develop-ment will provide owners time to fi ll vacant units ahead of the next construc-tion cycle, which is unlikely to reach meaningful levels until 2012-2013. Fur-thermore, apartment owners stand to benefi t from echo boomers transitioning into their prime renting years, with the number of 20- to 34-year-olds pro-jected to rise by approximately 5 million individuals in the next 10 years.

2010 National Apartment Outlook

◆ Fannie Mae as Landlord. Under a new plan, Fannie Mae will permit homeowners facing foreclosure to rent their homes for as long as a year, effectively creating another layer of shadow rental stock. At the same time, the program should minimize near-term REO sales, helping to sta-bilize the housing market, which remains critical to an economic recovery.

◆ Completions Retreating. Developers will deliver 65,000 apartments in 2010, down from 94,000 units last year. Completions in the most over-supplied housing markets, such as Phoenix and Las Vegas, will slip to the lowest levels in years. Only a few markets will register increases this year, including New York City and New Jersey, where a handful of high-rises will come online.

◆ Vacancy to Drop Moderately in 2010. Vacancy improvement in the second half of 2010 will offset some of the weakness recorded earlier in the year. Vacancy surpassed all previous peaks in 2009, increasing 140 basis points, and is forecast to end 2010 at 7.8 percent, a net decline of 30 basis points.

◆ Rent Trends to Lag. Fierce competition for renters will persist even after vacancy starts to subside, keeping downward pressure on rents. In 2010, asking and effective rents are expected to slip 1.7 percent and 3.0 percent, respectively. Owners will begin to see some pricing power in the second half of the year, particularly in lower vacancy markets that had signifi -cant rent adjustments in 2009.

◆ Demographics Favor Student Housing. Forecasts of an expanding college-aged population and rising post-secondary enrollment bode well for student housing over the next several years. Student housing outper-formed traditional apartments in 2009, with vacancy remaining in the 7.0 percent to 7.5 percent range. This trend should continue through 2010 as development in this segment slows by more than 50 percent.

Worst over for Operations; Recovery toGain Strong Momentum After 2010

* Estimate ** Forecast

Capital Markets


Commercial Mortgage Delinquency Rates

Del

inqu

ency

Rat

e

CMBS (30+ days and REO)Life Companies (60+ days)Fannie Mae (60+ days)Freddie Mac (60+ days)Banks & Thrifts (90+ days)

0%

1%

2%

3%

4%

5%

3Q09

4Q08

4Q07

4Q06

4Q05

4Q04

4Q03

4Q02

4Q01

4Q00

4Q99

4Q98

4Q97

CMBS, CDO & Other ABS, 12%

GSEs & Ginnie Mae, 38%

Other, 5%Life Insurance

Companies, 6%

SavingsInstitutions, 7%

State & Local Governments, 8%

Commercial Banks, 24%

Multi-Family Mortgage Debt Outstanding

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Mat

urin

g Ba

lanc

e (b

illio

ns)

$0

$25

$50

$75

$100

Estimated Multi-Family Debt Maturitiesby Vintage

Pre-20012001-2004

2005-20072008

All-in Rates Range-Bound, DespiteFluctuating 10-Year Treasury Yield

Rate

10-Year Treasury YieldFannie Mae All-in Rate (Tier 2)

0%

2%

4%

6%

8%

2009

2008

2007

Apartments will maintain a fi nancing advantage over other property types in 2010 due to the availability of debt from Fannie Mae and Fred-die Mac. The GSEs account for almost 60 percent of new multi-family

mortgage originations, followed by banks. Generally constrained lending, however, will keep sales and refi nancing below “normal” levels despite some improvement over 2009. Agency lending should persist at a healthy pace in 2010, assuming government-mandated changes steer clear of their multi-family lending arms. Furthermore, Freddie Mac’s Capital Markets Ex-ecution program holds promise as a viable source of liquidity, following the securitization of $2 billion of debt in 2009. Nonetheless, traditional CMBS issuance remains limited despite government programs such as TALF and PPIP, and is unlikely to be a major source of fi nancing in 2010. This presents the greatest challenge for deals over $15 million, an issue exacerbated by a pullback in lending by life insurance companies. Though a handful of life in-surers have showed renewed interest in lending, capacity limitations damp-en expectations for a 2010 surge. Aside from the GSEs, local and regional banks will account for the greatest share of apartment fi nancing this year, focusing on smaller, low-risk deals in primary markets with strong sponsors.

Delinquency rates continue to rise, though increases vary by lender type. Fannie Mae and Freddie Mac, which account for 38 percent of apartment debt outstanding, boast sub-1 percent delinquency due to conservative underwrit-ing through the boom. The CMBS sector, on the other hand, has recorded rapid increases in its apartment delinquency rate, which closed 2009 at an estimated 9 percent. CMBS debt originated between 2005 and 2007 presents the most risk and includes many large loans underwritten on optimistic rent/occupancy projections that failed to materialize. In addition, prices were at or near peak levels during this period, and high-leverage loans were prevalent. Many risky CMBS loans will mature between 2010 and 2012, though recent tax-law changes granting special servicers greater loan modifi cation fl exibil-ity may alleviate some default risk. An increase in defaults could prove most problematic for commercial banks, which account for one-fourth of outstand-ing multi-family debt. Banking risks are well-recognized, however, and gov-ernment efforts to prevent another fi nancial shock remain likely.

2010 Capital Markets Outlook

◆ Long-Term Rates Low. The 10-year Treasury yield increased in 2009 but remains low by historical standards, due partly to government Trea-sury purchases last year. Moderate economic growth and tame infl ation should prevent a major run-up in yields in 2010.

◆ Mortgage Rates Relatively Stable. Lenders will continue quoting all-in rates instead of spreads, limiting fl uctuations. Fannie Mae’s all-in rate is currently equivalent to late-2008 levels, when the 10-year was 100 basis points lower.

◆ Lenders Opt for Extensions over Near-Term Losses. Many upside-down owners remain unable to refi nance maturing debt, even for assets generat-ing healthy cash fl ows; however, lenders are increasingly amicable to exten-sions/modifi cations. Even properties with insuffi cient incomes may be can-didates for modifi cations, though equity contributions are typically required.

◆ Seller/Assumable Financing Critical as Lending Remains Constrained. More than half of all commercial real estate deals involved seller and/or assumable fi nancing in 2009. As balance sheets heal, caution and risk aversion will continue to dominate lending decisions. Investors should expect LTVs to remain in the 55 percent to 75 percent range.

GSE Lending Remains a Lifeline asTight Capital Markets Stifl e Sales Activity

Investment Outlook


Apartment Price and Cap Rate Trends

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Investment strategies will change course in 2010 as the buyer-anticipated wave of distressed properties comes out as a trickle. Prices have fallen, however, and with the economy starting a slow recovery, buyers’ and

sellers’ expectations will begin to align, sparking sales activity. While some troubled assets will enter the market in the coming quarters, lenders will con-tinue to extend loans and renegotiate terms rather than reclaim properties, particularly in light of relaxed FDIC guidelines regarding markdowns of un-derperforming loans. Lenders ultimately will have to act on nonperforming loans, though this will likely occur in stages over the next few years as banks’ balance sheets improve to the point where losses can be absorbed. Bottoming fundamentals and further evidence of a shortage of quality assets offered at truly distressed prices will move more buyers off the sidelines in 2010.

Sales velocity dropped more than 50 percent last year, but activity be-gan to improve modestly in the fourth quarter and will continue to gain mo-mentum in 2010. Average prices have fallen approximately 25 percent from the peak, but the trend varies by quality. A recent frenzy of buyer demand has resulted in multiple offers and cap rate compression for quality assets in stronger markets. This trend will persist as investors look long term and position themselves ahead of the recovery. REITs have successfully raised capital and are re-entering the market, targeting large complexes in primary metros, while institutions and syndicates are expected to step up activity as well. Among smaller private buyers, local investors will drive sales activity, as lenders continue to show a clear preference for investors with experience managing properties in their home markets. Following advances of 100 ba-sis points or more last year, cap rates will tick higher this year primarily among lower-tier properties and in secondary and tertiary metros .

2010 Investment Outlook

◆ Stabilizing Fundamentals Support Investment. Weak operating condi-tions contributed to stalled sales activity through much of 2009, as buyers and lenders were unsure how far property fundamentals and NOIs would slip. With the economy entering a recovery and most performance measure-ments expected to stabilize in 2010, investors have more confi dence in their forecasts and underwriting. A sharper-than-anticipated rise in long-term interest rates, however, would pose a major risk to pricing and cap rates.

◆ Busted Condos, Stalled Developments Attracting Buyers. While the number of distressed properties hitting the market remains far below expectations, opportunistic buyers are fi nding deep discounts in projects that encountered diffi culties in the recession and conversions that were initiated just prior to the market’s bust. The bulk of these deals are occur-ring in Las Vegas, Phoenix and Florida.

◆ Declining Dollar Driving Foreign Interest. By the end of 2009, the U.S. dollar had fallen more than 10 percent against foreign currencies. A fa-vorable exchange rate could peak foreign interest, particularly in gateway markets such as New York City, Washington, D.C., Miami, San Francisco and Los Angeles. In the fourth quarter, the Kuwait Finance House an-nounced plans to purchase $450 million of U.S. apartment assets.

◆ Job Cuts Drive College Enrollment. One byproduct of elevated unem-ployment is rising college enrollment, which is spurring demand for stu-dent housing. Cap rates for student housing increased 50 basis points in 2009, while the average price rose 5 percent. Both measurements outper-formed those for traditional apartments.

The Tale of Two Markets:Frenzy over Quality, Low Tolerance for Risk

* Estimate ** Through September

2010 Annual Report


Despite Limited Construction Activity, Shadow Stock Weighing on Operations

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Atlanta Down 3 Places 2010 Rank: 42 2009 Rank: 39

Market Forecast Employment: 0.2% ▼ Construction: 58% ▼ Vacancy: 30 bps ▲ Asking Rents: 3.0% ▼

D espite a considerable decline in multi-family development activity, still soft employment generated demand and competition from shad-ow inventory will push vacancy near record levels this year. Indeed,

completions in 2010 are expected to total the fewest number of units in 15 years. Moreover, about 80 percent of this year’s deliveries will come online in the North DeKalb submarket, isolating the effects of new inventory on metrowide conditions. While pressures from new development throughout the rest of the market will ease, competition from shadow inventory con-tinues to affect unit demand. More than 2 percent of apartments were con-verted to condos since 2003, and many are now competing as rentals. Also, as of the end of last year, homes available for-rent totaled an additional 0.7 of rental inventory. As a result, effective rents are projected to recede this year as owners increase concessions in response to shadow competition.

Ongoing operational challenges in 2010 should create additional buying opportunities for Atlanta apartment investors. Rising vacancy and increased expenses will continue to mitigate cash fl ows and push more assets into dis-tress, especially properties purchased at aggressive pro forma underwriting near the market peak. As a result, cap rates, which currently average in the high-7 percent to low-8 percent range, will tick higher and may begin to nar-row the pricing disconnect between buyers and sellers. Investment activity will center largely on distressed properties this year. Bank-owned assets in the Southwest, Austell and Stonecreek/Clarkston areas, in particular, may offer near-term discount opportunities, which would provide longer-term upside to investors willing to assume added operational risk.

2010 Market Outlook

◆ 2010 NAI Rank: 42, Down 3 Places. One of the nation’s highest vacancy rates and continuing job losses placed Atlanta down three spots in this year’s NAI.

◆ Employment Forecast: Total employment in Atlanta will decrease by 4,000 positions in 2010, a 0.2 percent loss. Last year, employers cut 105,000 jobs from payrolls.

◆ Construction Forecast: This year, developers are slated to bring online 1,500 units, a 0.4 percent addition to inventory but down signifi cantly from the 3,600 units delivered in 2009. Over the past fi ve years, comple-tions have averaged 4,900 units annually.

◆ Vacancy Forecast: The average vacancy rate is projected to rise 30 basis points in 2010 to 11.6 percent. Last year, vacancy increased 100 basis points.

◆ Rent Forecast: Asking rents are expected to decline 3 percent this year to $800 per month, and effective rents are projected to drop 3.5 percent to $708 per month. In 2009, asking rents slipped 4.3 percent, while effective rents fell 4.4 percent.

◆ Investment Forecast: Owners will continue to retain properties in areas with steady renter demand, including the core North Fulton County, Buckhead and Midtown submarkets. Opportunities to purchase dis-tressed assets will remain, however, allowing some buyers to take on greater risk .



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Market Forecast Employment: 2.5% ▲ Construction: 68% ▼ Vacancy: 40 bps ▼ Asking Rents: 0.6% ▲

Job Growth Driving In-Migration,Fueling Apartment Demand

In Austin, the robust employment growth that supported one of the healthiest local economies prior to the recent downturn is anticipated to resume in the coming months, attracting job seekers from areas deeply

maligned by the recession. A recovery in the global economy will be par-ticularly benefi cial for Austin fi rms, as technology sales in emerging mar-kets will revive the local manufacturing sector, which has declined by 15 percent since peaking in 2007. As a result, apartment demand is expected to increase as 2010 progresses, supported by a boost in household formation. Effective rents will fall, however, as the infl ux of construction that artifi -cially buoyed rents last year dissipates and operators offer concessions to fi ll vacant units. In fact, operators of some smaller properties that rely on high occupancy to maintain revenues have led the way, recording double-digit rent declines in an attempt to lure tenants.

Many investors are expected to remain on the sidelines in the fi rst half of the year as the impact of distressed assets on valuations materializes. Transactions in the early months of 2010 will likely consist of well-located complexes with assumable debt or assets priced to cash fl ow on a relatively short time horizon. Velocity will accelerate as the year progresses and the expectations gap narrows, while properties with forthcoming debt ma-turities will come on the market at attractive prices. Average cap rates in the metro are projected to approach the 9 percent range this year. Well-capitalized buyers may be able to acquire distressed assets with cap rates signifi cantly higher, though deferred maintenance could become a greater concern within these deals.

2010 Market Outlook

◆ 2010 NAI Rank: 16, Up 4 Places. Austin’s four-spot rise in the ranking is due a forecast for the second-strongest employment growth in the coun-try for 2010.

◆ Employment Forecast: The rate of job growth is anticipated to gain steam as 2010 progresses. Companies are forecast to expand local payrolls at a 2.5 percent clip this year with the addition of 19,000 positions. In 2009, total employment contracted by 6,000 jobs.

◆ Construction Forecast: A sharp reduction in development activity is ex-pected in 2010 as 2,500 units come online, signifi cantly below the 7,900 apartments that were delivered last year.

◆ Vacancy Forecast: Population gains and job growth will fuel a 2.1 per-cent increase in apartment demand this year, resulting in a 40 basis point improvement in vacancy to 10.6 percent.

◆ Rent Forecast: Asking rents are forecast to rise 0.6 percent in 2010 to $849 per month while effective rents retreat 0.7 percent to $752 per month . Three years of concession burn-off will be lost by year end.

◆ Investment Forecast: In the Round Rock/Georgetown submarket, own-ers attempting to sell high-vacancy assets will offer signifi cant leasing incentives to push occupancy above 85 percent in order to expand fi -nancing options for buyers. As fundamentals in the area stabilize in 2011, buyers should be able to realize above-average returns by raising rents.

AustinUp 4 Places 2010 Rank: 16 2009 Rank: 20

2010 Annual Report


Market Forecast Employment: 0.9% ▲ Construction: 70% ▼ Vacancy: 20 bps ▲ Asking Rents: 3.1% ▼

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Despite a slowdown in construction activity, soft tenant demand and competition from shadow rental inventory will continue to weigh on Boston apartment operations this year. Demand-side fundamentals

are expected to remain weak in 2010, as increased worker productivity in the manufacturing and professional and business services sectors will limit payroll expansion, and most new jobs will come from the education and health services industry. Also competing with apartments are single-family homes being rented out by investors. This trend is prevalent in suburban areas outside of the city that recorded above-average for-sale inventory growth in previous years. Elsewhere, properties in core submarkets within Route 128 will experience high demand from renters, keeping near-term operations steady.

Investment activity will pick up this year as seasoned investors re-enter the market in search of distressed properties and buy-and-hold investors target stabilized assets. Local buyers may continue to focus on distress and leverage operational effi ciencies by investing in complexes that are failing to meet cash fl ow requirements, particularly in tertiary submarkets. In-vestor demand also will remain elevated for properties in core areas such as Brookline and Cambridge due to steady operations. Cap rates in these close-in submarkets average in the high-6 percent to low-7 percent range, up slightly from the start of 2009. Initial yields in the suburbs, meanwhile, average in the 9 percent to 10 percent range and will likely rise modestly this year as a result of additional distress and softer investor demand.

2010 Market Outlook

◆ 2010 NAI Rank: 8, Down 4 Places. Boston ranked near the top in most of the index measurements, keeping the metro in the top 10 of the NAI this year.

◆ Employment Forecast: Job cuts at the beginning of the year will give way to employment growth of 22,000 positions in 2010, or 0.9 percent, follow-ing the elimination of 56,000 workers last year. The education and health services sector is forecast to create approximately 12,000 jobs.

◆ Construction Forecast: Builders are expected to complete 1,000 apart-ment units this year, adding 0.5 percent to stock. In 2009, around 3,300 units entered the market. The majority of the projects scheduled for de-livery are located in suburban submarkets, including the South Shore/Route 128 South and Mystic River North/Route 128 areas.

◆ Vacancy Forecast: Vacancy is projected to rise 20 basis points to 6.8 per-cent in 2010, after increasing 60 basis points last year.

◆ Rent Forecast: Asking rents are expected to fall 3.1 percent this year to $1,619 per month, while effective rents are forecast to drop 3.4 percent to $1,518 per month. In 2009, asking rents declined 4.1 percent, and effec-tive rents receded 5 percent.

◆ Investment Forecast: Transaction velocity will remain steady in close-in submarkets, although cap rates will trend upward due to expectations for greater expenses. Distressed sales could increase in the suburbs as higher vacancy rates adversely impact cash fl ows.

Performance Steady in Core Areas;Suburban Locations Face Challenges

Boston Down 4 Places 2010 Rank: 8 2009 Rank: 4



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In Charlotte, a sharp decline in construction activity will help to tem-per the projected rise in vacancy this year, although homes and condos turned for-rent will offer strong competition to apartments in some sub-

markets. Completions will decrease 68 percent in 2010, adding a minimal 0.4 percent to stock. Much of the new supply will come online near trans-portation arterials in expanding residential and commercial areas north of Uptown, such as the Harris Boulevard/Mallard Creek Church Road sub-market. Above-average tenant demand , however, will keep vacancy in this area near 9 percent this year. In the Uptown submarket, competition from shadow stock, primarily condos employed as rentals, will cause vacancy to trend higher. Area vacancy levels typically remain range near 5 percent, but the added competition is expected to push vacancy to the high-8 percent range by year end. As a result, concessions in the submarket could push higher by nearly 100 basis points this year to 15 percent of asking rents.

