NATIONAL APARTMENT RESEARCH REPORT FORECAST. a Berkshire Hathaway and Jefferies Financial Group company

Transcription

1 NATIONAL APARTMENT RESEARCH REPORT FORECAST 219 a Berkshire Hathaway and Jefferies Financial Group company

2 The Value of Certainty Berkadia is an industry-leading real estate company. We provide comprehensive capital solutions and investment sales advisory and research services for multifamily and commercial properties, and rank among the largest, highest rated and respected master and primary servicers in the industry. $25 BILLION Berkadia s 218 loan origination volume surpassed $25 billion. $37 BILLION Since 213, our investment sales division has closed more than 2,6 transactions, totaling over $37 billion. 2, TRANSACTIONS Over 2, transactions financed throughout our history. $19 BILLION Total historical sales by our investment sales advisors exceed $19 billion. $23 BILLION One of the largest loan and servicing portfolios worldwide at more than $23 billion. 61 OFFICES 61 offices nationwide, covering all major markets. a Berkshire Hathaway and Jefferies Financial Group company

3 FORECAST 219 TABLE OF CONTENTS NATIONAL TRENDS 2 ALBUQUERQUE 4 ATLANTA 5 AUSTIN 6 BALTIMORE 7 BATON ROUGE 8 BIRMINGHAM 9 CHARLESTON 1 CHARLOTTE 11 CHATTANOOGA 12 CHICAGO 13 CINCINNATI 14 CLEVELAND 15 COLORADO SPRINGS 16 COLUMBUS 17 DALLAS-FORT WORTH 18 DENVER 19 DES MOINES 2 DETROIT 21 EL PASO 22 GREENVILLE SC 23 HOUSTON 24 INDIANAPOLIS 25 INLAND EMPIRE CA 26 JACKSONVILLE 27 KANSAS CITY 28 KNOXVILLE 29 LAS VEGAS 3 LEXINGTON 31 LOS ANGELES-NORTH 32 LOS ANGELES-SOUTH 33 LOS ANGELES-WEST 34 LOUISVILLE 35 MEMPHIS 36 MILWAUKEE 37 MINNEAPOLIS-ST. PAUL 38 NASHVILLE 39 NEW ORLEANS 4 OMAHA 41 ORANGE COUNTY CA 42 ORLANDO 43 PHILADELPHIA 44 PHOENIX 45 PORTLAND 46 RICHMOND 47 SACRAMENTO 48 SALT LAKE CITY 49 SAN ANTONIO SAN DIEGO 51 SAN FRANCISCO 52 SAN JOSE 53 SEATTLE-TACOMA 54 SOUTH FLORIDA 55 ST. LOUIS 56 TAMPA-ST. PETERSBURG 57 TUCSON 58 TULSA 59 VENTURA COUNTY CA 6 VIRGINIA BEACH 61 WASHINGTON, D.C. 62

