More #Multifamily REITs Looking Beyond Primary Markets

The strategies pursued by three of the major apartment REITs — Home Properties, Mid-America Apartment Communities, and AvalonBay Communities — are indicative of the changing dynamic in the multifamily housing investment market. With a number of investors bidding up prices for higher quality apartment communities in the nation’s top markets, many of America’s apartment REITs are increasingly focusing their development activities in the core markets while also looking to invest in secondary markets outside of the major urban cores. Mid-America Apartment Communities Chairman and CEO H. Eric Bolton Jr., in particular, likes what he sees in the secondary markets. “Within our large market segment of the portfolio,” he states, “latest projections suggest a ratio of just over eight jobs to each new unit expected to be delivered next year, which is stronger than the last up-cycle we had over the 2004 to 2007 timeframe. Within our secondary market segment, the story is even better, with a job growth to new supply ratio projected to be just over 10-to-one in 2013.” Meanwhile, AvalonBay Communities Inc. continues to have a strong major market presence, with apartment communities concentrated in Northern and Southern California, Seattle, the Mid-Atlantic region, Boston, and New York. Nevertheless, it has been looking more and more closely at the “exurbs” in its major markets. AvalonBay President Timothy J. Naughton concludes, “Clearly over the last 10 years, urban has outperformed suburban. On the other hand, that hasn’t gone unnoticed by the market and that’s been reflected certainly in asset pricing and in land pricing. So, our view is to pursue more of a mixed strategy.”

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