Apartment sales activity in Charlotte will remain limited in the near term due to investors’ lingering concerns over the fundamental stability of the local market. As expectations for rising expenses and vacancy rates fur-ther widen the value disconnect between buyers and sellers, cap rates will trend higher, with investors underwriting for potential declines in operat-ing revenues. Buyers will likely target properties in areas near employment and residential hubs south of Uptown, such as Ballantyne and Fairview North, as renter demand remains high in these submarkets. Longer-term upside, meanwhile, may exist in apartment assets north of the downtown area. Residential growth in these locations continues to be steady due to ongoing business and commercial expansions associated with the North Carolina Research Campus in Kannapolis.

2010 Market Outlook

◆ 2010 NAI Rank: 29, Up 4 Places. A forecast for resumed payroll expan-sion in 2010 pushed up Charlotte four places in this year’s index.

◆ Employment Forecast: Employers are expected to add 8,000 positions to Charlotte head counts this year, a 1 percent increase. In 2009, instability in the banking industry contributed to the elimination of 40,000 jobs.

◆ Construction Forecast: Completions will slow to approximately 1,200 apartments in 2010, down from about 3,800 units last year. Over the past fi ve years, additions have averaged 1,500 rentals annually.

◆ Vacancy Forecast: Vacancy is expected to rise 30 basis points to 11.5 percent this year. In 2009, vacancy increased 300 basis points due to job losses and a spike in apartment deliveries.

◆ Rent Forecast: Asking rents are projected to reach $742 per month in 2010, a 2.5 percent drop from last year, while effective rents will fall 3 percent to $657 per month. In 2009, asking rents decreased 4.6 percent, and effective rents receded 5.4 percent.

◆ Investment Forecast: In 2010, investors may focus more on stabilized assets in areas with steady renter demand, such as Ballantyne and the Concord/Kannapolis submarkets, in an attempt to mitigate short-term investment risk.

Investment Activity Centering on Pockets of Stability North and South of Uptown

CharlotteUp 4 Places 2010 Rank: 29 2009 Rank: 33

2010 Annual Report



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While employment in the Chicago metro will rebound this year, apartment operating fundamentals will remain soft, especially in the suburbs, where pronounced payroll cuts have dragged on

renter demand. Construction activity will slow in 2010, though a consider-able shadow rental inventory continues to pose a threat, particularly in the South Loop. Other submarkets, however, will show signs of strength this year. Apartments on the Northside will get a boost from a large young-pro-fessional cohort, while the eastern Oak Park submarket will benefi t from comparatively low rents, as well as its proximity to employment corridors and arterial routes. These factors should also contribute to further vacancy improvements in the O’Hare submarket through 2010.

Investment activity will likely be driven by local buyers this year, par-ticularly in the city, where a number of assets have been discounted due to softened conditions and cap rates that have climbed into the mid-7 percent range. Deals involving out-of-state buyers will remain limited, as many of these investors are targeting metros where prices have declined consider-ably. Newly formed syndicates consisting of long-term owners who are divesting assets and pooling cash also will continue to emerge and seek out distressed properties in areas with broken condo projects, including neighborhoods in the South and West loops. Nontraditional buyers will re-enter the market to take advantage of price reductions in submarkets such as Downers Grove and Glenview/Evanston, as initial yields in the suburbs are projected to approach 9 percent this year.

2010 Market Outlook

◆ 2010 NAI Rank: 20, Down 9 Places. Continued inventory growth and a modest vacancy increase caused Chicago’s nine-spot drop in the ranking.

◆ Employment Forecast: With the local labor market recovering later this year, employers are expected to add a total of 32,000 positions in 2010, a 0.7 percent gain.

◆ Construction Forecast: Developers are projected to complete 1,230 apart-ment units by year end, increasing stock by 0.3 percent. Approximately 70 percent of the new units will be located in city submarkets.

◆ Vacancy Forecast: Driven by decreased renter demand in the suburbs, metrowide vacancy is forecast to reach 7.3 percent this year, 30 basis points higher than at the close of 2009.

◆ Rent Forecast: Asking rents will end 2010 at $1,010 per month, down 2.2 percent from last year, while effective rents will drop 2.7 percent to $925 per month.

◆ Investment Forecast: Buyers with short timelines will likely target as-sets on the Northside, as the opportunity to increase rents in the coming years is greatest in the area due to stable demand. Investors with long-term hold strategies may seek properties on the Westside, where prices are lower, but a recovery may be a couple of years away.

Syndicates and NontraditionalBuyers Set to Accelerate Activity

Chicago Down 9 Places 2010 Rank: 20 2009 Rank: 11



Demand Sturdy for Suburban Class A Units; Weakness Persists in Outlying Areas

CincinnatiDown 8 Places 2010 Rank: 30 2009 Rank: 22

Although work force reductions have peaked in Cincinnati, layoffs will persist through the fi rst quarter of 2010, delaying a recovery in apart-ment demand in many submarkets . The construction, professional

and business services, and trade, transportation and utilities sectors con-tinue to shed a signifi cant number of jobs , and further cuts are expected due to the failed renegotiation by Ford with the autoworkers’ union. Economic stresses will be most apparent in the outlying Clermont County and South-west submarkets, where an older mix of stock and distance from major em-ployers will contribute to higher concessions in 2010. Meanwhile, owners downtown and in the Northern Kentucky submarket will continue to lower rents through midyear, as renters are increasingly balking at the elevated rates in these locations. Proximity to employment in the core and along in-terstates 71 and 75 will support Class A demand in the suburban Blue Ash/Amberley submarket, however, as both revenues and vacancy are forecast to improve measurably this year. Metrowide, construction output will fall only slightly in 2010 , with supply growth concentrated in the fi rst half.

Investment activity will remain conservative in Cincinnati, though projections for increased buyer confi dence may cause velocity to tick higher as the year progresses. Listings of Class A properties in the beltway are expected to stay limited due to rising cap rates. Consequently, buyers will look to obtain top-tier assets in northern Butler and Warren counties, as spillover demand from Dayton continues to buttress operations in these areas. Most acquisitions, however, will occur near employers and along major highways in close-in Hamilton County, where cap rates are rising but renter demand is projected to rebound fi rst.

2010 Market Outlook

◆ 2010 NAI Rank: 30, Down 8 Places. High home affordability, rising va-cancy and below-average job growth drove down Cincinnati eight places in this year’s NAI.

◆ Employment Forecast: Hiring during the second half will underpin the creation of 5,000 jobs this year, or growth of 0.5 percent. In 2009, roughly 35,500 workers were let go.

◆ Construction Forecast: Approximately 560 apartments are expected to be added to inventory in 2010, down from 640 units last year.

◆ Vacancy Forecast: Inventory growth and the slow rebound in hiring will support a 30 basis point rise in vacancy this year to 8.1 percent. In 2009, the average vacancy rate climbed 100 basis points.

◆ Rent Forecast: Asking rents are forecast to slip 1.9 percent to $679 per month in 2010, and effective rents are projected to decrease 2.3 percent to $635 per month. Asking and effective rents fell 2.5 percent and 3.3 percent, respectively, last year.

◆ Investment Forecast: Investors will continue to target upper-tier prop-erties in the Blue Ash/Amberley submarket due to a limited supply of comparable units for renters. Consequently, cap rates for these assets are expected to remain in the low- to mid-8 percent range this year, well below the marketwide average .

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2010 Annual Report


Market Forecast Employment: 0.2% ▼ Construction: 329% ▲ Vacancy: 30 bps ▲ Asking Rents: 2.4% ▼

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Cleveland apartment operations should begin to stabilize in the latter part of 2010, aided by limited new stock and easing job cuts. Concerns over the solidity of both the local economy and job market, especially

the manufacturing sector, have kept development activity in check. Dur-ing the past fi ve years, apartment stock in Cleveland has expanded by less than 1 percent, helping to counteract the gradual decline in employment-generated renter demand. As a result, vacancy remains below the national average. While the completion of a redevelopment project downtown is expected to push the total construction output for 2010 above the level re-corded last year, rental inventory in the metro will grow by a mere 0.2 per-cent. On the demand side, employment losses continue to slow, with the education and health services sector forecast to add positions at the greatest rate in nearly three years.

The near-term outlook for the Cleveland investment market remains cautious, although a narrowing expectations gap between buyers and sell-ers could generate more activity this year. Moderating revenue, higher va-cancy rates and increasing expenses may drive pricing lower, raising cap rates and drawing more buyers into the market. Average initial yields are in the high-8 percent to mid-9 percent range, with cap rates among lower-tier properties likely to rise aggressively this year as a result of conservative demand. Distress will remain limited in 2010 due to the lack of high-priced transactions in recent years. Investment activity will center on close-in, stable areas that maintain high tenant demand despite market challenges, such as Shaker Heights.

2010 Market Outlook

◆ 2010 NAI Rank: 32, Down 6 Places. Cleveland’s employment market and demand for apartments will remain soft in 2010, pushing down the metro six spots in this year’s ranking.

◆ Employment Forecast: Total employment in the Cleveland metro is ex-pected to contract 0.2 percent, or by 2,000 positions, in 2010, following the loss of 47,000 jobs last year.

◆ Construction Forecast: Approximately 240 units will be delivered this year. In 2009, completions totaled 56 units.

◆ Vacancy Forecast: After increasing 100 basis points last year, vacancy is forecast to push up 30 basis points to 7.3 percent in 2010. The rise is slow-ing as job cuts ease and development activity remains in check.

◆ Rent Forecast: This year, asking rents are projected to fall 2.4 percent to $698 per month, while effective rents are expected to decline 2.9 percent to $659 per month. In 2009, asking rents dropped 3.2 percent, and effec-tive rents receded 3.7 percent.

◆ Investment Forecast: Transaction velocity will pick up through the year as the pricing disconnect between sellers and investors narrows. Distress should remain low, and investor interest will center on core areas with steady, desirable demographics.

Limited Development in Clevelandto Slow the Rise in Vacancy

Cleveland Down 6 Places 2010 Rank: 32 2009 Rank: 26



Columbus Outperforms Most Midwestern Metros, but Distress Drags on Prices

ColumbusDown 8 Places 2010 Rank: 31 2009 Rank: 23

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The sturdy local economy has helped Columbus withstand the reces-sion better than most Midwestern markets. Despite budget shortfalls, government employment continues to provide stability to the Co-

lumbus economy. Additionally, gains persist in the education and health services sector, due primarily to the presence of Ohio State University and numerous private colleges, along with ongoing efforts by the local gov-ernment to encourage growth in the healthcare industry. A $1 billion ex-pansion of the Ohio State University Medical Center was approved late last year, which should bolster the Downtown submarket. The project will require 5,000 workers to build and is expected to add 6,000 direct jobs once completed in 2014. Hiring also could pick up this year in the metro’s large trade and transportation sector, stimulating renter demand, particularly in the Groveport submarket. Through the downturn, the area posted signifi -cant vacancy fl uctuations due to a high concentration of distribution/logis-tics operations around the Rickenbacker Intermodal Terminal.

Apartment sales in the Columbus metro area will remain limited this year, as local investors once again account for the bulk of activity. Cap rates have varied dramatically in recent quarters, and averages are diffi cult to pinpoint due to distressed sales involving lower-quality and/or poorly performing assets. Among the few stable properties currently listed, cap rates average in the mid-8 percent range. As 2010 progresses, foreclosures will garner more attention. Apartments account for the greatest share of commercial real estate distress in Columbus, and most of the assets in spe-cial servicing are at risk because of performance issues; therefore, loan ex-tensions may do little to resolve these challenges. The increase in distressed inventory will put additional downward pressure on prices, though inves-tors anticipating drastic cuts for better-performing assets in strong areas such as Dublin and Westerville may be disappointed, as many owners con-tinue to wait for a turnaround.

2010 Market Outlook

◆ 2010 NAI Rank: 31, Down 8 Places. Affordable home prices and an above-average vacancy rate caused Columbus to fall nine spots in the 2010 NAI.

◆ Employment Forecast: After 10,500 positions were cut last year, job growth will resume in Columbus in 2010 with local employers adding 4,500 new jobs, a 0.5 percent gain.

◆ Construction Forecast: Developers are expected to complete 450 apart-ments this year, down from 1,250 units in 2009.

◆ Vacancy Forecast: In 2010, vacancy will slip 10 basis points to 8.8 percent due to modest employment growth and reduced construction. Last year, vacancy increased 70 basis points.

◆ Rent Forecast: Asking rents are forecast to decline 2 percent to $646 per month this year, while effective rents will dip 2.6 percent to $597 per month.

◆ Investment Forecast: Aside from the general economy, community-spe-cifi c issues also can impact renter demand and, ultimately, values. Sig-nifi cant programming cuts at schools in Grove City, for instance, could further dampen renter demand, causing the area to lag in a recovery.

Market Forecast Employment: 0.5% ▲ Construction: 64% ▼ Vacancy: 10 bps ▼ Asking Rents: 2.0% ▼

2010 Annual Report


Market Forecast Employment: 2.3% ▲ Construction: 33% ▼ Vacancy: 40 bps ▲ Asking Rents: 0.4% ▲

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Although the Metroplex’s economy has begun its recovery, apartment fundamentals will continue to deteriorate in 2010 due to oversupply concerns and affordable home prices. Vacancy is forecast to hit a cy-

clical high, driving operators to widen concessions to nearly seven weeks of free rent by year end . The hyper-competitive submarkets that emerged in late 2009 are anticipated to transition into groups of adjacent areas com-peting for tenants. As job growth gains momentum, renters will be more willing to relocate to take advantage of deep discounts offered at Class A complexes near employment centers . In addition, the expansion of the fi rst-time homebuyer credit will entice some renters into ownership, freeing up top-tier units for traditional Class B renters. Backfi lling mid-tier units will prove more diffi cult, as employment in some blue-collar sectors will not gain traction until the second half of this year, making low-income resi-dents hesitant to take on higher rents, despite incentives.

Local buyers will begin to place capital that has accumulated over the past two years, while out-of-state owners exit the market before cap rates rise further. Investors are anticipated to trade up in the coming months, taking advantage of low interest rates and average fi rst-year yields that are expected to approach 9 percent . REO properties and well-located Class B assets, in particular, will attract local buyers who have existing relationships with area lenders/servicers. REITs and institutions, meanwhile, could be-gin to deploy capital into the Metroplex by midyear as vacancy in top-tier properties starts to stabilize and cap rates settle in the high-7 percent range.

2010 Market Outlook

◆ 2010 NAI Rank: 23, Up 6 Places. The Metroplex rose six spots in the NAI due to strong employment growth and moderating construction.

◆ Employment Forecast: After eliminating 66,000 spots in 2009, employers are anticipated to create 66,000 jobs this year, a 2.3 percent increase to payrolls. Nearly 12,000 professional and business services positions are expected to be added.

◆ Construction Forecast: Development activity will remain robust in 2010 as 7,800 units come online, expanding stock by 1.4 percent. Last year, 11,700 units were completed.

◆ Vacancy Forecast: Apartment vacancy is projected to rise 40 basis points this year to 9.5 percent. Core areas such as the Oaklawn/Uptown/CBD submarket will likely outperform as job growth resumes.

◆ Rent Forecast: In 2010, asking rents are forecast to increase 0.4 percent to $768 per month, while effective rents slip 0.9 percent to $677 per month as owners continue to widen concessions.

◆ Investment Forecast: The late arrival of the recession to the Metroplex has allowed owners to study its impact on apartment fundamentals in alternative metros. As a result, some operators facing deteriorating NOIs and refi nancing may preserve equity by selling assets in advance.

Local Buyers Expected to Lead Acquisitions in the Metroplex This Year

Dallas/Fort Worth Up 6 Places 2010 Rank: 23 2009 Rank: 29



Rising Buyer Momentum to Fuel Sales Velocity for Downtown Assets

DenverUp 6 Places 2010 Rank: 21 2009 Rank: 27

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Denver apartment fundamentals began to fi rm in late 2009, particu-larly downtown and in the western suburbs, setting the stage for fair-ly healthy operating conditions throughout much of the metro this

year. Payroll expansion should boost renter demand, but deliveries will slow only slightly, putting upward pressure on vacancy. This year’s com-pletions will exceed the metro’s fi ve-year average by more than 30 percent , increasing existing stock by 1.3 percent. The rise in vacancy will likely be concentrated in the eastern portions of the metro and should be relatively mild in properties located in the city. By the end of 2010, rentals in the city of Denver are expected to have vacancy rates that are as much as 100 basis points lower than the average rate in outlying areas. Despite the metro’s third consecutive year of rising v acancy, operators should be able to slow the pace of rent declines this year, especially in submarkets where vacancy is expected to stay below 10 percent.

Investor interest among large, private buyers, syndicates and institu-tions began to materialize in late 2009, a trend that will likely accelerate transaction velocity this year. Property prices have remained fairly steady over the past fi ve years, in sharp contrast to the boom-and-bust cycles that have occurred in some other major western metro areas. This stability will attract investors with buy-and-hold strategies, signaling to local investors that the market has likely reached a bottom. By the fourth quarter of last year, the average cap rate in Denver had risen to nearly 8 percent. Initial yields vary based on location and quality, however; properties in central Denver, for instance, can change hands with cap rates in the low-7 percent range, while the metro’s older Class C assets with higher vacancy rates of-ten trade with yields close to 9 percent.

2010 Market Outlook

◆ 2010 NAI Rank: 21, Up 6 Places. Forecasts for healthy employment growth pushed up Denver six places in the 2010 ranking.

◆ Employment Forecast: This year, employers are forecast to expand met-ro head counts by 1.1 percent with the creation of 13,000 jobs. In 2009, approximately 40,000 positions were eliminated.

◆ Construction Forecast: Completions will slow to 2,050 units in 2010, fol-lowing the delivery of roughly 2,550 apartments last year.

◆ Vacancy Forecast: Despite expanding local payrolls, the addition of new stock will push up vacancy 40 basis points this year to 9.6 percent. In 2009, steep job losses spurred a 160 basis point vacancy spike.

◆ Rent Forecast: Asking rents are expected to dip 1.2 percent in 2010 to $843 per month, while effective rents will fall 2 percent to $745 per month. Last year, asking and effective rents slipped 3.8 percent and 3.9 percent, respectively.

◆ Investment Forecast: Few distress opportunities will emerge this year, but some deeply discounted properties may come to market in North Aurora. Vacancy in the area is well above the metro average, and de-clines in retail and construction employment have led many local renters to double up.


2010 Annual Report



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Increased stabilization in the Detroit auto industry will result in lighter job losses this year, providing some relief to the local economy. A shift in resident sentiment may have an adverse effect on apartment fundamen-

tals, however, as some renters transition into the area’s inexpensive hous-ing market. As a result, vacancy will push higher in the fi rst part of 2010, particularly in the middle-class suburbs, due to government incentives to purchase homes. The Macomb County and Novi/Livonia submarkets will likely post the sharpest rises in vacancy in the fi rst six months of the year, while the Farmington Hills and Troy submarkets, where home prices re-main elevated, should record relatively stable rental conditions. The most signifi cant threat to Detroit fundamentals in the second half of 2010 could be the growing national job market, which may draw residents away from the metro.