4 NATIONAL TRENDS ECONOMY AND APARTMENT SUPPLY The U.S. economy reached its second-longest expansion in the post-war era, as employment grew 1.6%, or by 2.4 million workers, in 218. Job creation accelerated from 217 as nearly every employment sector posted gains. White-collar industries continued to grow, with 517,6 workers added in the professional and business services sector to lead job creation over the last four quarters. These typically higher-paying positions contributed to national wages rising 3.6% annually through the third quarter of 218, outpacing the preceding five-year average of 3.%. The rise in payrolls and wages along with positive contributions from personal consumption expenditures and federal government spending contributed to a 2.8% increase in real gross domestic product annually through the fourth quarter of 218. The expansion cycle is expected to continue through this year with nearly 2. million jobs added for 1.3% growth. At the same time, real GDP is forecast to expand between 2.4% and 2.7% this year. Change (mil) U.S. EMPLOYMENT GROWTH Percentage Change U.S. EMPLOYMENT GROWTH % % %.8.6%..% *Estimate; **Forecast Source: Berkadia, BLS, TOP METROS: EMPLOYMENT GROWTH Change While national employment growth remained strong in 218, several major markets significantly outperformed the national trend. Approximately half a dozen large markets expansion more than doubled the national rate. The recovery from Hurricane Harvey as well as the rebounding energy industry led to Houston employers adding a national-leading 111, net jobs, expanding the work force 3.6%. The New York and the Dallas-Fort Worth markets also each gained more than, jobs last year, both of which were boosted by hiring in the professional and business services sector. While job creation is forecast to moderate in 219, these markets are expected to lead hiring again this year. Change 218 (ths)* Percentage Change TOP METROS EMPLOYMENT GROWTH Houston NY Dallas-Fort Worth Phoenix S. Florida L.A. D.C. SEA-TAC *Estimate Source: Berkadia, BLS, Atlanta Boston 5% 4% 3% 2% 1% % Change 218* Units Completed (ths) U.S. PIPELINE U.S. Construction Pipeline A rise in the labor force contributed a sharp increase in household formation in recent years. Apartment developers have worked to meet the housing demand. While additions last year moderated from the postrecession peak in 217, nearly 31,4 marketrate units came online in 218. Supply growth was concentrated in the core of most major metros, with more than half of units delivered in the top third of most-expensive markets to build. National inventory growth is expected to continue to taper as more than 284,6 units are scheduled to come online over the next four quarters. Part of the slowdown comes amid labor shortages, rising construction costs, and concerns of oversupply in some markets. *Estimate; **Forecast Source: Berkadia, Axiometrics TOP METROS: SUPPLY GROWTH 218 PERFORMANCE HIGHLIGHTS Units Completed 218 (ths)* 2 1 Units Occupancy 3 TOP METROS SUPPLY GROWTH Dallas-Fort Worth New York Denver D.C. SEA-TAC S. Florida L.A. West Atlanta Chicago Austin 97% 95% 93% 91% Occupancy 218* EMPLOYMENT CHANGE 2,423,2 1.6% YOY $1, % YOY 95.4% 3 BPS YOY 31,397 UNITS 3.3% YOY *Estimate Source: Berkadia, Axiometrics 2 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

5 ,, AND INVESTMENT TRENDS $1,4 $1,2 $1, U.S. AND $6 92% *Estimate; **Forecast Source: Berkadia, Axiometrics 99% 98% 97% 96% 95% $8 TOP METROS: HIGHEST Minn-St. Paul NY Sacramento Effective Rent U.S. AND *Estimate Source: Berkadia, Axiometrics Occupancy 217 Occupancy 218 Occupancy* TOP METROS HIGHEST L.A. South Detroit The rise of single-family home prices, the drop in existing home sales, and the increase in apartment leasing activity indicated renting remained an attractive option for many U.S. residents. Apartment occupancy elevated 3 basis points annually to an average of 95.4% in the fourth quarter of 218. Driving this rise was affordability of housing, as occupancy was highest among Class C stock, running basis points higher than the overall average. With the decline in affordability of homeownership, still-tight mortgage origination standards, and low inventories of homes, demand for apartments is expected to persist. Leasing activity is forecast to trail inventory growth to shift occupancy back to 95.1% by year-end. 219 PERFORMANCE HIGHLIGHTS Orlando L.A. North Inland Empire San Diego 96% 95% 93% SF-OAK In 218, occupancy elevated as the annual effective rent growth accelerated. After rising 2.6% in 217, effective rent advanced 2.8% last year to $1,333 per month by December. Effective rent growth among suburban product outpaced stock in the urban core, as operators faced increased competition that required them to offer concessions as incentives to potential renters. Operators in lower-rent markets in the Sun Belt region capitalized on vigorous growth in employment and population. All the top five markets with more than 5% average effective rent increase were within this region. Nationwide, operators are expected to keep upward pressure on rent as payrolls continue to rise. Effective rent is forecast to rise 3.% over the next four quarters to finish the year at an average of $1,373 per month. While rent increases will remain strongest in the Sun Belt markets, Sacramento should return to one of the high-growth areas. Multifamily remained an appealing investment in commercial real estate. Preliminary sales data for 218 indicated a 4.6% increase in annual transactions from the year prior. With cap rates averaging an all-time low of 5.3% last year, investors searched for yield in secondary markets with stronger population and employment growth. While foreign buyers, especially from Asia and the Middle East, were less engaged in the U.S. apartment market, the rise in private investors made up the difference. Buyers were again most active in the New York City and the Los Angeles markets. The strength of the U.S. apartment market was further highlighted as the average price per unit purchased elevated 8.% year over year to $156,612 in 218. Effective Rent Growth 218* TOP METROS: GROWTH 8% 6% 4% 2% % Las Vegas Orlando Phoenix TOP METROS GROWTH Jacksonville *Estimate Source: Berkadia, Axiometrics Tucson $1,11 $1,229 $1,45 $1,24 $777 $892 $1,476 $1,162 $1,388 $1,951 U.S. APARTMENT INVESTMENT Knoxville Inland Empire Tampa-St. Pete. Sacramento L.A. North EMPLOYMENT CHANGE 1,9,6 95.1% $175, $1, Price Per Unit U.S. APARTMENT INVESTMENT Cap Rate 7.5% 7.% 1.3% YOY 3 BPS YOY $125, 6.5% $1, ,623 UNITS $, $75, 6.% 5.5% 3.% YOY 5.6% YOY $, * 5.% *Estimate; Property Sale $2.5 Million+ Source: Berkadia, Real Capital Analytics Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 3

