Some Suburban and Urban Apartment Investment Returns Are Equal
Digested from “In ‘Good’ Suburbs, Apartment Investment Returns Match the Urban Core”
Property Management Insider (4/14/15) Parsons, Jay
Generally speaking, investment returns for apartment communities in central business districts (CBDs) of the nation’s core 50 markets outrank the returns of apartments in the suburbs. However, apartments in economically healthy suburbs — or “good suburbs” — produce investment returns similar to apartments in CBDs, according to an analysis by MPF Research.
MPF Research defined “good suburbs” as those that had at least 3 percent net employment growth over the last six years, and average monthly rents higher than those of their parent metro area’s average.
Using the National Council of Real Estate Investment Fiduciaries’ database of apartments owned by institutional investors, MPF Research found that both apartment communities in “good suburbs” and in CBDs within the same metro area returned 12.5 percent over the last four years.
MPF Research predicts that, over the next few years, “good suburbs” will experience better rent growth than CBDs because of stable supply — compared to growing supply in CBDs — but continuing strong demand.