Distressed assets will dominate the local apartment investment land-scape in 2010, though investment opportunities will vary by location. In the outlying suburbs of Macomb County, REO deals and loan sales will be favored by local investors with long-term hold strategies as a result of healthy population growth forecasts and discounted pricing. In the Pon-tiac/Waterford submarket, meanwhile, buyers should fi nd stabilized prop-erties that will outperform over the long term due to a projected 20 percent increase in the prime renter age cohorts over the next fi ve years, the largest rise in the metro. Elsewhere, a few rarely listed properties may come to market in Ann Arbor, home to the large University of Michigan student population. Risk-averse investors will target these assets, though cap rates in Washtenaw County are expected to be as much as 150 basis points below the marketwide average, which is forecast to surpass 10 percent in 2010.

2010 Market Outlook

◆ 2010 NAI Rank: 36, Down 1 Place. While vacancy in Detroit is expected to remain near the national average, the metro slipped one spot in the 2010 NAI due to the nation’s deepest job cuts.

◆ Employment Forecast: Led by losses in the manufacturing segment, em-ployers are expected to eliminate 14,000 jobs in Detroit this year, a 0.8 percent decline.

◆ Construction Forecast: With construction fi nancing scarce and few proj-ects penciling out, only 120 apartment units are anticipated to come on-line in 2010.

◆ Vacancy Forecast: As the local population continues to decrease, vacan-cy is forecast to rise 20 basis points to 7.9 percent by year end. In 2009, vacancy climbed 80 basis points.

◆ Rent Forecast: Asking rents will continue to decline, falling 2.4 percent this year to $789 per month, while effective rents will retreat 4.1 percent to $699 per month.

◆ Investment Forecast: Local owners with signifi cant accumulated equity may consider divesting in 2010 if considerable capital infusion is neces-sary within the next few years. A rebound in valuations will be slow in Detroit, limiting potential ROI for short-term holds.

Cap Rates Continue to Rise as Low-Cost Housing Dilutes Apartment Demand

Detroit Down 1 Place 2010 Rank: 36 2009 Rank: 35



Investment Redeployment OpportunitiesEmerge as Market Stabilizes

Fort LauderdaleDown 5 Places 2010 Rank: 39 2009 Rank: 34

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Owners of properties in Broward County will continue to face opera-tional challenges in the months ahead, although conditions will sta-bilize gradually as the year progresses. The pace of layoffs started to

diminish at the end of 2009 and will ease further this year, but vacancy is nonetheless expected to exceed 9 percent, and rents will drop for the second consecutive year. Vacancy will improve modestly in the Class A sector as foreclosures sustain a fl ow of former homeowners into rental housing. The presence of shadow stock, though, will likely prevent operators of high-end properties from raising rents considerably. Class B/C vacancy, meanwhile, has already increased to nearly 10 percent. While lower-tier vacancy may continue to climb, the most signifi cant spikes have already occurred, and operations could start to settle late in the year. The performance of Class B/C properties is poised to recover steadily once new households begin forming as a result of resumed job creation.

In the investment arena, transaction volume steadied last year after several periods of steep declines. Sales of a few lender-owned properties boosted activity, and additional fi nancially distressed assets are expected to sell in the months ahead as rising vacancy, declining rents and increasing concessions place further pressure on cash fl ows. Properties with sound operations in desirable coastal submarkets will attract greater interest from investors, who will likely be able to obtain agency debt to fi nance deals. Overall, many investors who purchase this year can realize potentially strong gains as a recovery in fundamentals takes hold. In addition, owners who have equity in properties may increasingly assess their portfolios to identify properties that do not meet their long-term objectives. By selling such assets, capital can then be redeployed into larger properties that will serve as long-term core holdings.

2010 Market Outlook

◆ 2010 NAI Rank: 39, Down 5 Places. Forecasts for persistent job cuts and deep rent declines pushed down Fort Lauderdale by fi ve places in the NAI.

◆ Employment Forecast: Approximately 2,200 job cuts are forecast in 2010, a 0.3 percent decline. Last year, employers trimmed 19,000 workers.

◆ Construction Forecast: Minimal apartment construction will occur in the near term, with only 300 units expected to be completed this year, fol-lowing the delivery of 432 apartments in 2009.

◆ Vacancy Forecast: Rental demand will remain weak in 2010, contribut-ing to an 80 basis point jump in the vacancy rate to 9.3 percent. Last year, vacancy spiked 160 basis points.

◆ Rent Forecast: Asking rents are projected to drop 4.4 percent to $1,008 per month this year, and effective rents are forecast to slide 5.2 percent to $929 per month.

◆ Investment Forecast: Cap rate trends will be diffi cult to identify due to an expected uptick in sales of distressed assets. Investors will underwrite stabilized properties for higher near-term vacancy and additional rent declines in 2010.


2010 Annual Report



The Houston economy will begin to improve this year after low oil prices and mass layoffs at area Fortune 500 companies weighed on the market in 2009. Nonetheless, the construction of new units will

outpace demand, pushing vacancy higher and widening concessions. This trend will be most prevalent in the Montrose/River Oaks submarket. In-ventory in the area is projected to expand by more than 6 percent, resulting in vacancy approaching 11 percent, up nearly 250 basis points from year-end 2009. Submarkets with relatively affordable home prices, such as Katy/Bear Creek and Montgomery County, also are expected to post signifi cant increases in vacancy in the coming months as tenants transition into ho-meownership. The Heights and Inwood/Northwest Houston submarkets, meanwhile, should outperform the metro due to their proximity to employ-ment centers and limited availability of housing alternatives for local resi-dents. In addition, high-growth Fort Bend County will attract job seekers, supporting demand for top-tier units.

The investment climate in Houston will continue to shift in the fi rst half of the year, as the buyer/seller expectations gap remains wide. Many potential buyers are waiting on the sidelines for signifi cantly discounted REO properties to come to market. These deals have been slow to material-ize, however, and fi re-sale prices have been absent. The largest discounts expected to emerge are in loan sales, which will continue to attract buyer interest this year. In the second half, a more traditional investment environ-ment will begin to surface, though deals will still require a considerable amount of cash due to tightened lending standards. Investors with a pen-chant for improving occupancy levels may want to target core locations, where recent rent cuts could result in some distressed sales.

2010 Market Outlook

◆ 2010 NAI Rank: 28, Up 4 Places. Strong hiring is expected to resume in Houston this year, driving up the metro four spots in the NAI.

◆ Employment Forecast: Job growth is anticipated to resume this year as payrolls expand by 54,000 positions, a 2.1 percent gain.

◆ Construction Forecast: After nearly 12,900 apartments came online last year, development is expected to slow to 5,600 units in 2010, expanding marketwide inventory by 1.2 percent.

◆ Vacancy Forecast: Despite a 0.8 percent increase in apartment demand, vacancy will tick up 30 basis points to 12.6 percent this year due to sup-ply additions. Last year, vacancy spiked 220 basis points.

◆ Rent Forecast: Asking rents are projected to fi nish 2010 at $737 per month, a 1.2 percent loss. Effective rents, meanwhile, are expected to re-treat 2.7 percent to $656 per month.

◆ Investment Forecast: The 2012 completion of the METRORail Green Line extensions will connect Texas Southern University and the University of Houston to the downtown core, creating demand for infi ll apartments near rail stations, as well as generating construction jobs.

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Energy Rebound Aiding Economic Recovery in Houston

Houston Up 4 Places 2010 Rank: 28 2009 Rank: 32



Job Growth Benefi ting Western Areas;Low Rents Boosting Eastern Submarkets

IndianapolisUp 4 Places 2010 Rank: 27 2009 Rank: 31

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While the effects of the recession on the Indianapolis apartment mar-ket are expected to linger into the fi rst half of 2010, renter demand will strengthen later in the year, leading to an improvement in va-

cancy. Healthy population growth, softening supply-side pressure and a comparatively quick recovery in the local labor market will be catalysts for a rebound in renter demand. Conditions are expected to be strongest in the Boone/Hendricks submarket; several growing industrial parks in Avon and along Interstate 65 will sustain a solid pool of renters, while population gains over the next fi ve years are anticipated to be some of the most sub-stantial in the metro. Absorption also will remain above-average in the East and Southeast submarkets, where low rents are attracting tenants. In ad-dition, minimal construction activity in these close-in eastern areas should keep vacancy rates below the metro average in the near term.

Elevated cap rates will maintain out-of-state investor interest in the In-dianapolis apartment market this year. First-year yields are forecast to rise into the mid-9 percent range by mid-2010 and will likely remain relatively stable through the end of the year. Local buyers face numerous hurdles, in-cluding tight credit and strict access to Fannie Mae and Freddie Mac fund-ing, as Indiana is a fi rst-review state for the lenders. Indianapolis-based buyers who remain active are expected to follow divergent strategies. Some will focus on older-vintage assets near the downtown area, where the job market is stable and the renter pool is composed primarily of young profes-sionals and students. Other local investors will seek newer complexes in outlying areas; many of these properties were purchased during the price run-up and now face fi nancial hurdles amid weakened conditions, making them more susceptible to considerable discounting this year. Regional buy-ers, meanwhile, will likely target stabilized Class A assets across the metro in a fl ight to safety.

2010 Market Outlook

◆ 2010 NAI Rank: 27, Up 4 Places. Healthy employment growth and mini-mal additions to inventory pushed up Indianapolis four places in this year’s ranking.

◆ Employment Forecast: Driven by gains in the professional and business services and government sectors, employers in Indianapolis are expected to add 9,000 jobs this year, increasing payrolls by 1 percent.

◆ Construction Forecast: Following the completion of nearly 1,460 apart-ment units last year, deliveries are projected to ease to 370 units in 2010.

◆ Vacancy Forecast: Vacancy is forecast to reach 9.2 percent this year, 20 basis points lower than in 2009, when the rate jumped 170 basis points.

◆ Rent Forecast: Asking rents are projected to end 2010 at $637 per month, while effective rents will reach $593 per month, annual declines of 1.8 percent and 2.5 percent, respectively.

◆ Investment Forecast: Buyers with extended hold strategies may fi nd op-portunities in the southern portion of the metro. The completion of work on the new Interstate 69 will draw employers to the Southwest/Johnson County submarket in the coming years, generating renter demand.


2010 Annual Report



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The wave of construction completed over the past three years will con-tinue to affect property fundamentals in the Jacksonville market. In 2009, the delivery of 2,000 units contributed to a 170 basis point jump

in vacancy. Supply has increased much faster than demand, especially in the North Jacksonville and Arlington submarkets, both of which posted vacancy of around 20 percent last year. No new projects are scheduled to be delivered in these areas in 2010, but limited demand will sustain high va-cancy rates. While supply growth has been a driver behind the recent rise in metrowide vacancy, trends have started to shift, as completions will decline this year. Also, permitting fell more than 30 percent in 2009 and is projected to retreat further in 2010 due to lingering weakness in demand generators. Any pause in building activity will provide owners an opportunity to fi ll vacant units as demand begins to recover.

Investment activity will pick up over the course of 2010 as buyers identify prospects and many owners either develop disposition strategies or seek to expand local portfolios. Cap rates average in the mid-9 percent range and will likely creep closer to 10 percent as vacancy remains elevated and cash fl ows stay under pressure. At current cap rates levels, experienced operators are likely to fi nd opportunities below replacement costs this year and will be able to ride up values as the recovery in operating conditions gathers momentum. Financially distressed assets will likely come to mar-ket more frequently, allowing owners of fundamentally sound properties to redeploy capital into discounted assets. Investors who purchase in the current market should realize strong equity growth as the burn-off of con-cessions and improvements in occupancy bolster NOIs in 2011 and 2012.

2010 Market Outlook

◆ 2010 NAI Rank: 44, Down 1 Place. Jacksonville is forecast to have the highest apartment vacancy rate in the country this year, and employers will continue to trim payrolls, pushing the metro to the bottom of the NAI.

◆ Employment Forecast: In 2010, employers will ease the pace of job cuts, as 3,000 positions are expected to be eliminated, a 0.5 percent decline. Last year, 19,000 jobs were shed.

◆ Construction Forecast: Developers added 2,000 units in 2009 but will slow production to 1,000 units this year.

◆ Vacancy Forecast: Supply growth and soft demand are expected to push up the vacancy rate 60 basis points in 2010 to 14.5 percent, after vacancy jumped 170 basis points last year.

◆ Rent Forecast: Asking rents are forecast to fall 4.1 percent to $747 per month this year. Effective rents are projected to slip 5.3 percent to $693 per month.

◆ Investment Forecast: More fi nancially distressed properties will come to market in 2010. Refi nancing may prove challenging for owners of assets purchased from 2004 to 2007, which could result in sales at discounts.

Investors Focus on DistressedOpportunities as Supply Hangover Persists

Jacksonville Down 1 Place 2010 Rank: 44 2009 Rank: 43



As Foreclosures Ebb in Kansas City,Investors Target Stabilized Assets

Kansas CityDown 8 Places 2010 Rank: 24 2009 Rank: 16

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Despite projections for reduced completions and modest job growth this year, key metrics in the Kansas City apartment market are ex-pected to soften, led by weakness in the upper tier. In 2009, Class A

vacancy rates improved in most submarkets, as uncertainty in the housing market kept renters in their units. Class B/C occupancy levels fell, how-ever, with many renters opting to double up to control costs. These trends will likely continue through 2010, though the solid performance in the top tier may be less pronounced due to persistent competition from shadow stock. For-rent condos will pose the largest threat in the Downtown/East Kansas City submarket, where for-sale building was concentrated in recent years. As a result, the submarket is forecast to post above-average rent de-clines and heightened concessions in 2010 as apartment operators attempt to maintain occupancy levels.

While underwriting has historically been conservative in Kansas City, the number of foreclosures increased in the second half of 2009, driving healthier transaction velocity than in other regional metros. Foreclosures are expected to subside this year, however, keeping cap rates in the high-8 percent range. Cash-heavy buyers will likely target larger, stabilized assets in areas with tight vacancy levels and minimal concessions, such as Lee’s Summit or the Plaza. Investors with high risk tolerance may fi nd opportu-nities in submarkets where fundamentals started to weaken just recently, like Southwest Kansas City and North Kansas City. First-year returns in these areas remain above the metro average and are forecast to tick higher in 2010 due to rising vacancy rates.

2010 Market Outlook

◆ 2010 NAI Rank: 24, Down 8 Places. Above-average vacancy and high housing affordability lowered Kansas City eight spots in this year’s NAI.

◆ Employment Forecast: Hiring in the local labor market is anticipated to gain steam in the second half of 2010, after employers posted signifi cant losses last year. Payrolls are expected to increase by 7,000 jobs this year, a 0.7 percent expansion.

◆ Construction Forecast: Approximately 350 units are slated to come on-line in 2010, following the addition of 910 units last year.

◆ Vacancy Forecast: Despite easing supply-side pressure, job cuts through the fi rst half will hinder demand. As such, metrowide vacancy is forecast to reach 8.9 percent this year, 20 basis points higher than in 2009, when vacancy jumped 100 basis points.

◆ Rent Forecast: Asking rents are projected to recede 1.8 percent from last year to $673 per month, while effective rents will slip 1.9 percent to $624 per month.

◆ Investment Forecast: Investors with extended hold strategies may fi nd opportunities in the Gladstone/Liberty submarket. Population and household growth in the area are forecast to expand at rates exceeding their respective metro averages over the next fi ve years, supporting rent-er demand.


2010 Annual Report



An economic recovery in Las Vegas will be slow to materialize due to the battered housing market and the metro’s dependence on con-sumer spending. Softened spending will limit hiring in services-ori-

ented industries, particularly real estate, hospitality and retail. Consequent-ly, renter demand will remain weak until a more substantial economic rebound begins to take shape in 2011. Moreover, ongoing housing troubles have produced a surplus of shadow stock, creating competition for apart-ment operators. As a result, vacancy is forecast to nearly double the long-term average this year, forcing owners to cut rents further. The North sub-market will remain one of the hardest-hit areas in the metro; the submarket has received more than one-third of all new apartment supply over the past fi ve years and will register the most severe supply/demand imbalance in 2010, with vacancy forecast to exceed 18 percent.

Distressed and REO asset sales will have a considerable impact on ve-locity and valuations this year as more owners face operational challenges and a greater number of complexes fall into foreclosure. With market prices declining below sellers’ strike prices and buyers searching for bargains, the pricing disconnect remains wide. New economic and capital market reali-ties, however, will begin to narrow the gap as the year progresses and sell-ers become pressured to shrink portfolios. Weak sales activity in 2009 left investors uncertain of realistic cap rates and values, but as troubled assets begin to trade more frequently this year, a pricing fl oor will emerge. Cap rates averaged in the mid-8 percent range for quality assets in 2009, with lower-grade complexes in double-digit territory . In 2010, cap rates could rise as much as 100 basis points depending on quality and location.

2010 Market Outlook

◆ 2010 NAI Rank: 43, Up 1 Place. Forecasts for weak job growth, rising vacancy and steep rent declines caused Las Vegas to remain near the bottom of this year’s ranking.

◆ Employment Forecast: Following the loss of 57,000 jobs last year, local employers are forecast to add 2,500 positions in 2010, or a 0.3 percent gain to metrowide payrolls.

◆ Construction Forecast: Completions are expected to total 990 apartments this year, down from 2,500 units in 2009.

◆ Vacancy Forecast: Expanding rental stock and tepid household forma-tion will push up vacancy 70 basis points to 12 percent in 2010, after vacancy jumped 320 basis points last year.

◆ Rent Forecast: Asking rents are expected to reach $782 per month this year, 4.8 percent lower than in 2009, while effective rents will drop 6.6 percent to $708 per month.

◆ Investment Forecast: Maturing debt will cause many owners to bring apartments to market over the next three years, though few stabilized properties will likely emerge as some operators attempt to hold out until fundamentals begin to fi rm. Assets with debt coming due in that time will have to be discounted to meet buyers’ demands and risk tolerance.

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Las Vegas Recovery to Lag Nation;Increases Pressure on Fragile Operations

Las Vegas Up 1 Place 2010 Rank: 43 2009 Rank: 44



Los AngelesUp 2 Places 2010 Rank: 13 2009 Rank: 15

Sales Velocity Gaining Momentum as Cap Rates Tick Higher

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Following two years of deep employment contractions, employers are expected to expand payrolls minimally in Los Angeles County in 2010. Cuts will continue in the retail and construction sectors, how-

ever, which will push vacancy higher, particularly in the San Fernando Val-ley. Apartment vacancy in some parts of the Valley hit the mid-6 percent range in 2009 and could approach 8 percent by the end of this year. Space demand will stay relatively steady in the Westside Cities, although owners will likely have to trim rents further to retain tenants. Conditions will re-main softest in the county’s Class A assets, as economic weakness has driv-en some renters to move into less expensive units to cut costs, while other tenants have chosen to transition into shadow stock or purchase homes due to increased affordability.