6 ALBUQUERQUE 218 REVIEW Changes in the Albuquerque economy and apartment market in 218 consistently followed the moderate course observed over the last few years. Employers added 5,7 workers to local payrolls, a year-over-year gain of 1.4%, compared to an average 1.2% annual increase during the prior three years. Sitel Group hired 4 workers in the last half of 218, boosting the professional and business services sector which expanded 5.8% annually with 3, new jobs. Since the recession, a large portion of Albuquerque s new jobs has been in the lower-paying leisure and hospitality and the education and health services sectors. These workers are prime candidates for apartment living, especially since a typical monthly home mortgage exceeds average apartment rent by about 39%. Renters newly occupied 363 apartments in 218. Leasing activity trailed 4 apartment deliveries, the highest annual completions since 215. The supply imbalance resulted in a 2-basis-point annual reduction in occupancy to 94.2% by year-end. During the same period, monthly effective rent advanced 2.1% to $814. 5,7 1.4% YOY $ % YOY 916,6 218 PERFORMANCE HIGHLIGHTS 7.% 6.8% 6.6% 6.4% 6.2% 372,2 363 Units $12, $11, $, $9, $8, AND $54, % 2 BPS YOY 4 Units 12.4% YOY 18.% YE 218.4% YOY YE 218.6% YOY YE % YOY YE BPS YOY Index Value (Base Year 213 = ) 6, 4, 2, -2, $8 $8 $7 $7 4.2% 14 BPS YOY -4, 94.5% 94.% 93.5% 93.% $6 92.5% 13 19** AND DELIVERIES 13 19** 219 PREVIEW Local employers are projected to fill 4,7 new jobs in 219, an annual increase of 1.2%. A number of mass hirings will underpin the local economy over the next several years. Netflix Inc. plans to spend $1 billion in production in the area over the next 1 years, and this activity will support 1, new jobs in the local information industry. TaskUs LLC will bolster the professional and business services sector as the company creates 7 jobs through 223. In the leisure and hospitality sector, 325 full- and part-time positions will be filled when Topgolf opens this year. In the multifamily market, apartment absorption is expected to be on par with deliveries in 219, yielding average occupancy of 94.2% in December, the same as year-end 218. Effective rent is forecast to reach $834 per month by December, a 2.5% annual increase, outpacing the five-year average by 2 basis points. Only 419 new apartments are anticipated to be delivered in the next two years. Additionally, builders plan to break ground on more than 1,7 units through 22, meaning many of those units will not come online until after 221. Limited inventory growth may portend favorable occupancy and rent trends in the near term. 4 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