Investment activity in Los Angeles County gained momentum during the fourth quarter of last year as buyers sought to acquire institutional-grade assets that rarely change hands. Cap rates range between 6 percent and as high as 7.5 percent for older Class C assets or properties in less de-sirable locations. While distress is not expected to play a signifi cant role in sales activity this year, buyers may fi nd some discounted opportunities in the San Fernando Valley. Assets in the area could present attractive long-term upside potential, as metro-leading population growth over the next fi ve years ultimately will support renter demand and revenue gains.

2010 Market Outlook

◆ 2010 NAI Rank: 13, Up 2 Places. Los Angeles rose two spots in this year’s index due to forecasts for continued low vacancy and slight job gains.

◆ Employment Forecast: The local employment market is expected to re-main soft in the fi rst few months of 2010 before stabilizing in the second half. Following a loss of 115,000 jobs in 2009, payrolls are forecast to ex-pand by 0.3 percent this year, with the addition of 13,000 positions.

◆ Construction Forecast: Rental completions will slow to 1,550 units in 2010, a 0.2 percent addition to inventory. Approximately 800 apartments are expected to come online in the San Fernando Valley.

◆ Vacancy Forecast: Vacancy is forecast to tick up 20 basis points this year to 6 percent in response to ongoing stock additions.

◆ Rent Forecast: Lingering high unemployment will continue to pressure owners to lower rents. Asking rents are expected to fall to $1,335 per month in 2010, while effective rents will slip to $1,263 per month, respec-tive declines of 2.8 percent and 3.6 percent annually.

◆ Investment Forecast: Rising international trade may support renter and investor demand for apartments in the South Bay/Long Beach area this year . Imports and exports accelerated in late 2009, and further increases are likely as the recession ends and global consumption gains momen-tum. After contracting last year, a growing level of container traffi c at the Port of Long Beach could drive absorption and revenue growth at nearby propertie s throughout 2010.


2010 Annual Report



Louisville apartment vacancy will decline in 2010 as sturdy housing demand persists and construction activity slows considerably. Ad-ditionally, many local businesses will begin rehiring this year. The

opening of the U.S. Census Bureau’s Jeffersonville offi ce and Ford’s plans to relocate its Kuga SUV-manufacturing operations to Louisville could create more than 3,000 new jobs. The added positions would increase the number of renter households in the metro’s core and the Jeffersonville and South Central submarkets, boosting area occupancy levels. In the Northeast Jefferson County submarket, meanwhile, the metro’s highest asking rents will decline slightly through the fi rst half, though vacancy will stabilize due to a lack of competing suburban Class A product. Similarly, marketwide asking rents will continue to drop as the year progresses; however, mod-est late-year rent growth is likely in some submarkets. On the supply side, inventory expansion will slow further in 2010, with just 50 units expected to come online.

Economic headwinds have had a modest impact on investment activ-ity in Louisville, as the number of sales has remained low but consistent over the past three years. In 2010, investor demand will likely continue to outweigh the availability of operationally sound apartment properties. As owners of top-tier complexes are most reluctant to market their assets, ac-tivity is projected to be greatest among Class B/C properties constructed in the 1970s. In this segment, cap rates in the high-8 percent to mid-9 percent range will attract experienced local buyers who began increasing their ac-tivity in 2009. Also, the limited number of newer assets within Jefferson County may increase investor interest in properties in Oldham, Shelby and Clark counties.

2010 Market Outlook

◆ 2010 NAI Rank: 15, Down 5 Places. Despite minimal forecast comple-tions, high housing affordability and widening concessions caused Lou-isville to drop fi ve spots in the NAI.

◆ Employment Forecast: With employment growth accelerating in the sec-ond half of the year, businesses are forecast to add 5,000 jobs in 2010, expanding Louisville payrolls by 0.8 percent. In 2009, roughly 21,700 workers were let go in the metro.

◆ Construction Forecast: After 650 units were added to apartment inven-tory last year, just 50 units are slated for completion in 2010.

◆ Vacancy Forecast: Vacancy will fall 20 basis points this year to 7.1 per-cent. In 2009, vacancy increased 30 basis points.

◆ Rent Forecast: In 2010, asking rents are forecast to slip 0.3 percent to $637 per month, and effective rents are expected to decrease 1 percent to $599 per month. Asking rents declined 1.1 percent last year, while effective rents receded 2.3 percent.

◆ Investment Forecast: Modest cap rate increases are anticipated in Jef-fersonville this year, as resilient revenue growth will maintain elevated investor interest and keep competition high for these assets.

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Sale Activity Constrained as Many Owners Hold Assets Through Downturn

Louisville Down 5 Places 2010 Rank: 15 2009 Rank: 10



Miami-Dade Continues to Stabilizeon Strength of Class B/C Properties

MiamiUp 3 Places 2010 Rank: 25 2009 Rank: 28

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Despite upheaval in the housing market and the loss of more than 60,000 jobs during the recession, Miami-Dade County apartments have demonstrated signifi cant resilience, with vacancy averaging in

the low-6 percent range. The county’s high proportion of Class B/C rentals remains well-suited for a large population of service-industry workers. Tra-ditionally strong Class B/C submarkets such as Hialeah and North Miami/Bayshore have faltered somewhat through the downturn but still post va-cancy rates of less than 5 percent. Rents will recover quickly in both areas as demand strengthens during the early stages of an economic rebound. Shad-ow stock will continue to constitute a competitive force in other parts of the county. To date, a glut of condos downtown has most adversely affected Class A rentals in adjacent submarkets, including North Miami Beach/Bal Harbour. Class A vacancy in these areas will creep closer to 10 percent this year, and concessions will remain elevated.

Investment activity reverted to a more sustainable level last year as the buyer/seller expectations gap narrowed, a trend that will persist through the early part of 2010. Cap rates ended 2009 at approximately 8.5 percent, and rates generally ranged higher for lesser-quality properties. This year, average cap rates are expected to settle near 9 percent. In addition, while some fi nancially distressed assets came to market last year, a greater num-ber will become available in 2010 as lenders seek to avoid assuming the daily responsibilities of operating rental complexes. Discounted, fi nancially distressed properties will provide investors with opportunities that may not reappear for some time, while also pushing down the marketwide median price. Although a recovery may not gain signifi cant momentum until next year, current owners could be able to redeploy their equity into other assets in 2010 that can provide signifi cant returns as tenant demand rebounds.

2010 Market Outlook

◆ 2010 NAI Rank: 25, Up 3 Places. Supported by forecasts for relatively tight vacancy and only a modest increase in inventory, the Miami metro rose three places in the 2010 NAI.

◆ Employment Forecast: Employers are forecast to cut 3,000 jobs this year, a 0.3 percent decline but an improvement from 2009, when 27,000 work-ers were let go.

◆ Construction Forecast: Approximately 500 units will be added to rental stock in 2010, up from 340 units last year. Unsold condos being used as rentals represent the most signifi cant source of competitive supply.

◆ Vacancy Forecast: After climbing 130 basis points in 2009, vacancy in the county is forecast to rise 50 basis points this year to 6.8 percent.

◆ Rent Forecast: In 2010, asking rents are projected to fall 3 percent to $1,010 per month. Effective rents are forecast to decline 3.5 percent to $935 per month.

◆ Investment Forecast: Long-term owners may increasingly redeploy eq-uity into deeply discounted properties in anticipation of the uptick in interest rates that typically accompanies an economic recovery.


2010 Annual Report



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While apartment fundamentals in Milwaukee are expected to remain some of the healthiest in the Midwest, conditions in local Class C properties will weaken in 2010 as owners backfi ll vacant units.

Shadow stock has emerged as a signifi cant concern, especially in the City East submarket, where condo construction was concentrated in recent years. Older-vintage units will be hit hard by these pressures, as many newer condos are being offered at rental rates comparable to apartments. In addition, some residents once employed in blue-collar industries will continue to conserve capital by doubling up into Class C units, resulting in weaker operations in this tier. As for new supply, deliveries will acceler-ate from 2009, and with more builders beginning to seek available sites in preparation for strengthened fundamentals, construction activity will re-main elevated through 2011.

Despite softening in 2009, conditions in the local apartment market have been sturdier than those in many Midwestern metros in recent years. As such, many owners have opted to retain assets. This marketwide sta-bility also has restricted the number of distressed or foreclosed listings, keeping some small, local buyers on the sidelines in anticipation of deep discounts that are not likely to materialize. Larger investors will continue to drive activity this year, targeting Class B assets in close-in suburbs like the City West and Wauwatosa/West Allis submarkets, where competi-tion from shadow stock and single-family housing is modest and renter demand remains stable. With sales activity metrowide projected to stay conservative through 2010, cap rates will continue to average in the high-7 percent to low-8 percent range.

2010 Market Outlook

◆ 2010 NAI Rank: 17, Down 5 Places. Forecasts for slight job losses and persistent rent declines pushed down Milwaukee fi ve spots in the NAI, despite tight vacancy levels.

◆ Employment Forecast: Cuts in the professional and business services sector are projected to drive a marketwide loss of just 1,000 positions this year, or a decline in total employment of 0.1 percent.

◆ Construction Forecast: Nearly 470 units are slated to come online in 2010, expanding inventory by 0.5 percent.

◆ Vacancy Forecast: Vacancy is forecast to reach 5.5 percent this year, up 30 basis points from 2009.

◆ Rent Forecast: Asking rents are expected to fall 2.4 percent to $784 per month in 2010, while effective rents will decrease 2.9 percent to $743 per month, returning concessions to 2004 levels.

◆ Investment Forecast: Buyers are increasingly targeting affordable hous-ing projects, where renter demand remains stable due to ongoing job losses. The Wisconsin Housing and Economic Development Authority recently approved $20 million for the construction of affordable housing complexes in Milwaukee, however, which will increase competition for these properties in the coming years.

Shadow Stock Emerging Threat, but Close-in Suburbs Retain Strong Investor Interest

Milwaukee Down 5 Places 2010 Rank: 17 2009 Rank: 12



Minneapolis-St. PaulDown 1 Place 2010 Rank: 4 2009 Rank: 3

Diverse Employment Fueling EconomicResilience, but Rents Remain Soft

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Supported by its diverse employment base, the Minneapolis-St. Paul economy is poised to be one of the fi rst metros in the Midwest to emerge from the recession. While projected job gains in 2010 will lead

to vacancy improvements, marketwide rents will continue to decrease. With metro residents becoming more cost-conscious, owners in outlying areas like the West and Washington County submarkets will enact signifi -cant asking and effective rent cuts this year to attract renters. Stable asking rents are anticipated in inner-ring suburbs such as Edina and St. Louis Park, as well as growing live/work corridors, including the Uptown neighbor-hood in Minneapolis and Maryland Park in St. Paul, due to solid demand from young professionals. In fact, interest from this cohort will offset sup-ply-side pressure, as more than 70 percent of this year’s completions are located in these areas.

Transaction velocity slowed in 2009, as few properties came to market and most buyers were waiting for signifi cant foreclosure-driven discounts that failed to materialize. Listings should increase this year as more owners attempt to divest assets in order to position themselves for future growth, which will result in some investors re-entering the market. While the num-ber of distressed properties is projected to remain modest in 2010, attractive pricing will continue to draw interest from local investors seeking previ-ously unattainable assets in prime suburban areas. Initial yields metrowide are forecast to rise to the mid-8 percent range as the expectations gap nar-rows, although the increase will be more moderate in close-in areas like the Southwest and Minneapolis submarkets due to strong demand.

2010 Market Outlook

◆ 2010 NAI Rank: 4, Down 1 Place. The Twin Cities are forecast to have one of the lowest vacancy rates in the country and strong job growth this year, keeping the metro near the top of the NAI.

◆ Employment Forecast: Led by gains in the education and health services sector, metro payrolls are expected to increase 1.3 percent in 2010 with the creation of 22,000 positions.

◆ Construction Forecast: Developers are slated to complete nearly 480 apartment units this year, a 0.3 percent inventory expansion. In 2009, roughly 545 units came online.

◆ Vacancy Forecast: Metrowide vacancy is forecast to end 2010 at 5 per-cent, a 10 basis point improvement from last year.

◆ Rent Forecast: Owners will continue to reduce asking rents to maintain occupancy levels while keeping concessions relatively modest. Asking rents are expected to fall 2.3 percent this year to $908 per month, and ef-fective rents are projected to dip 2 percent to $854 per month.

◆ Investment Forecast: The St. Paul submarket is anticipated to post tight conditions in the coming years. Several large employers recently moved into the area, which will bolster near-term renter demand. Tenant de-mand over the long term, meanwhile, will be generated by the Central Corridor line, which will ease commutes and facilitate a vibrant live/work corridor.


MSA Name Atlanta Austin Boston Charlotte Chicago Cincinnati Cleveland Columbus Dallas/Fort Worth Denver Detroit Fort Lauderdale Houston Indianapolis Jacksonville Kansas City Las Vegas Los Angeles Louisville Miami Milwaukee Minneapolis-St. Paul New Haven New Jersey New York City Oakland Orange County Orlando Philadelphia Phoenix Portland Riverside-San Bernardino Sacramento Salt Lake City San Antonio San Diego San Francisco San Jose Seattle St. Louis Tampa Tucson Washington, D.C. West Palm Beach



Statistical

* Estimate ** Forecast 2 See Statistical Summary Note on page 59.

Employment Vacancy Asking Rent Growth2 (Year-End)2 (Year-End)2

07 08 09* 10** 0.8% -3.8% -4.4% -0.2% 3.3% 1.3% -0.8% 2.5% 1.3% -1.4% -2.3% 0.9% 3.2% -3.3% -4.8% 1.0% 0.6% -2.4% -3.4% 0.7% 1.3% -2.0% -3.4% 0.5% -0.3% -3.1% -4.5% -0.2% 0.8% -1.4% -1.1% 0.5% 2.6% 0.1% -2.2% 2.3% 2.2% -1.9% -3.3% 1.1% -1.8% -5.8% -5.7% -0.8% -0.3% -4.5% -2.5% -0.3% 3.5% 0.9% -2.9% 2.1% 1.4% -2.3% -2.4% 1.0% -0.2% -3.8% -3.1% -0.5% 1.0% 0.0% -2.0% 0.7% 0.9% -3.9% -6.4% 0.3% 0.4% -3.4% -2.9% 0.3% 0.7% -2.4% -3.6% 0.8% 1.0% -3.4% -2.6% -0.3% 0.0% -2.2% -5.8% -0.1% 0.1% -2.2% -2.8% 1.3% 0.7% -2.5% -3.3% 0.2% 0.4% -1.8% -2.8% 0.5% 1.8% -0.7% -2.8% 0.8% 0.4% -3.8% -3.1% -0.2% -1.0% -3.8% -3.4% 0.8% 1.1% -3.6% -4.2% -0.1% 0.5% -1.6% -2.3% 0.7% 0.7% -5.8% -6.2% 0.7% 1.3% -2.2% -4.4% 1.4% -0.2% -6.1% -5.1% 0.6% -0.1% -4.1% -3.9% -0.1% 2.7% -1.0% -3.8% 1.8% 3.2% 0.6% -0.7% 2.6% 0.2% -1.9% -4.1% 1.0% 2.0% -1.6% -4.8% 0.5% 2.0% -1.7% -3.9% 0.5% 3.0% -1.6% -3.2% 1.6% 0.5% -1.4% -3.1% 0.7% -1.3% -3.7% -4.2% -0.3% 0.0% -3.3% -4.2% 0.4% 0.8% -0.4% -0.8% 1.2% -1.6% -4.2% -2.8% -0.4%

07 08 09* 10** $844 $862 $825 $800 $835 $870 $844 $849 $1,680 $1,742 $1,670 $1,619 $779 $798 $761 $742 $1,046 $1,071 $1,033 $1,010 $692 $710 $692 $679 $728 $739 $715 $698 $664 $677 $659 $646 $763 $786 $765 $768 $867 $887 $853 $843 $834 $835 $808 $789 $1,112 $1,115 $1,054 $1,008 $738 $769 $746 $737 $663 $675 $649 $637 $795 $799 $779 $747 $688 $701 $685 $673 $854 $865 $821 $782 $1,426 $1,463 $1,374 $1,335 $628 $646 $639 $637 $1,116 $1,104 $1,041 $1,010 $831 $841 $803 $784 $935 $957 $929 $908 $1,566 $1,593 $1,521 $1,497 $1,279 $1,308 $1,269 $1,247 $2,850 $2,879 $2,688 $2,647 $1,360 $1,402 $1,281 $1,241 $1,537 $1,571 $1,463 $1,414 $876 $890 $842 $806 $1,001 $1,023 $1,002 $985 $773 $777 $748 $729 $800 $825 $803 $775 $1,057 $1,058 $1,006 $969 $962 $966 $919 $881 $724 $752 $732 $719 $684 $701 $685 $685 $1,298 $1,344 $1,306 $1,308 $1,861 $1,934 $1,757 $1,699 $1,647 $1,674 $1,477 $1,446 $962 $1,014 $955 $928 $717 $729 $708 $694 $829 $843 $797 $767 $637 $651 $632 $611 $1,316 $1,364 $1,332 $1,337 $1,113 $1,109 $1,061 $997

07 08 09* 10** 8.2% 10.3% 11.3% 11.6% 6.7% 7.7% 11.0% 10.6% 5.7% 6.0% 6.6% 6.8% 6.0% 8.2% 11.2% 11.5% 4.8% 5.4% 7.0% 7.3% 7.0% 6.8% 7.8% 8.1% 5.6% 6.0% 7.0% 7.3% 7.3% 8.2% 8.9% 8.8% 6.1% 7.3% 9.1% 9.5% 6.9% 7.6% 9.2% 9.6% 6.4% 6.9% 7.7% 7.9% 5.5% 6.9% 8.5% 9.3% 8.8% 10.1% 12.3% 12.6% 8.3% 7.7% 9.4% 9.2% 9.9% 12.2% 13.9% 14.5% 6.7% 7.7% 8.7% 8.9% 6.1% 8.1% 11.3% 12.0% 3.6% 4.5% 5.8% 6.0% 7.2% 7.0% 7.3% 7.1% 4.0% 5.0% 6.3% 6.8% 4.1% 3.7% 5.2% 5.5% 4.1% 4.4% 5.1% 5.0% 4.1% 4.1% 4.5% 4.8% 3.4% 3.9% 5.2% 5.4% 2.1% 2.3% 3.5% 3.4% 5.1% 5.3% 7.0% 7.2% 3.7% 5.1% 6.9% 6.7% 7.2% 10.0% 10.6% 11.2% 4.2% 5.7% 6.5% 6.6% 8.3% 11.1% 12.3% 12.6% 4.2% 5.2% 6.8% 7.0% 6.3% 7.0% 9.4% 9.8% 6.5% 7.2% 8.0% 8.6% 4.3% 5.0% 6.5% 6.9% 6.6% 9.0% 10.9% 10.4% 3.7% 4.1% 5.2% 5.4% 3.9% 3.6% 5.1% 5.4% 3.9% 5.2% 5.7% 5.5% 4.4% 5.8% 7.9% 8.4% 6.8% 7.8% 9.4% 9.1% 6.9% 8.7% 10.5% 10.8% 8.2% 11.0% 12.5% 12.7% 5.1% 5.5% 6.7% 6.5% 8.0% 7.9% 8.8% 9.6%

MSA NameAtlantaAustinBoston

CharlotteChicago

CincinnatiClevelandColumbus

Dallas/Fort WorthDenverDetroit

Fort LauderdaleHouston

IndianapolisJacksonvilleKansas City

Las VegasLos Angeles

LouisvilleMiami

MilwaukeeMinneapolis-St. Paul

New HavenNew Jersey

New York CityOakland

Orange CountyOrlando

PhiladelphiaPhoenixPortland

Riverside-San BernardinoSacramento

Salt Lake CitySan Antonio

San DiegoSan Francisco

San JoseSeattle

St. LouisTampaTucson

Washington, D.C.West Palm Beach



Summary

* Estimate ** Forecast 2 See Statistical Summary Note on page 59.

Median Sales Price Completionsper Unit2 (Units)2

07 08 09* 10** 5,040 5,088 3,600 1,500 4,311 4,836 7,900 2,500 5,119 4,004 3,300 1,000 2,418 2,373 3,800 1,200 669 2,195 2,059 1,226 228 170 644 556 256 144 56 240 297 204 1,250 450 6,910 10,066 11,662 7,800 478 1,795 2,550 2,050 346 280 230 120 512 522 432 300 8,068 12,764 12,860 5,600 472 372 1,459 368 1,538 1,862 2,000 1,000 1,337 497 911 352 2,721 3,085 2,500 990 3,940 5,155 1,750 1,550 571 240 644 50 0 507 340 500 69 91 261 467 528 1,054 545 478 439 511 281 450 3,625 1,398 1,228 2,429 2,823 1,997 1,848 3,651 335 2,002 1,250 760 2,265 1,520 3,800 1,000 1,417 3,149 1,300 600 643 1,323 500 1,000 5,510 4,329 4,633 1,794 667 1,472 1,481 482 2,550 440 1,259 520 780 168 0 100 308 369 1,502 1,200 3,323 1,663 3,700 1,900 923 935 541 1,100 657 281 452 625 690 861 0 250 2,442 2,669 4,150 2,600 164 228 503 103 662 2,352 1,400 1,000 137 0 288 0 7,884 6,130 5,700 4,746 297 207 0 400

07 08 09* $66,578 $55,556 $40,242 $69,222 $61,462 $56,044 $82,143 $74,175 $75,000 $62,292 $69,063 $30,172 $79,861 $78,499 $55,682 $36,304 $36,062 $36,558 $34,401 $34,028 $34,363 $39,474 $41,896 $41,176 $41,578 $36,765 $27,885 $62,805 $59,782 $62,500 $42,180 $37,797 $28,591 $92,857 $81,250 $73,750 $36,837 $34,318 $35,037 $50,629 $41,518 $30,483 $48,780 $50,754 $34,161 $44,559 $42,254 $37,584 $84,500 $66,667 $63,793 $137,049 $133,767 $128,500 $43,466 $40,779 $39,993 $88,542 $79,722 $71,703 $55,698 $56,167 $50,000 $65,058 $60,000 $59,300 $71,465 $70,833 $70,385 $87,500 $83,333 $72,045 $137,500 $125,641 $114,792 $141,250 $125,000 $116,188 $156,667 $139,409 $140,000 $69,129 $67,222 $41,667 $71,434 $69,607 $68,654 $68,537 $57,446 $42,083 $70,497 $71,786 $70,690 $103,958 $90,455 $69,598 $81,318 $80,078 $75,000 $80,000 $71,825 $68,058 $46,935 $42,994 $22,682 $125,000 $119,517 $115,000 $214,385 $205,000 $183,167 $155,833 $169,348 $131,250 $118,817 $116,875 $104,643 $56,550 $43,878 $56,522 $65,000 $58,438 $54,671 $48,678 $51,923 $42,425 $121,250 $94,000 $86,857 $102,428 $85,000 $81,633

2010 Annual Report


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Market Forecast Employment: 0.2% ▲ Construction: 61% ▲ Vacancy: 30 bps ▲ Asking Rents: 1.6% ▼

This year’s slow rebound in hiring, particularly in the professional and business services and trade, transportation and utilities sectors, will continue to dampen apartment fundamentals in southwestern Con-

necticut. Nevertheless, modest historical rent increases and average inven-tory growth of just 1.1 percent annually over the past fi ve years have led to pent-up renter demand in many submarkets. In New Haven Harborside and North Haven/Wallingford/Meriden, for example, slight vacancy im-provements are projected to persist in 2010, which should allow rent reduc-tions in these areas to taper off by midyear. Alternately, owners in Fairfi eld County will continue to rely on concessions due to elevated rents. The larg-est rent cuts have already occurred in the county, and modest job creation will cause rent discounts to ease further as the year progresses. Construc-tion will increase to an uncharacteristic high of 450 units in 2010. Comple-tions will be limited to the New Haven core, however, where vacancy is the tightest in the metro area and unoccupied units fi ll quickly.

Continuing a trend that began during the second half of 2009, velocity will accelerate in 2010, though the number of sales will remain well below peak levels. Buyers will be most active in New Haven and lower Fairfi eld County due to their historically strong rental demand and large concentra-tions of employers. Investment activity also will increase in the Walling-ford/Meriden submarket, given the resiliency of area operating fundamen-tals through even the worst of the recession. In Bridgeport, expectations for still-soft rent and vacancy trends will likely limit an upswing in buying activity this year, though the possibility of cap rates nearing 9 percent will maintain some investor interest.

2010 Market Outlook

◆ 2010 NAI Rank: 14, Down 7 Places. Employment growth in New Haven is forecast to lag the national average, causing the metro to fall seven places in the index, despite low overall vacancy.

◆ Employment Forecast: Employers are forecast to increase head counts in the New Haven metro area by 1,600 positions in 2010, or 0.2 percent, after shedding 26,700 jobs last year.

◆ Construction Forecast: Construction output is expected to increase to 450 units this year, following the completion of 280 apartments in 2009.

◆ Vacancy Forecast: In 2010, limited job growth and the delivery of new stock will contribute to raising vacancy 30 basis points to a still-healthy 4.8 percent. Vacancy increased 40 basis points last year.

◆ Rent Forecast: Asking rents will decline 1.6 percent to $1,497 per month this year, while effective rents will dip 2.5 percent to $1,405 per month. In 2009, asking and effective rents fell 4.5 percent and 6.2 percent, respectively.

◆ Investment Forecast: A lack of distressed properties and increased ac-tivity from both private and institutional investors will keep the spread between cap rates and agency lending rates tight in 2010. In lower Fair-fi eld County, however, persistent buyer interest and the low availability of for-sale top-tier properties may underpin slight cap rate compression.

Buyers to Remain Active in Southwestern Connecticut, Despite Operational Softness

New Haven Down 7 Places 2010 Rank: 14 2009 Rank: 7




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New JerseyDown 1 Place 2010 Rank: 6 2009 Rank: 5

Stable Vacancy to Persist in Hudson County, Though Supply Growth to Lift Concessions

Despite gradual economic improvements, just a fraction of the jobs lost in recent years will be reabsorbed in 2010, keeping apartment demand soft. While supply-side concerns remain modest statewide,

more than 1,300 units will be delivered this year in Hudson County. As a result of this added supply and a growing stock of shadow rentals from the tepid but still-expanding condominium market, concessions in the county are projected to rise to nearly 5 percent of asking rents in 2010, compared to a low of under 2 percent in late 2008 . Nevertheless, employment concentra-tions within and near the submarket will keep vacancy among the tightest in the state. Vacancy also will remain at healthy levels in Morris and Pas-saic counties; however, elevated rents in the latter will underpin continued concession increases. In Central New Jersey, modest inventory growth and minimal movement in vacancy will hasten the recoveries of rents. Con-struction output will be similarly muted in Southern New Jersey, though a slower rebound in hiring will maintain upward pressure on vacancy.

Sales velocity remains low but steady statewide, although fi rming investor confi dence and improving economic conditions are expected to boost deal fl ow in the coming quarters. In the north, conservative buyers will remain focused on operationally sound assets in Bergen, Passaic and Morris counties , though more aggressive investors will take on high-va-cancy or troubled properties in East Essex and Hudson counties, where cap rates are expected to increase measurably this year . Sales in Central New Jersey reached a low point in 2009, but more positive economic and op-erational outlooks should attract buyers to northern Middlesex and Mercer counties, where employment-generated renter demand is healthiest. While investment activity in Southern New Jersey is projected to pick up in 2010 due to growing investor confi dence, the region’s slower employment re-covery will likely keep the uptick modest.

2010 Market Outlook

◆ 2010 NAI Rank: 6, Down 1 Place. New Jersey fell out of the top fi ve due to forecasts for accelerating construction and rising vacancy.

◆ Employment Forecast: Employers are forecast to add 20,000 positions to New Jersey payrolls in 2010, or 0.5 percent. Last year, 110,300 jobs were cut.

◆ Construction Forecast: After 1,230 units were completed in 2009, rental inventory is projected to expand by 2,430 units this year.

◆ Vacancy Forecast: Employment growth will not be suffi cient to increase apartment demand, and vacancy will rise 20 basis points to 5.4 percent in 2010. Vacancy pushed up 130 basis points last year.

◆ Rent Forecast: This year, asking rents are forecast to decline 1.7 percent to $1,247 per month as effective rents recede 2.5 percent to $1,170 per month. Asking and effective rents decreased 3.0 percent and 5.3 percent, respectively, in 2009.

◆ Investment Forecast: Falling rents and supply-side pressures are expect-ed to lower sales prices in Hudson County, creating some rare opportu-nities to acquire discounted assets in this densely populated area .

2010 Annual Report


Market Forecast Employment: 0.8% ▲ Construction: 97% ▲ Vacancy: 10 bps ▼ Asking Rents: 1.5% ▼

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More than a year has passed since the Wall Street collapse, and easing employment declines at the close of 2009 are expected to transition into job growth in 2010. These work force gains, however, will not

be suffi cient enough to keep apartment demand growth from lagging. As a result, rents will continue to fall, although the pace of reductions will mod-erate. Owners feel most pressured to lower rents in neighborhoods where redevelopment efforts caused rents to surge in recent years , including Upper Manhattan, northern Brooklyn and Long Island City. Vacancy, conversely, is expected to fl uctuate only modestly in most submarkets this year due to housing prices that are still out of reach. Portions of Long Island City and upper Manhattan may be exceptions, as inventory overhangs and elevated rents could restrain leasing activity in both areas . Supply-side concerns will linger marketwide, with the construction output of market-rate rentals nearly double that of last year. Condominium development activity will decrease, although continuing softness in sales will yield a rise in shadow stock.

Buyers holding out for fi re-sale prices have begun to realize that dis-tress will not be as substantial as anticipated. As a result, sales velocity will rise from the minimal levels of 2009. Deal fl ow will be supported by increased activity from experienced local investors, as well as the resur-gence of institutional and foreign buyers. While the ruling over the J-51 tax abatement may dampen short-term activity, the issue is expected to impact only a small portion of properties, mostly in northern Brooklyn and below 96th Street in Manhattan. Sales will remain concentrated in Brooklyn and Manhattan this year, although growing buyer competition could push local investors to assets that offer higher cap rates in the Bronx or Queens.

2010 Market Outlook

◆ 2010 NAI Rank: 3, Up 5 Places. New York City rose fi ve spots in the NAI due to forecasts for the lowest overall vacancy rate in the country, resumed employment growth and low housing affordability.

◆ Employment Forecast: New York City employment is forecast to in-crease by 29,000 positions, or 0.8 percent, in 2010, compared to the loss of 103,800 jobs last year.

◆ Construction Forecast: After 1,850 market-rate rentals were completed in 2009, apartment inventory is expected to expand by 3,650 units this year.

◆ Vacancy Forecast: In 2010, rent cuts and employment gains are projected to support a 10 basis point decrease in vacancy to 3.4 percent. Vacancy surged 120 basis points last year .

◆ Rent Forecast: Asking rents at the city’s large market-rate properties are forecast to dip 1.5 percent to $2,647 per month this year, while effective rents will retreat 2.5 percent to $2,506 per month. In 2009, asking and ef-fective rents fell 6.6 percent and 8.1 percent, respectively.

◆ Investment Forecast: Aggressive and experienced investors are expect-ed to target apartment assets with retail components or J-51 tax abate-ment issues this year, as uncertainty and strict underwriting will thin the buyer pool in these segments. Consequently, less competition for these properties should yield higher near-term returns.

Citywide Vacancy to Retreat, Despite Surge in Completions and Shadow Rental Threats

New York City Up 5 Places 2010 Rank: 3 2009 Rank: 8




Oakland apartment investments face signifi cant challenges in 2010 as deeply discounted home prices have narrowed the housing af-fordability gap dramatically, luring renters into for-sale residences.

Northeastern Contra Costa County, which includes the communities of An-tioch, Pittsburg, Oakley and Brentwood, remains disproportionately affect-ed by the housing downturn and shadow rentals, leading to large increases in apartment vacancy. The Fremont/Newark/Union City submarket has outperformed the metro since the onset of the recession , registering rela-tively minimal vacancy rises, but the looming NUMMI plant closure will drag on renter demand this year. GM pulled out of the plant in 2009, and Toyota will cease operations there in the fi rst quarter, leading to the direct loss of 4,700 jobs and potential layoffs among supporting businesses. There is positive news in the submarket, however, as a factory for solar panel maker Solyndra is under way, and the company signed a lease in late 2009 for a 500,000-square feet building in Fremont that was previously occupied by Hewlett-Packard Co.

Sales velocity in the Oakland apartment market is anticipated to ac-celerate in 2010 as investors continue to move off of the sidelines, drawn by the most attractive pricing in years. Cap rates average in the low-7 percent range, though lesser-quality assets in tertiary locations can trade up to 200 basis points higher. Given the limited amount of apartment delinquency relative to the metro’s size, distress is not expected to impact prices sig-nifi cantly. To date, most of the distress has occurred among management-intensive properties in lower-income areas such as eastern Oakland; few high-quality assets in desirable submarkets are considered troubled. Taking note of this trend, local, private investors have returned to the investment market, overlooking expectations for near-term weakness in fundamentals to focus on the likelihood of a relatively swift recovery starting in 2011.

2010 Market Outlook

◆ 2010 NAI Rank: 18, Up 1 Place. Forecasts for continued revenue declines and employment contraction kept Oakland near the middle of the 2010 NAI, despite low housing affordability and modest additions to inventory.

◆ Employment Forecast: Following a 3.1 percent decline in 2009, employ-ment is forecast to dip 0.2 percent this year with the loss of 1,500 jobs.

◆ Construction Forecast: Completions will total 760 units in 2010, down from 1,250 rentals last year and more than 50 percent below the 10-year average.

◆ Vacancy Forecast: Vacancy is forecast to rise 20 basis points to 7.2 per-cent as reduced construction helps to offset the effects of weak housing market conditions and additional job losses. Vacancy spiked 170 basis points in 2009.

◆ Rent Forecast: Asking rents are expected to slip 3.1 percent to $1,241 per month in 2010 while effective rents decline 4.3 percent to $1,145 per month.

◆ Investment Forecast: Buyers are fi nding few stable properties available, and multiple offers are becoming more common. Owners considering a sale within the next 18 months, especially those willing to carry a note, may want to act quickly to take advantage of pent-up demand.

Falling Home Prices Challenge Apartment Demand, but Distress Remains Contained

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OaklandUp 1 Place 2010 Rank: 18 2009 Rank: 19

2010 Annual Report



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A partment performance in Orange County should stabilize this year following the wave of completions and job losses in 2009 that drove vacancy to historic highs and caused owners to slash rents to retain

tenants. Completions will ease signifi cantly in 2010, and both metrowide employment and household creation will increase, leading to reduced apartment market volatility. Development was concentrated in the Irvine, South Anaheim and Costa Mesa submarkets last year, and the average va-cancy rate in these areas increased 400 basis points to 10 percent. While soft conditions will likely persist in these submarkets for much of 2010, fundamentals should remain stable throughout the rest of Orange County. Housing prices have retreated considerably in the metro but remain high relative to incomes, leaving rental housing as the only affordable option for many residents.

Both the recession and decline in sales velocity started early in Orange County, and the market will likely be one of the fi rst to register more nor-malized investment activity in 2010. Late last year, investors began target-ing busted condo and development deals, as well as institutional-grade as-sets. The resumption of activity was due in large part to buyers and sellers acknowledging current market realities. Many investors are underwriting deals assuming that rents will decline modestly in the near term and that demand will not improve signifi cantly until at least 2011. Still, cap rates for most properties are in the high-6 percent to low-7 percent range, high enough to move many buyers from the sidelines. Prospective investors of large prop-erties are seeking cap rates above 7 percent, while assets with 50 or fewer units in the best locations can trade with initial yields as low as 6.5 percent.

2010 Market Outlook

◆ 2010 NAI Rank: 7, Up 6 Places. Orange County is one of a handful of markets in the country that is forecast to record a vacancy improvement this year, pushing up the metro six places in this year’s NAI.

◆ Employment Forecast: In 2010, employers are forecast to add 11,000 workers to payrolls, an increase of 0.8 percent. Losses totaled 49,800 jobs last year, a 3.4 percent decline.

◆ Construction Forecast: Following the delivery of 3,800 units in 2009, only 1,000 apartments are projected to come online this year.

◆ Vacancy Forecast: With renter demand anticipated to increase by the end of 2010 and the development pipeline minimal, vacancy is forecast to dip 20 basis points this year to 6.7 percent.

◆ Rent Forecast: Despite an uptick in renter demand, the soft economy and increased housing affordability will put downward pressure on rents. Asking rents are expected to fall 3.3 percent in 2010 to $1,414 per month, while effective rents will contract 3.8 percent to $1,342 per month.

◆ Investment Forecast: Institutional buyers and syndicates are expected to continue to pursue large assets in Orange County, particularly newer properties in the Platinum Triangle. Owners with debt coming due in the next few years may choose to list assets in 2010 rather than risk an unexpected rise in interest rates.