7 ATLANTA 218 REVIEW Rent growth accelerated in the Atlanta area in 218 as apartment deliveries and demand slowed. Effective rent rose an average of 3.4% last year to $1,176 per month in December, 6 basis points higher than nationwide rent growth. The rate of rent appreciation in upper-tier apartments increased at a slower pace than lower-rent units, particularly in the urban core, due in part to the sheer number of new apartments and the resulting competitive environment. Metrowide occupancy was 93.9% by yearend, 1 basis points lower than December 217. The reduction in the occupancy rate was spurred by leasing activity that trailed deliveries by 33%. Builders delivered 9,257 units in 218. More than 61% of new inventory followed the narrow swath from Downtown Atlanta through Midtown and Buckhead to Sandy Springs. The majority of these new units were high-end apartments, though similar new product also appeared in some of the outlying submarkets. In the labor market, employers added 54,7 workers to payrolls, a 2.% annual increase. 54,7 2.% YOY $1, % YOY 218 PERFORMANCE HIGHLIGHTS 7.% 6.5% 6.% 5.5% 5.% $, 6,51,9 $13, $11, $9, $7, Index Value (Base Year 213 = ), 75,, 25, $1,3 $1,2 $1, $1, $9 3.7% 6 BPS YOY 2,219,3 6,167 Units AND 94.5% 94.% 93.5% 93.% 92.5% $8 92.% 13 19** 1 $65, % 1 BPS YOY 9,257 Units 32.% YOY 21.5% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 15, 1, 5, 13 19** 219 PREVIEW The local economy and multifamily market will continue on an upward track in 219. Developers have 11,667 apartments scheduled for completion this year. Leasing activity will rise sharply along with the increase in deliveries, though is expected to trail completions by approximately 11%, resulting in a 1-basis-point dip in occupancy to 93.8% in December. The rise in leasing activity will prompt operators to increase monthly effective rent to $1,219 by December, a 3.6% year-over-year gain. Renters looking for new apartments will discover many options outside the urban core. Nearly twothirds of new stock this year will emerge outside the Downtown/Midtown/Buckhead/ Sandy Springs corridor. Local employment is forecast to expand 1.6% in 219 with 45,9 hires, many of whom will need multifamily housing. Rising employment, corporate and regional office relocations to the area, healthy in-migration, and a well-educated workforce will create demand for new apartment stock near employment centers. Atlanta s diverse pool of renters will also seek other apartment classes. Demand for mid-tier apartments is expected to remain healthy, largely because Class A rent premium is typically about 2% higher than B/B+ product. For the investor, this means potential headroom for rent increases among middle-tier assets. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 5

8 AUSTIN 218 REVIEW Apartment developers continued to invest in the growing Austin metropolitan area amid sustained demand for housing. Builders brought nearly 8,7 units online in 218. A large share of the deliveries was in the Southwest submarket, where residents are in proximity to Downtown Austin, the Southwest Parkway, and the Barton Creek Greenbelt. The latest metrowide additions were part of nearly 3% apartment inventory growth since 21. Strong structural tailwinds such as a robust economy and ideal demographics helped apartment demand nearly keep pace with the onslaught of new deliveries. Above all, Austin has benefited from an educated young workforce that has helped attract high wage industries like clean technology, software and digital media, and advanced manufacturing companies. Overall, employment expanded 2.4% in 218. Despite healthy absorption last year, supply-side pressure shifted apartment occupancy down 2 basis points annually to 94.%. At the same time, monthly effective rent advanced 1.6% to $1,28 in December. 24,9 2.4% YOY $1,28 1.6% YOY 6.5% 6.% 5.5% 5.% 4.5% $75, 2,23, 3.% 1 BPS YOY $175, $1, $125, $, Index Value (Base Year 213 = ), 4, 3, 2, 1, $1,3 $1,2 $1, $1, AND 95.% 94.5% 94.% 93.5% $9 93.% 13 19** 218 PERFORMANCE HIGHLIGHTS 842,8 7,668 Units $76, % 2 BPS YOY 8,666 Units 11.% YOY 18.9% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 12, 9, 6, 3, 13 19** 219 PREVIEW Abundant land and strong demographics bode well for the future of the Austin market. Because business costs are much cheaper in the Silicon Hills of Austin than in the Silicon Valley of California, technology companies have been relocating their headquarters or opening satellite locations in Austin for years. Part of the growth will come this year as grocer H-E-B opens a technology center in the East Austin submarket that will employ several hundred people. These new jobs will be a part of 2.4% overall employment growth forecast this year, matching the expansion in 218. A healthy job market will attract people to Austin, as net migration is expected to reach 41, people. As more residents look for housing, renting will remain an attractive option as single-family home prices continue to grow. This demand will result in a year-over-year increase in apartment leasing activity. Even with the rise, net absorption will trail the approximate 8, units scheduled to come online by year-end, resulting in a 1-basispoint dip in occupancy. At 93.9%, occupancy will be on par with the 1-year average. Apartment operators will capitalize on healthy occupancy by advancing effective rent on average 2.5% this year to $1,238 per month in December. 6 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