Buyers Emerging from the Sidelines; Isolated Oversupply Challenges Persist

Orange County Up 6 Places 2010 Rank: 7 2009 Rank: 13




Layoffs in Orlando will ease substantially this year, but subdued rental housing demand will persist, leading to rising vacancies and a fur-ther decline in rents. Apartment demand in the market is typically

fueled by employment in the construction, retail, and leisure and hospital-ity sectors. Job cuts in these industries have accounted for nearly half of the more than 80,000 positions lost in Orlando during the recession, trigger-ing a spike in vacancy. While some employers may add to head counts in 2010, the pace of hiring will not be signifi cant enough to ignite a vigorous rebound in multi-family housing demand . Rents, meanwhile, are projected to fall for the second consecutive year, although the rate of concession in-creases will slow considerably in most areas. As 2009 came to a close, many owners were reducing asking rents considerably rather than offering ad-ditional inducements to tenants.

Last year, sales activity in the market came to a standstill as tighter lend-ing criteria and uncertainty over the direction of fundamentals weighed on investor and lender sentiment. Activity is expected to pick up in 2010 as the economy and apartment fundamentals start to stabilize. Investors will in-creasingly focus on fi nancially distressed or lender-owned properties, which should appear in greater numbers this year, especially as diminished cash fl ows force some owners to surrender assets. The appearance of these proper-ties on the market will provide an opportunity for investors with equity in sta-bilized assets to redeploy capital into deeply discounted properties, some of which have never been marketed. Owners who need to sell, meanwhile, will weigh the risk of chasing down the market further if a sell decision is delayed.

2010 Market Outlook

◆ 2010 NAI Rank: 35, Down 5 Places. While job losses in Orlando will be minimal, vacancy is elevated and forecast to continue to rise. This increase, coupled with above-average rent declines, caused the metro to fall fi ve spots in the 2010 ranking.

◆ Employment Forecast: Approximately 1,000 jobs will be cut from Or-lando payrolls this year. In 2009, employers shed 44,000 positions, the most ever eliminated in a year.

◆ Construction Forecast: In 2010, developers are expected to complete 600 units, expanding rental stock by 0.5 percent. Last year, 1,300 units were delivered. Multi-family permit issuance fell approximately 80 percent in 2009 to 700 units, and the decline will suppress construction for the next several quarters.

◆ Vacancy Forecast: The vacancy rate is forecast to rise 60 basis points this year to 11.2 percent, following a 60 basis point increase in 2009.

◆ Rent Forecast: Asking rents are expected to drop 4.3 percent in 2010 to $806 per month. Effective rents are projected to slide 4.5 percent to $738 per month.

◆ Investment Forecast: While economic conditions may not yet support a robust recovery in 2010, the market is at or near its bottom. Proper-ties purchased this year will offer investors an opportunity to realize im-proved cash fl ows as a recovery picks up speed.

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Despite Increasing Economic Stability, Apartment Rebound to Lag in Orlando

OrlandoDown 5 Places 2010 Rank: 35 2009 Rank: 30

2010 Annual Report



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Operational performance in the Philadelphia apartment market is expected to remain soft in the near term, although limited devel-opment activity and a projected resumption of job growth point to

long-term stability. Despite the uptick in completions later in the year, stock will increase by a meager 0.5 percent. Further, the new units that are sched-uled to come online are located in areas of higher renter demand, including the Lower Merion and Central Chester County submarkets. Consequently, the deliveries should not signifi cantly affect vacancy. On the demand side, easing job cuts through midyear will be followed by limited hiring, help-ing to steady apartment demand. Employment will continue to strengthen over the long term as more companies expand and begin to rehire. Fisker Automotive, for instance, recently agreed to purchase the shuttered Gen-eral Motors plant in Wilmington. The fi rm will create 2,000 factory jobs and 3,000 vendor positions by 2014.

Investment activity may pick up in 2010 as the pricing disconnect be-tween buyers and sellers continues to narrow. Owners who are seeking exit strategies might consider listing assets, as rising expenses and property taxes, along with minimal rent gains, will likely suppress near-term income growth. Investors, meanwhile, may increasingly realize that the bottom of the market was nearly reached last year, highlighted by historically low interest rates, increasing cap rates and struggling NOIs. Cap rates currently average in the 8 percent range and appear to be stabilizing, although softer fundamentals may apply downward pressure on pricing in the near term. Over the long term, Philadelphia will remain a stable market for apartment investment due to expectations for steady employment and a slowdown in supply additions.

2010 Market Outlook

◆ 2010 NAI Rank: 5, Down 3 Places. A forecast revenue decline and accel-erating construction caused Philadelphia to slip three spots in the NAI.

◆ Employment Forecast: A year after 65,000 positions were removed from the metro last year, employers are expected to add 18,000 jobs to Phila-delphia payrolls in 2010, an increase of 0.7 percent.

◆ Construction Forecast: Completions will total approximately 1,000 apartments this year, up from 500 units in 2009. Over the past fi ve years, annual deliveries have averaged 1,500 units.

◆ Vacancy Forecast: Limited supply-side additions will keep vacancy in check. In 2010, vacancy is forecast to rise just 10 basis points to 6.6 per-cent, following an 80 basis point increase last year.

◆ Rent Forecast: This year, asking rents are forecast to drop 1.7 percent to $985 per month, and effective rents are projected to fall 1.9 percent to $928 per month. In 2009, asking and effective rents declined 2.1 percent and 3.9 percent, respectively.

◆ Investment Forecast: Low interest rates and higher yields may attract more investors to Philadelphia apartment assets. Owners considering exit strategies could contemplate selling due to the likelihood of minimal near-term rent growth and higher operating expenses.

Value Disconnect Between Buyers, Sellers Continues to Narrow in Philadelphia

Philadelphia Down 3 Places 2010 Rank: 5 2009 Rank: 2




E mployment gains and a drop-off in completions this year will help to limit further deterioration in apartment property fundamentals, especially within supply-restricted submarkets. Construction activity

will decrease by over 60 percent in 2010, after roughly 4,600 units were added to inventory last year. As a result, job cuts in the construction sec-tor will persist, although, resumed hiring in other sectors will offset these losses. Conditions in the South Scottsdale and South Tempe/Ahwatukee submarkets are expected to improve toward the end of the year, as no new inventory has come online in either submarket and both are close to major employment hubs . Additionally, the impact of shadow rentals is less sig-nifi cant in these areas than in outlying suburbs, which will restrain average vacancy rates to the high-8 percent range this year, compared to over 12 percent metrowide .

Investment activity in Phoenix will pick up in 2010 as more distressed assets are listed and the buyer/seller expectations gap begins to narrow. Many out-of-state investors will likely re-enter the market as distressed sales pull down prices, creating value-add opportunities for buyers with long-term hold strategies. Close-in properties will garner the most atten-tion from buyers until fundamentals start to stabilize , although investors also may want to consider opportunities in the South Chandler submarket, where vacancy is improving. As high-tech and renewable energy compa-nies in the Price Road area of the submarket resume hiring, additional de-mand should support even lower vacancy in 2010. Metrowide, cap rates are expected to inch up this year to the mid-7 percent range for stabilized Class A properties and the 8 percent range for assets in the lower tiers.

2010 Market Outlook

◆ 2010 NAI Rank: 34, Up 7 Places. Resumed hiring and modest additions to inventory drove up Phoenix seven places in the 2010 ranking, despite an elevated vacancy rate.

◆ Employment Forecast: Employers are forecast to add 11,000 positions to Phoenix head counts this year, a 0.7 percent gain. Last year, 112,600 jobs were eliminated.

◆ Construction Forecast: Approximately 1,800 apartment units are expect-ed to come online in 2010. Over the past fi ve years, completions have averaged 4,100 units annually.

◆ Vacancy Forecast: Metrowide vacancy is projected to rise 30 basis points to 12.6 percent this year. In 2009, vacancy jumped 120 basis points.

◆ Rent Forecast: Asking rents are expected to fall 2.5 percent in 2010 to $729 per month. With concessions forecast to increase to 10 percent of asking rents this year, effective rents are projected to decline 3 percent to $656 per month.

◆ Investment Forecast: In 2009, the median price of an apartment property in the Phoenix metro decreased 27 percent to $42,100 per unit. Prices will likely continue to recede well into 2010 as more distressed assets change hands at a discount.

Central Areas Approaching Balance; Oversupply Weighs on Outlying Submarkets

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PhoenixUp 7 Places 2010 Rank: 34 2009 Rank: 41

2010 Annual Report



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Although the Portland-Vancouver economy will begin to recover late this year, challenges will persist as an above-average unemployment rate and oversupply of shadow stock weigh on absorption. Elevated

apartment completions and widespread layoffs have pushed vacancy to levels last recorded in 2003. As a result, rents will drop further in 2010, with concessions rising at a faster clip in downtown Portland, where builders have been most active in recent years. Renter demand in the area is strong historically, but increased deliveries and reversions drove Class A vacancy in the Northwest/Downtown submarket above 19 percent in 2009 , which will prompt high-end apartment owners to cut rents this year. Metrowide, apartment construction activity will slow considerably in 2010, helping to alleviate supply strains. Moreover, the urban growth boundary in Portland will limit future stock additions, allowing fundamentals to improve quickly once job growth regains momentum.

Investment activity in the metro reached a low in 2009 but will pick up this year as buyers seek unique opportunities to reposition their portfo-lios. Local investors will look to smaller assets on the outer east side, where steep discounts are allowing operators to rebuild value as the economy sta-bilizes. A large concentration of blue-collar employment east of Interstate 205 will drive long-term demand for affordable housing in these areas, as the pay levels associated with these positions typically preclude homeown-ership. Some owners who have preserved equity in assets may look to sell in order to redeploy capital into larger, high-end buildings. Out-of-state players who are recalibrating long-term hold strategies are showing con-siderable interest for infi ll assets in northwestern Portland, where opera-tions will stabilize as demand rebounds. Cap rates for these well-located properties averaged in the mid-7 percent range at the end of 2009 and will rise further this year as near-term weakness dampens revenues.

2010 Market Outlook

◆ 2010 NAI Rank: 19, Up 2 Places. Employment growth in Portland is fore-cast to be among the strongest in the country, while inventory expansion will be minimal, causing the metro to creep up two places in the 2010 index.

◆ Employment Forecast: Employers in the Portland-Vancouver metro are forecast to add 13,500 jobs this year, a 1.4 percent increase. In 2009, roughly 44,300 positions were eliminated.

◆ Construction Forecast: Completions will slow to just 480 units in 2010, down from 1,480 units last year.

◆ Vacancy Forecast: Following a 160 basis point climb in 2009, vacancy is projected to rise 20 basis points this year to 7 percent.

◆ Rent Forecast: Asking rents are forecast to decline 3.5 percent to $775 per month in 2010, while effective rents will slip 4.6 percent to $692 per month.

◆ Investment Forecast: As 2010 progresses, more buyers will re-enter the Portland market in search of troubled assets. Such listings, however, will likely be isolated to properties that were acquired during the peak and are now under fi nancial distress. Owners not under pressure to sell may attempt to wait out the downturn until conditions fi rm.

Supply Strains to Ease, but HighUnemployment Rate to Restrict Demand

Portland Up 2 Places 2010 Rank: 19 2009 Rank: 21




The local housing industry downturn will continue to adversely im-pact the apartment supply/demand balance in the Inland Empire this year, though operational performance will depend largely on lo-

cation. A glut of foreclosed single-family homes have fl ooded the market in recent years, and investors have turned many of these properties into rent-als. Competition from these discounted shadow assets is especially strong in outlying submarkets, including Southwest Riverside County, Perris and Palm Springs/Palm Desert. This heightened competition will cause area incentives to nearly double long-term averages in 2010. Conversely, opera-tions are expected to be steadier this year in submarkets closer to Los Ange-les County. Vacancy in South Ontario/Chino and Rancho Cucamonga, for instance, began to stabilize late in 2009 and will lead the metro in improve-ments once a recovery starts.

Inland Empire sales activity is expected to increase as distressed and REO listings become more prevalent. A number of smaller bank-owned properties came to market late last year, attracting bargain-seeking buyers. As 2010 progresses, larger, newly built Class A complexes also will work through the foreclosure pipeline, drawing investors with considerable capi-tal reserves. The eastern and southern portions of the metro should offer the most distressed-asset opportunities; however, properties in these areas will likely recover more slowly than the market as a whole. Sales of traditional apartment assets are expected to be limited as owners who are not in imme-diate distress elect to hold at a time when buyers are demanding signifi cant price reductions. Marketwide cap rates fi nished 2009 in the low- to mid-8 per-cent range and are projected to rise 50 basis points to 100 basis points in 2010.

2010 Market Outlook

◆ 2010 NAI Rank: 37, Up 5 Places. The Inland Empire rose fi ve spots in the NAI due to forecasts for modest payroll additions and minimal construction.

◆ Employment Forecast: Employers will add 6,800 jobs to Inland Empire payrolls this year, a 0.6 percent increase. In 2009, roughly 60,000 posi-tions were eliminated.

◆ Construction Forecast: More modest permitting activity will result in the delivery of just 520 apartments in 2010, down from 1,260 units last year .

◆ Vacancy Forecast: Waning demand and ongoing competition from shad-ow inventory are expected to drive up vacancy 40 basis points this year to 9.8 percent. In 2009, vacancy increased 240 basis points.

◆ Rent Forecast: Asking rents are forecast to fall 3.7 percent to $969 per month in 2010, while effective rents are projected to drop 5.6 percent to $895 per month.

◆ Investment Forecast: Buyers searching for troubled assets also may want to track the performance of recently built complexes in the University City/Moreno Valley submarket, where 3,300 units have been delivered over the past fi ve years. Waning occupancy levels and elevated conces-sions will likely erode revenues further in the area and push more assets to the brink of default, potentially resulting in steep price reductions.

Increasing Shadow Rental CompetitionEroding Demand; Distress on the Rise

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Riverside-San BernardinoUp 5 Places 2010 Rank: 37 2009 Rank: 42

2010 Annual Report

* Estimate ** Forecast *** No completions in 2009

Market Forecast Employment: 0.1% ▼ Construction: N/A*** Vacancy: 60 bps ▲ Asking Rents: 4.1% ▼

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Renter migration to shadow stock will continue to impact Sacramento apartment fundamentals in 2010, resulting in steep rent cuts, partic-ularly in high-end units. Completions will remain minimal, but the

abundance of discounted shadow rentals will maintain elevated vacancy rates for top-tier properties. As such, Class A owners in the Roseville/Rock-lin and South/Elk Grove submarkets will post vacancy rates near 10 percent this year, with concessions averaging more than 30 days of free rent . Vacan-cy rates in the limited Class A inventory downtown have inched lower since early 2009 and should continue to improve modestly through 2010 as rent-ers relocate closer to dense job centers. Class B/C operations, meanwhile, will remain healthier than those in the top tier and are expected to recover quickly once job creation resumes in 2011 . This year, a large student popula-tion will fuel strengthened performance in Class B/C complexes within the Davis and Woodlands submarkets, where vacancy will stay below 6 percent.

After traditional apartment trading slowed to a trickle in 2009, an an-ticipated rise in REO offerings should help to boost sales activity this year, though nondistressed-asset sales will remain tepid. Cap rates for stabilized properties ended last year at 8 percent and are projected to rise an addition-al 50 basis points in 2010, with a shallower uptick expected for assets in the downtown and midtown areas. Smaller REO deals should dominate dis-tressed-asset sales in the early months of 2010, though larger bank-owned complexes will likely emerge later in the year. Some investors with long-term hold strategies may reposition their portfolios and seek discounted buildings that offer the potential for strong upside. Owners will continue to face challenges when attempting to divest traditional listings during the fi rst half of the year, however, and sellers will need to adjust prices to meet the market. As REO deals begin to trade with greater frequency, though, a pricing fl oor will emerge and help to align expectations.

2010 Market Outlook

◆ 2010 NAI Rank: 33, Up 4 Places. Minimal completions are expected to keep supply-side pressures in check in Sacramento this year, supporting a four-spot rise in the ranking.

◆ Employment Forecast: After 33,400 positions were shed last year, pay-rolls are forecast to shrink by 0.1 percent, or 1,200 workers, in 2010.

◆ Construction Forecast: Completions are expected to total fewer than 100 apartments this year, after no units were delivered in 2009.

◆ Vacancy Forecast: Competition from shadow stock, along with a lack of new demand derived from job growth, will push up vacancy 60 basis points in 2010 to 8.6 percent. Last year, vacancy rose 80 basis points.

◆ Rent Forecast: This year, asking rents are forecast to fall 4.1 percent to $881 per month while effective rents drop 5.5 percent to $804 per month. In 2009, asking and effective rents dipped 4.9 percent and 7.6 percent, respectively.

◆ Investment Forecast: Traditional apartment sales in outlying submar-kets are projected to be limited this year, with long-term hold buyers targeting stabilized assets in the downtown and midtown areas. Rede-velopment projects geared toward new residents and businesses, like the Railyards and Curtis Park Village, will generate renter demand .

Rents to Fall Further as Owners Compete with Steeply Discounted Shadow Stock

Sacramento Up 4 Places 2010 Rank: 33 2009 Rank: 37




Resumed economic expansion and accelerating household growth in 2010 should set the stage for a healthy rebound in apartment funda-mentals in 2011. Last year, severe job losses and a spike in construction

weighed on conditions. Metro employers will begin to add to payrolls this year, spurring renter demand and moderating vacancy rises in most submar-kets. Still, some areas will remain oversupplied, resulting in softer funda-mentals through much of 2010. In the West Jordan submarket, for instance, inventory levels rose by more than 15 percent last year with the completion of approximately 1,100 units. Vacancy in the area is among the highest in the metro, exceeding 8 percent as of the end of 2009, and operators will have to offer far greater concessions than the metrowide average in the coming quar-ters. Elsewhere, renter demand in downtown Salt Lake City, which has one of the tightest vacancy rates in the metro, could receive a boost over the next several years due to the $1.5 billion Downtown Rising project. The residential component of the mixed-use development will include high-end condos that will debut early in 2010 and Class A rentals that will come online in phases.

Investment activity should accelerate this year as buyers’ and sellers’ expectations become more closely aligned and employment and household growth resume. Distress will likely be limited, although a number of prop-erties involved in institutional deals that were made at peak prices in 2007 and 2008 may begin to enter the market by the end of 2010. Some previ-ously sidelined buyers are expected to return by midyear, as cap rates for Class A properties reached 7.5 percent in 2009 and initial yields for Class B/C assets approached 9 percent. The local housing market is the primary investment wild card, as some traditional apartment buyers could target the metro’s glut of foreclosed homes if prices continue to fall.

2010 Market Outlook

◆ 2010 NAI Rank: 11, Down 2 Places. Modest development activity, steadily rising vacancy and greater concessions caused Salt Lake City to fall two spots in the 2010 index.

◆ Employment Forecast: The development of the National Security Agen-cy Data Center at Camp Williams is expected to add at least 5,000 con-struction jobs to the metro. As such, total employment is forecast to in-crease by 11,000 positions in 2010, a 1.8 percent gain.

◆ Construction Forecast: After spiking in 2009, apartment deliveries will slow to 1,200 units this year.

◆ Vacancy Forecast: Despite anticipated job growth, vacancy is expected to tick up 40 basis points in 2010 to 6.9 percent , following a 150 basis point rise last year.

◆ Rent Forecast: Asking rents are forecast to decline 1.8 percent this year to $719 per month. As concessions increase due to rising vacancy rates, effective rents are projected to contract 2.8 percent to $656 per month.

◆ Investment Forecast: Investors are expected to be increasingly active in Salt Lake City. A once-anticipated wave of distressed properties has failed to materialize, and prices have retreated to levels that will con-tinue to spark buyers’ interest.

Employment Expansion to ButtressFundamentals, Spark Investment Activity

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Salt Lake CityDown 2 Places 2010 Rank: 11 2009 Rank: 9

2010 Annual Report


Market Forecast Employment: 2.6% ▲ Construction: 49% ▼ Vacancy: 50 bps ▼ Asking Rents: 0.0% ■

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A healthcare- and military-dependent job base kept San Antonio from slipping into a pronounced recession in 2009 and should lead to an accelerated rebound in early 2010 . The metro will boast fl at asking

rents and falling vacancy this year, buoyed by job gains and a growing population. As other markets struggle to expand payrolls in the initial months of 2010, job seekers are expected to fl ock to San Antonio, generat-ing migration-related apartment demand, especially for Class A properties near employment centers on the northern and western sides of the metro. AT&T, Medtronic and Nationwide Insurance all have announced plans to add positions in the market, and supplemental jobs at support fi rms are anticipated to follow. The manufacturing-geared southern portion of San Antonio will get a boost from Toyota this year, which plans to hire 850 more workers to ramp up production of the Tacoma truck.

Obtaining fi nancing for local apartment complexes will remain a sig-nifi cant hurdle for investors, keeping velocity measured in the fi rst half of the year. As 2010 progresses, however, deal fl ow is expected to acceler-ate as some recently built complexes in northern San Antonio reach occu-pancy rates that meet Fannie Mae and Freddie Mac fi nancing thresholds, attracting large buyers. Private investors, meanwhile, are targeting solid cash-fl owing complexes near major thoroughfares in core areas. Properties adjacent to Loop 410 between interstates 10 and 35, in particular, remain in strong demand. Area listings with assumable debt will attract the most attention. Average cap rates metrowide are forecast to climb 50 basis points this year to the mid- to high-9 percent range.

2010 Market Outlook

◆ 2010 NAI Rank: 12, Up 2 Places. San Antonio is expected to record the country’s most robust employment growth this year, driving up the met-ro two places in the ranking.

◆ Employment Forecast: After shedding approximately 6,300 positions in 2009, employers are anticipated to resume hiring this year, adding 22,000 jobs in the metro, a 2.6 percent gain.

◆ Construction Forecast: Development is easing, as obtaining construction fi nancing remains challenging. By year-end 2010, stock additions are ex-pected to total 1,900 units, a 1.3 percent increase.

◆ Vacancy Forecast: Apartment demand driven by job and population growth will improve vacancy 50 basis points this year to 10.4 percent. In 2009, vacancy jumped 190 basis points.

◆ Rent Forecast: Asking rents are projected to remain fl at in 2010 at $685 per month, while effective rents will slip 0.6 percent to $632 per month. Concessions are expected to increase to four weeks of free rent.

◆ Investment Forecast: The expansion of the Brook Army Medical Center at Fort Sam Houston is anticipated to be completed in 2011, adding 5,000 military personnel and 9,000 students to the area and supporting apart-ment demand in submarkets near the base.

Shallow Recession and Expedited Recovery Expected for San Antonio Apartment Market

San Antonio Up 2 Places 2010 Rank: 12 2009 Rank: 14



Market Forecast Employment: 1.0% ▲ Construction: 103% ▲ Vacancy: 20 bps ▲ Asking Rents: 0.2% ▲

San Diego apartment fundamentals will outperform much of the coun-try this year, as additions to supply will be modest and payrolls will expand for the fi rst time since 2007. The USS Carl Vinson is scheduled

to rejoin the Pacifi c Fleet in 2010 , returning thousands of relocated families to the metro and providing a boost to rental housing demand . The local leisure and hospitality sector is forecast to grow by approximately 2 per-cent this year as the national economic recovery gains momentum and lei-sure and business travel increases slowly. While vacancy is expected to tick higher in 2010, the rise will be minimal and concentrated in the Downtown submarket. A glut of condos came online in the area just as the local hous-ing market began to decline, and many of these units now serve as rentals. Supply-side pressure downtown will increase further as 400 apartments and 200 new condo units are completed this year. As a result, vacancy in the area is expected to nearly double to the 12 percent range by year end , while vacancy in all other metro submarkets should remain relatively fl at.

With property performance expected to be steady throughout much of the metro, investment activity will likely pick up this year . Buyers’ and sell-ers’ expectations became more closely aligned throughout 2009, particularly for stabilized properties with fewer than 40 units. Cap rates rose more than 100 basis points last year to an average of 6.5 percent, with some lesser as-sets changing hands in the mid- to high-7 percent range. Cap rates could tick higher in 2010, but increases similar to those recorded in 2009 are unlikely.

2010 Market Outlook

◆ 2010 NAI Rank: 2, Up 4 Places. San Diego is expected to post a low over-all vacancy and relatively steady rents in 2010, fueling the metro’s four-spot rise in the index.

◆ Employment Forecast: The growing government sector will help to drive up metrowide employment 1 percent in 2010 with the forecast ad-dition of 12,500 jobs. Last year, 52,500 positions were lost.

◆ Construction Forecast: Builders are scheduled to complete 1,100 units this year, a 0.6 percent increase to inventory, following the delivery of 541 apartments in 2009.

◆ Vacancy Forecast: As employment growth helps to stabilize renter de-mand, vacancy is forecast to tick up 20 basis points in 2010 to 5.4 percent. Last year, steep job losses elevated vacancy by 110 basis points.

◆ Rent Forecast: Asking rents are expected to reach $1,308 per month this year, a 0.2 percent gain, while effective rents will inch up 0.1 percent to $1,250 per month.

◆ Investment Forecast: Property location will be a primary investor focus, as buyers will increasingly target assets in core areas. Buyer demand for properties in the North and East County submarkets will likely be less robust than in areas closer to suburban job centers, such as La Jolla, and apartments in far outlying locations will need to be priced to yield above-average cap rates .

Job Growth Stimulating Demand; Supply Concerns Limited to Downtown Submarket

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San DiegoUp 4 Places 2010 Rank: 2 2009 Rank: 6

2010 Annual Report



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Deep job losses and the challenged economy drove sharp rent cuts in San Francisco last year, while properties in Marin and San Mateo counties recorded similar declines . Weakness in the local employ-

ment base pushed vacancy higher throughout the San Francisco market, though a lack of signifi cant new supply kept the average rate fairly tight and will limit the metrowide rise this year. While payrolls are expected to expand somewhat, particularly in the second half of 2010, additional rent reductions are likely as operators try to minimize unit downtime. With the exception of northern Marin County, the competitive impact of shadow rentals on apartment property fundamentals has been minimal.

While a number of factors that restrained local investment activity last year persist, including tight lending standards and the pricing expectations gap between buyers and sellers, sales velocity should increase in 2010. Af-ter very few transactions closed in the fi rst half of 2009, the new market began to take shape during the second half, pushing cap rates into the mid-5 percent range in the city and the 6 percent range in Marin and San Mateo counties, where they are expected to stay in 2010. Despite current revenue declines, many experienced area owners are choosing to ride out the down-turn in anticipation of an eventual rebound in NOIs. Some distressed assets entered the market last year, but the tide of these at-risk properties appears to have slowed. Distress sales increased in 2009 , though the median price fell just 11 percent, and sharp price cuts are unlikely this year due to high replacement costs and limits on new construction.

2010 Market Outlook

◆ 2010 NAI Rank: 9, Up 8 Places. Employment growth is expected to out-pace inventory expansion in San Francisco, keeping vacancy low and pushing up the metro eight places in the NAI.

◆ Employment Forecast: Employers are expected to slowly expand pay-rolls in 2010, adding 5,000 workers, a 0.5 percent increase. Last year, weakness in the fi nancial services sector contributed to the loss of 47,300 jobs in San Francisco.

◆ Construction Forecast: Metrowide apartment inventory is forecast to ex-pand by 0.5 percent this year with the completion of 625 new units. In 2009, 452 rental units came online.

◆ Vacancy Forecast: Despite modest additions to payrolls, renters will con-tinue to double up in 2010, as a widespread economic recovery will be slow to take hold. As such, vacancy is expected to increase 30 basis points in 2010 to 5.4 percent, following a 150 basis point spike last year.

◆ Rent Forecast: Asking rents are forecast to contract 3.3 percent to $1,699 per month this year, while effective rents are projected to fall 3.5 percent to $1,598 per month. In 2009, asking and effective rents receded 9.2 per-cent and 9.4 percent, respectively.

◆ Investment Forecast: Downpayment requirements have risen to approx-imately 40 percent, close to historical levels. As such, borrowers with strong personal fi nancial statements will likely account for nearly all of the investment activity in 2010.

Stabilizing Job Market, Modest Constructionto Slow the Pace of Vacancy Increases

San Francisco Up 8 Places 2010 Rank: 9 2009 Rank: 17



Market Forecast Employment: 0.5% ▲ Construction: N/A*** Vacancy: 20 bps ▼ Asking Rents: 2.1% ▼

Although revenue streams in the South Bay apartment market are fore-cast to soften further in 2010, economic conditions should stabilize as the year progresses, laying the groundwork for a recovery in late

2010. Employment gains will materialize in the fi rst half of this year, sug-gesting that the current downturn in renter demand will be shallower than the dot-com bust from 2001 to 2003, when more than 200,000 local positions were eliminated. Nonetheless, the absence of meaningful job formation in most sectors and modest supply growth will delay an improvement in va-cancy until the second half. Some assets will recover quickly, however, in-cluding Class A properties in Sunnyvale and Mountain View, where strong demographics and a dense base of high-paying jobs support demand. Con-versely, top-tier complexes near Sun Microsystems in Santa Clara may face added challenges, as the company plans to cut staffi ng levels during the fi rst half of 2010. Some districts within Palo Alto and San Jose that employ a signifi cant number of retail workers, meanwhile, will struggle to maintain occupancy levels as renters double up.

High-net-worth buyers began to re-enter the South Bay market toward the end of 2009 and will account for a signifi cant share of investment activ-ity this year. Although more cash-heavy buyers have emerged, particularly those targeting larger mid-tier properties, many operators of performing assets are unwilling to sell at a discount and may elect to hold through the downturn. Consequently, motivated owners who are facing resetting loans or operational challenges will comprise most of the seller pool in 2010. Dis-tress should remain modest and limited to owners who purchased at the height of the market and were unable to achieve pro forma rents. As a re-sult, cap rates that were in the low-6 percent range at year-end 2009 will rise only slightly this year.

2010 Market Outlook

◆ 2010 NAI Rank: 10, Up 8 Places. A slight vacancy decline and modest employment growth drove San Jose’s eight-spot rise in the ranking.

◆ Employment Forecast: Employers are expected to increase payrolls 0.5 percent in 2010, adding 4,500 positions. Last year, 35,000 jobs were shed.

◆ Construction Forecast: After no units came online in 2009, builders are projected to deliver nearly 250 apartment units this year.

◆ Vacancy Forecast: Modest job growth will support a slight 20 basis point vacancy improvement in 2010 to 5.5 percent, after vacancy rose 50 basis points last year.

◆ Rent Forecast: Rent reductions will moderate from 2009. Asking rents are forecast to decrease 2.1 percent to $1,446 per month this year, while effec-tive rents are expected to drop 3.7 percent to $1,324 per month. Last year, asking and effective rents fell 11.8 percent and 13.3 percent, respectively.

◆ Investment Forecast: REITs and institutions will begin to acquire assets in moderation this year , focusing on core areas in the northwestern por-tion of the metro . Deal fl ow from these buyers is not likely to pick up con-siderably until a clear pricing fl oor is established, however, particularly for larger Class A and Class B complexes.

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South Bay Economy Emerging from Recession, but Headwinds Remain

San JoseUp 8 Places 2010 Rank: 10 2009 Rank: 18

2010 Annual Report



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Even as the recession subsides, the lingering effects of job losses and additions to stock in recent years will drive vacancy in the Puget Sound to historic highs in 2010 . Large-scale layoffs in 2009 by several

major local employers, including Washington Mutual, Microsoft and Boe-ing, will limit renter demand near these campuses this year . As for con-struction activity, builders will fi nish a number of projects in 2010 that were either permitted or broke ground prior to the downturn. These deliveries will put upward pressure on vacancy, especially in the Downtown/Capitol Hill/Queen Anne submarket, where one-third of the metro’s new units will come online by midyear. Subdued condo sales also will impact the apart-ment supply/demand imbalance this year. Many of the roughly 3,900 for-sale units built after 2008 and nearly 10,000 apartment units that have been converted to condos over the past fi ve years are expected to compete with apartment units. Consequently, owners will continue to raise concessions, particularly in Bellevue and the downtown area, where condo develop-ment efforts were centered in recent years.

The late arrival of the recession to Seattle has resulted in divergent in-vestment strategies among local buyers. Some investors are shifting their fo-cus to markets with a shorter recovery horizon, while others continue to wait on the sidelines for discounted properties. Distressed-asset and REO sales will provide a small boost to local sales activity this year, though the supply of these listings will hinge on the willingness of banks to work with owners. In 2010, investors are expected to focus on properties downtown, although area fundamentals will remain soft in the near term. Projects such as the University Link plan, which extends the light-rail system north from Capitol Hill to the University of Washington, will attract long-term hold buyers. Ini-tial yields in core areas of the Puget Sound were in the low-6 percent range at the close of 2009, while cap rates in the outskirts averaged in the low- to mid-7 percent range and could rise as much as 75 basis points this year.

2010 Market Outlook

◆ 2010 NAI Rank: 22, Up 3 Places. Job growth is forecast to fuel absorption of new units in Seattle, resulting in a three-spot rise in the NAI.

◆ Employment Forecast: Hiring activity is forecast to resume in 2010. Em-ployers are expected to add 26,400 workers this year, expanding payrolls by 1.6 percent. In 2009, approximately 55,000 positions were shed.

◆ Construction Forecast: In 2010, developers will deliver 2,600 apartments, down from 4,150 units last year.

◆ Vacancy Forecast: Inventory growth will drive a 50 basis point rise in va-cancy to 8.4 percent this year. Vacancy increased 210 basis points in 2009.

◆ Rent Forecast: In 2010, asking rents are forecast to fall 2.8 percent to $928 per month, and effective rents will drop 3.9 percent to $852 per month.

◆ Investment Forecast: The recent decision by Boeing to build a second commercial aircraft production facility in South Carolina may spur some apartment owners in Everett, where the company’s current site is locat-ed, to re-evaluate their holdings due to uncertainty over future produc-tion in the area and the potential impact on long-term renter demand.

Employment Growth Resumes, ThoughNew Supply to Outpace Demand in 2010

Seattle Up 3 Places 2010 Rank: 22 2009 Rank: 25




Supply-side pressure should ease in 2010, while the recovery of the local labor market will strengthen demand. Nevertheless, persistent weakness in top-tier properties will hinder a signifi cant improvement

in vacancy across the metro. With cost-consciousness growing, elevated rents in many Class A units will succumb to rising vacancy rates and, in turn, signifi cant concession increases. This trend will be most pronounced in the St. Charles County and West County submarkets, which have large proportions of Class A product. Lower-tier properties, meanwhile, will re-main more stable as renters stay cautious with their budgets. As such, areas with a considerable share of Class C assets, like the St. Louis City South and Airport/I-70 submarkets, will outperform the metro in 2010. In terms of supply, metrowide completions will decrease this year. All of the projects slated to debut are located in the St. Louis City North submarket, which will further weaken near-term Class A conditions in the area.

While transaction velocity slowed dramatically in 2009, deal fl ow is an-ticipated to increase in the coming months as the expectations gap narrows. Local investors will drive sales activity this year, as institutional-grade list-ings that fi t many out-of-state buyers’ criteria will remain limited. Inves-tors are expected to target older-vintage assets near healthy employment corridors such as the Clayton/Mid-County submarket. Average cap rates marketwide are forecast to creep up from the low- to mid-8 percent range through the fi rst half as sellers adjust pricing to compensate for near-term risk. Properties in areas with elevated vacancy rates and large rent reduc-tions, like the Florissant/North County submarket, will need to be listed at above-average cap rates to attract offers.

2010 Market Outlook

◆ 2010 NAI Rank: 26, Down 2 Places. While vacancy in St. Louis is fore-cast to improve, the rate remains above the national average, causing the metro to slip two places in the index.

◆ Employment Forecast: Led by projections for increased hiring in the government and manufacturing sectors during the second half, metro-wide payrolls are expected to increase by 8,500 workers in 2010, or 0.7 percent, after 41,000 jobs were cut last year.

◆ Construction Forecast: Following the addition of approximately 500 units in 2009, developers are scheduled to complete just 105 units this year, all of which are located in the St. Louis City North submarket.

◆ Vacancy Forecast: Despite weakness in the metro’s upper tier, overall vacancy is forecast to fall 30 basis points to 9.1 percent in 2010.

◆ Rent Forecast: Asking rents are projected to retreat to $694 per month this year, a 2 percent slide, while effective rents will decrease 2.1 percent to $648 per month.

◆ Investment Forecast: Enrollment at the University of Missouri-St. Louis increased 5 percent in the 2009-2010 school year and is expected to con-tinue to rise. As such, investors seeking relative stability may fi nd op-portunities near the campus in the Airport/I-70 submarket.

Lower-Tier Properties Garner Increased Renter/Investor Demand

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St. LouisDown 2 Places 2010 Rank: 26 2009 Rank: 24

2010 Annual Report



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The Tampa market has passed through the most severe phase of the recession, a period during which the apartment vacancy rate climbed 360 basis points. Job reductions will ease in 2010, but demand will re-

main subdued, resulting in further vacancy increases and rent cuts. In some Pinellas County submarkets, vacancy will surpass 11 percent this year as the local unemployment rate exceeds metro and state levels, while subdued population growth will reduce housing demand. Hillsborough County sub-markets, meanwhile, will fare somewhat better as completions slow. Still, sluggish demand will be the dominant factor behind apartment perfor-mance marketwide, forcing owners to continue to offer concessions to main-tain suffi cient occupancy levels in order to cover mortgage-related expenses.

Investment activity will accelerate in 2010 as the economic downturn wanes. More lender-owned properties will likely come to market as loan extensions fail to sustain some operators through an extended period of higher vacancy rates and lower cash fl ows. Sales of fi nancially distressed assets will decrease values and raise cap rate expectations. For owners who plan to shed stabilized or cash-fl owing properties within the next few years, 2010 may be an opportune time to sell before cap rates increase much further. Meanwhile, buyers waiting for the market to reach a bottom before acting could miss opportunities to conduct deals on favorable terms and acquire assets before the upswing in fundamentals begins.

2010 Market Outlook

◆ 2010 NAI Rank: 40, No Change. Tampa’s vacancy rate is expected to be among the highest in the country this year, and revenues will contract sharply. As such, the metro remains near the bottom of the NAI.

◆ Employment Forecast: In 2010, employers will cut 4,000 jobs, a 0.3 per-cent reduction but an improvement from last year, when 51,000 positions were eliminated.

◆ Construction Forecast: Developers are forecast to complete 1,000 units this year, down from 1,400 new rentals in 2009. Planned projects total about 5,100 units, or 3 percent of existing stock.

◆ Vacancy Forecast: Although supply growth will ease in 2010, demand will remain weak, resulting in a 30 basis point rise in vacancy to 10.8 percent. Last year, vacancy climbed 180 basis points.

◆ Rent Forecast: This year, asking rents are projected to fall 3.8 percent to $767 per month, compared with a 5.5 percent decrease in 2009. Effective rents slid 6.3 percent last year and will decline an additional 4 percent in 2010 to $713 per month.

◆ Investment Forecast: Although the metro area has posted losses in both payrolls and population, investors continue to seek well-performing as-sets in most seasoned submarkets. Interest in properties in areas that are far from employment hubs, such as eastern Pasco County and Hernando County, will remain tepid in the near term.

Sluggish Apartment DemandWears on Tampa Owners

Tampa No Change 2010 Rank: 40 2009 Rank: 40




Employment contractions through the fi rst half of the year will contin-ue to weigh on the Tucson apartment market in 2010. Ongoing losses in the professional and business services sector are driving up vacan-

cy rates, especially in Class A complexes. Top-tier properties also have been affected by renters downgrading to Class B/C units in order to cut costs. Although concessions already average nearly 7 percent of asking rents, ris-ing vacancy rates will force owners to start to reduce rents further to retain tenants. Renter demand may strengthen in some areas, however, as local defense fi rm Raytheon Missile Systems has begun looking at overseas con-tract opportunities, which would bring additional jobs to the metro. As a result, properties in southeastern Tucson could register an uptick in leasing activity in 2010, given the area’s proximity to the company.

Until apartment fundamentals stabilize, investment activity will center on lender-owned properties and assets in central locations. Vacancy rates in outlying areas remain some of the highest in the metro due to an over-supply of single-family homes serving as rentals. As such, complexes in the Central Tucson/University-North submarket will continue to garner the greatest interest this year. A combination of student-driven renter de-mand and limited construction will keep vacancy in the area well below the metro average. As for pricing trends, the metrowide median price fell nearly 20 percent last year to $42,400 per unit and will edge lower in 2010 as more deeply discounted, distressed assets change hands and investors underwrite for deteriorating revenue.

2010 Market Outlook

◆ 2010 NAI Rank: 38, No Change. Despite minimal completions, the va-cancy rate in Tucson is forecast to continue to creep higher this year, keeping the metro at #38.

◆ Employment Forecast: Employment gains in the government and educa-tion and health services sectors will help to offset losses in other segments this year. Total employment is expected to increase by 1,500 workers, or 0.4 percent, in 2010. Approximately 15,600 positions were eliminated last year.

◆ Construction Forecast: After 288 apartment units came online in 2009, no units are scheduled for completion this year.

◆ Vacancy Forecast: Vacancy is forecast to rise 20 basis points in 2010 to 12.7 percent, the highest rate in over two decades. Last year, vacancy increased 150 basis points, as heavy job losses weighed on demand.

◆ Rent Forecast: Asking rents are projected to fall to $611 per month this year, a 3.3 percent decline, while effective rents are expected to recede 3.6 percent to $567 per month.

◆ Investment Forecast: The Flowing Wells area may receive greater inter-est from buyers with long-term hold strategies this year, as a glut of re-cently built and renovated properties are in various stages of foreclosure in the area and will likely be auctioned off at discounted prices.

Vacancy Pushing Higher; Buyers TargetingDistressed Assets, Infi ll Properties

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TucsonNo Change 2010 Rank: 38 2009 Rank: 38

2010 Annual Report


Market Forecast Employment: 1.2% ▲ Construction: 17% ▼ Vacancy: 20 bps ▼ Asking Rents: 0.4% ▲

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In Washington, D.C., easing job reductions toward the end of 2009 will transition into resumed job growth in many sectors this year as an eco-nomic recovery gains momentum . Hiring activity is expected to be

healthiest in the professional and business services, government, and edu-cation and health services industries, although a weaker rebound in the construction and trade, transportation and utilities sectors will dampen the recovery in overall employment. This continuing softness among blue-collar sectors, however, will keep lower-tier apartment demand weak in outlying areas such as Prince William, Stafford and Frederick counties . Conversely, renter demand and vacancy will remain healthiest this year near key employment hubs like Downtown/Logan Circle, Kensington/Wheaton and Pentagon City/Crystal City. Concessions, though, will con-tinue to expand marketwide, particularly in Rockville and western Fairfax County, where supply-side threats persist. At the metro level, construction will decline from 2009, with inventory growth slightly lagging an increase in renter demand.

Transaction velocity in the Washington, D.C., apartment market will remain conservative this year, though an uptick in activity that began dur-ing the second half of 2009 is expected to accelerate. The gradual return of institutional buyers to the market, coupled with a slight narrowing of the bid/ask gap, will spark activity in northern Virginia. Nevertheless, most of the transactions made in 2010 will likely occur in the district as buy-ers take advantage of softer operations and rising cap rates in the Uptown and Southeast submarkets. Similarly, weak leasing activity in lower Prince George’s County and outlying areas within Montgomery County will pro-vide investment opportunities at higher initial yields.

2010 Market Outlook

◆ 2010 NAI Rank: 1, No Change. Washington, D.C., retained the top spot in the NAI due to strong job growth, a falling vacancy rate and low hous-ing affordability.

◆ Employment Forecast: The resumption of hiring in the Washington, D.C., metro is expected to yield 35,000 new jobs in 2010, an increase of 1.2 percent. Last year, 24,000 positions were eliminated.

◆ Construction Forecast: This year, inventory will expand by nearly 4,750 units, or 1.2 percent, after the completion of 5,700 units in 2009.

◆ Vacancy Forecast: Employment growth will cause vacancy to improve 20 basis points to 6.5 percent in 2010. Last year, vacancy increased 120 basis points.

◆ Rent Forecast: This year, asking rents will increase 0.4 percent to $1,337 per month, while effective rents will tick 0.2 percent higher to $1,252 per month. Asking and effective rents retreated 2.3 percent and 4.4 percent, respectively, in 2009.

◆ Investment Forecast: While average cap rates surged 70 basis points to 6.8 percent last year, job growth and stabilizing revenues will keep initial yields in the low-7 percent range for most apartment assets in 2010.

Rebound in Hiring to Strengthen Apartment Demand; Values Stabilize

Washington, D.C. No Change 2010 Rank: 1 2009 Rank: 1



Demand-Side FundamentalsRemain Weak in Palm Beach County

With additional job losses expected this year, operating conditions in Palm Beach County will remain challenging. Tepid rental hous-ing demand pushed down asking and effective rents 4.3 percent

and 5.8 percent, respectively, last year, with steeper cuts forecast in 2010 as owners strive to maintain occupancy. Countywide vacancy is projected to climb to the mid-9 percent range this year, with the average rate ticking slightly higher for Class B/C units due to elevated unemployment and a continuing slowdown of in-migration. More than 1,200 units would have to be absorbed in the county for the vacancy rate to revert to its long-term average of 6.3 percent. Demand, though, will simply not be strong enough to produce such a result this year. Accordingly, investors who purchase properties now will take a longer-term view and underwrite for an im-provement in performance after 2010.

Identifying and establishing price trends will remain diffi cult in early 2010, as activity has fallen off considerably over the past 18 months. Prop-erty values have declined due to the effects of higher vacancy rates and lower rents on NOIs, while buyers’ and sellers’ expectations appear to be narrowing. As a result, activity will rebound gradually this year, and long-term upside in properties can likely be realized by investors taking action by year end. Owners who do not regard their properties as long-term hold-ings may fi nd that prices have dropped suffi ciently to justify a redeploy-ment of capital into larger assets that offer greater upside. Some of these properties were likely out of reach for investors during the middle of the decade, when prices rose steeply and competition was more intense. Areas of interest in 2010 will include communities in the northern portion of the county, such as Jupiter and Palm Beach Gardens.

2010 Market Outlook

◆ 2010 NAI Rank: 41, Down 5 Places. Steep rent declines are forecast in West Palm Beach this year, causing the market to fall fi ve places in the ranking.

◆ Employment Forecast: Reductions in fi nancial activities and profession-al and business services employment will contribute to the loss of 2,000 positions in Palm Beach County this year. In 2009, local employers shed 15,000 jobs.

◆ Construction Forecast: No rental units were completed in the county last year. In 2010, though, 400 units are expected to come online.

◆ Vacancy Forecast: After climbing 90 basis points in 2009, the vacancy rate in Palm Beach County is forecast to rise 80 basis points this year to 9.6 percent.

◆ Rent Forecast: A second consecutive year of slumping demand will force many owners to enact deeper rent cuts. Asking rents are projected to de-cline 6 percent to $997 per month in 2010, and effective rents are forecast to recede 6.8 percent to $914 per month.

◆ Investment Forecast: In 2010, investors will likely be more able to obtain either agency or local bank debt for stabilized assets selling for less than $10 million.

Market Forecast Employment: 0.4% ▼ Construction: N/A*** Vacancy: 80 bps ▲ Asking Rents: 6.0% ▼

West Palm BeachDown 5 Places 2010 Rank: 41 2009 Rank: 36

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National Multi Housing Group

Marcus & Millichap’s National Multi Housing Group (NMHG) is comprised of experienced and quali-fi ed multifamily investment professionals who provide advisory and transaction services across the country. This national team of multifamily experts provides private investors, institutions, invest-

ment advisers and developers with custom disposition, acquisition and market analysis capabilities through an expertly managed process.

Turning Expertise into Investor Value

Setting the Standard for Market and Asset Analysis

■ The foundation of our ability to create investor value is our approach to analyzing multifamily properties and markets. From thorough submarket research, including detailed inspection of competing assets and forecasting supply/demand trends, to comprehensive analysis of income and expenses, every factor is examined to compile a credible assessment of the investment’s current and future value.

Integrating Research, Marketing and Transaction Expertise

■ Our NMHG professionals work with clients to formulate the right marketing strategy and execute each transaction with maximum effi ciency and confi dence. The combination of our specialized research, fi nan-cial analysis and marketing experience has resulted in an impressive list of satisfi ed clients and a large volume of repeat business.

Unprecedented Marketing Capacity; Tightly Coordinated Process

■ For each assignment, a team of qualifi ed multifamily specialists is formed by the NMHG based on the project and the specifi c objectives of the client. A custom marketing strategy is then designed to assure the proper exposure, investor targeting and control.

Unparalleled Access to Private and Institutional Investors

■ Our NMHG management and multifamily professionals are in constant communication with institutional investors as well as high-net worth individuals, syndicators and developers. Our 39-year history of main-taining personal relationships with a diverse base of investors creates the most effective exposure to the right investors. The result is maximum value through a reliable and timely process.

For more information, contact:

Linwood C. ThompsonManaging Director, National Multi Housing GroupMarcus & Millichap500 Northpark Town Center1100 Abernathy Road, N.E.Building 500, Suite 600Atlanta, Georgia 30328Tel: (678) [email protected]






Marcus & Millichap Capital Corporation provides owners and investors access to the most competitive real estate fi nancing through prominent national and regional lenders. Our network of experienced and dedicated fi nance professionals assures that each refi nance, acquisition or development fi nanc-

ing receives the ideal rate and terms available in the marketplace. Each transaction is executed through a reliable and closely managed process.

Experience, Relationships Produce Optimal Financing

Specialized Financing Expertise

■ Our national team of fi nance professionals has specialized experience in providing fi nancing for a full range of investment property types. Our goal is to secure the most competitive fi nancing in both loan terms and proceeds by leveraging our expertise in local real estate markets as well as the national capital markets.

Proactive Loan Package Design

■ Our fi nancing experts optimize the loan package, structure and terms based on the specifi c needs and objectives of the client. From the application process to lender selection and managing the funding, we use a proactive approach to simplify the entire process for the client.

■ The track record and market knowledge of our representatives play a critical role in designing the right loan package up front. Each transaction is positioned to achieve the best fi nancing before the application process begins. Based on the latest local real estate market conditions, we produce a detailed assess-ment of the subject property and current capital market conditions.

A Broad Selection of Lender Relationships

■ Through our long-term relationships with well-established and respected lenders, our professionals are able to secure the right fi nancing, with the most attractive rates and terms, for each transaction.

■ Reliability and the ability to deliver the ideal fi nancing package on time are key aspects of our lender selection, which includes commercial banks, securitized lenders, Fannie Mae, Freddie Mac, life insur-ance companies and other capital sources. Only lenders with a proven history of execution are chosen on behalf of our clients.


William E. HughesManaging Director, Marcus & Millichap Capital Corporation19800 MacArthur Blvd., Suite 150Irvine, California 92612Tel: (949) [email protected]

Marcus & Millichap Capital Corporation


Marcus & Millichap’s Research Services group utilizes a two-tiered approach of combining local mar-ket research with national economic and real estate analysis to develop premier research services for real estate investors. Marcus & Millichap’s research capabilities are customized by property

type to service the unique needs of owners and investors in various property sectors. Market reports are produced on a regular basis in addition to specifi c submarket and area analyses to support clients’ invest-ment decisions.

Fact-Based Investment Strategies

Multifamily Demand Analysis

■ Extensive demographic analyses are performed, including studies of population, age, employment, edu-cation, income and traffi c volume. Housing affordability, household formation and housing value trends are tracked and analyzed for their impact on renter demand. Customized maps and reports are produced for submarket and property comparisons.

■ Comprehensive economic analysis and forecasts are produced based on data provided by respected pri-vate, academic and government sources. Indicators such as job formation, growth by industry, major employers and income trends are monitored constantly.

Multifamily Property Analysis

■ Marcus & Millichap Research Services routinely updates and analyzes rents, vacancies, sales and construc-tion activity nationally.

Financial Analysis

■ Our team works closely with clients to create fi nancial analysis scenarios supporting acquisition, disposi-tion and pricing strategies.

Customized Research and Consulting Services

■ In addition to multifamily publications and reports, we provide customized market studies, property and portfolio analysis, and development feasibility studies. These services are designed to help clients formu-late strategies ranging from acquisitions and dispositions to maximizing returns during the hold period.


Hessam NadjiSenior Vice President, Managing Director, Research ServicesMarcus & Millichap2999 Oak Road, Suite 210Walnut Creek, California 94597Tel: (925) [email protected]

Research Services



National Multi Housing GroupLinwood C. Thompson, Managing Director,


National Research TeamJohn Chang, National Research ManagerBryan O’Keefe, National Client Services ManagerSarah Brewer, Research AdministratorMichael Brown, Research AnalystAmber Bryan, Assistant EditorGreg Clemmer, Division Research ManagerDavid Delich, Research AnalystArt Gering, Senior Market AnalystJosh Gisselquist, Research AnalystSteve Hovland, Division Research ManagerErica Linn, Senior AnalystJon McNulty, GIS AnalystPeter O’Neil, Senior Market AnalystJarrod Thuener, Data AnalystMichael Yeager, Research Associate

Communications/Graphic DesignMichelle Cocagne, First Vice President,

Corporate CommunicationsJohn Sterns, Marketing ManagerStacey Corso, Public Relations Manager

Contact:John ChangNational Research Manager2398 E. Camelback Road, Suite 550Phoenix, Arizona 85016Tel: (602) 687-6700, ext. 6803Fax: (602) [email protected]

Managing DirectorsHarvey E. Green, President and Chief Executive Offi cerTel: (818) 212-2700 | [email protected]

Linwood C. Thompson, Senior Vice President, Managing DirectorNational Multi Housing GroupTel: (678) 808-2700 | [email protected]

Gary R. Lucas, Senior Vice President, Managing DirectorTel: (415) 963-3000 | [email protected]

Bernard J. Haddigan, Senior Vice President, Managing DirectorNational Retail Group, Specials Assets ServicesTel: (678) 808-2700 | [email protected]

John J. Kerin, Senior Vice President, Managing DirectorTel: (818) 212-2700 | [email protected]

Hessam Nadji, Senior Vice President, Managing DirectorResearch ServicesTel: (925) 953-1700 | [email protected]

Stuart E. Kaiser, Senior Vice President, Managing DirectorChief Financial Offi cerTel: (818) 212-2700 | [email protected]

William E. Hughes, Senior Vice President, Managing DirectorMarcus & Millichap Capital CorporationTel: (949) 419-3200 | [email protected]

Kevin A. Assef, Senior Vice President, Managing DirectorTel: (909) 456-3400 | [email protected]

Paul S. Mudrich, Senior Vice President, Managing DirectorChief Legal Offi cerTel: (650) 396-1900 | [email protected]

Gene A. Berman, Senior Vice President, Managing DirectorTel: (954) 245-3400 | [email protected]

Alan L. Pontius, Senior Vice President, Managing DirectorNational Offi ce and Industrial Properties GroupTel: (415) 963-3000 | [email protected]

Steven R. Chaben, Senior Vice President, Managing DirectorTel: (248) 415-2600 | [email protected]

National Apartment Index Note: Employment and apartment data forecasts for 2010 are based on the most up-to-date information available as of October 2009 and are subject to change. Due to the unprecedented depth and duration of the recession, the 2009 NAI was re-benchmarked to account for each market’s actual rent, vacancy and construction performance. Market coverage has been expanded to include Louisville.

Statistical Summary Note: Metro-level employment, vacancy, and annual asking and effective rents are year-end fi gures. Effective rent is equal to asking rent less concessions. Median prices and cap rates are a function of the age, class and geographic area of the properties trading and therefore may not be representative of the market as a whole. Forecasts for employment and apartment data are made during the fourth quarter.

Sources: Marcus & Millichap Research Services, American Council of Life Insurers, Blue Chip Economic Indicators, Bureau of Economic Analysis, California As-sociation of Realtors, California Employment Development Department, Commercial Mortgage Alert, CoStar Group Inc., Deutsche Bank, Dupre + Scott Apartment Advisors Inc., Economy.com, Fannie Mae, Federal Reserve, Foresight Analytics, Freddie Mac, Morgan Stanley, Mortgage Bankers Association, National Association of Realtors, National Council of Real Estate Investment Fiduciaries, National Real Estate Index, Real Capital Analytics, Real Data, Real Estate Center at Texas A&M University, RealFacts, RealPoint, Reis, Standard & Poor’s, The Conference Board, Trepp, TWR/Dodge Pipeline, U.S. Bureau of Labor Statistics, U.S. Census Bureau, U.S. Securities and Exchange Commission, U.S. Treasury Department.

© Marcus & Millichap 2009




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