9 BALTIMORE 218 REVIEW Continued redevelopment is spurring revitalization in the Baltimore metro. With projects like Port Covington in the Baltimore City East submarket underway, developers are creating economic opportunities as well as luxury living options for current residents and incoming millennials. Overall, builders brought more than 3,3 units online in 218. Inventory growth trailed rental demand as occupancy elevated 4 basis points annually to 94.6% by year-end 218. Contributing to the rental demand was a rise in payrolls. grew 1.9% last year, which was more than double the workforce expansion during 217. A significant share of these new jobs was in the professional and business services industry, in which the median annual salary was $71,, compared to metro the median of $43,6. These affluent renters were attracted to the new stock in these redeveloping areas, as leasing activity was highest in the Downtown submarket. At the metro level, monthly effective rent advanced 1.4% to $1,288 in December. 26, 1.9% YOY $1, % YOY 7.% 6.5% 6.% 5.5% $, 2,817,6 $2, $1, $, Index Value (Base Year 213 = ) 3, 2, 1, $1,3 $1,3 $1,2 $1,2 $1,1 AND 95.% 94.8% 94.6% 94.4% 94.2% $1, 94.% 13 19** 218 PERFORMANCE HIGHLIGHTS 4.1% 1 BPS YOY 1,112,4 4,57 Units $83, % 4 BPS YOY 3,328 Units 15.% YOY 18.6% YE 218.2% YOY YE 218.8% YOY YE % YOY YE BPS YOY AND DELIVERIES 4, 3, 1, 13 19** 219 PREVIEW With over 22, apartment units delivered in the Baltimore metropolitan area since 21, multifamily developers are anticipated to scale back additions this year. Construction is scheduled to complete on more than 2,7 units by year-end, down nearly 18% from 218. Builders are focusing on adding apartments near employment hubs, with a metro-leading 968 units to begin lease-up in the Downtown submarket. Apartment development is expected to continue a slow decline beyond 219 as multifamily permitting issuance is forecast to decelerate 2.5% this year. The strategic planning bodes well for apartment operators across Greater Baltimore as sustained leasing activity should hold average occupancy at 94.6% year over year. At the same time, apartment operators are anticipated to advance effective rent 1.9% to $1,313 per month in December. Another positive indicator for the local apartment market will be continued employment growth. The labor force is forecast to expand 1.% in 219. Aiding job growth is Baltimore s position as a U.S. cybersecurity operations center. Three cybersecurity companies announced they will relocate to the Port Covington development in the Baltimore City East submarket. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 7

10 BATON ROUGE 218 REVIEW Baton Rouge apartment fundamentals were driven chiefly by supply-side pressure in 218. Construction remained elevated in the metro as builders were still replacing thousands of multifamily units that were destroyed by severe flooding in 216. To this end, employers in the construction sector ramped up hiring by 15.% last year, adding 7, new jobs to their payrolls. To address the metro s substantial housing needs, 1,227 units came online during 218, outpacing the 541 units absorbed. Occupancy fell to 91.5% during 218, while monthly effective rent was lowered by 2.9% to $917, both due to new product driving greater competition. Strong economic performance in 218, reflected in 2.4% job growth and the 9,8 jobs that were added to the workforce, encouraged investors to count on sustained apartment demand in the Baton Rouge metro as product is delivered. Major development projects that were completed last year included the 336- unit Park Rowe Village at Perkins Rowe and the 272-unit Springs at Juban Crossing. 9,8 2.4% YOY $ % YOY 9.% 7.% 5.% 3.% 836, $12, $9, $6, $3, Index Value (Base Year 213 = ) 15, 1, 5, $1,4 $1, $8 $ $ ** -5, AND 218 PERFORMANCE HIGHLIGHTS 4.5% 4 BPS YOY 326,3 541 Units 1,2 8 4 $54, % 12 BPS YOY 1,227 Units 13.3% YOY 2.2% YE 218.2% YOY YE 218.8% YOY YE % YOY YE BPS YOY 98% 96% 92% 9% AND DELIVERIES 4, 3, 1, -1, 13 19** 219 PREVIEW Operators are expected to increase monthly effective rent.8% this year to $925, a response to growing demand for multifamily housing in the metro. Additionally, leasing activity is expected to make a significant jump over the next 12 months as 1,512 additional units are absorbed by residents. growth will underpin a rise in demand as employers are forecasted to add approximately 4,7 jobs to the Baton Rouge metro in 219, a gain of 1.1% annually. Driving additions to local payrolls is expansion in the health care industry, with a new children s hospital and cancer treatment center expected to open in the Baton Rouge Medical District by the end of the year. Sports and entertainment venue Topgolf will open a new location in Baton Rouge early in 219, promising another 3 new hires to start the year. Additionally, IBM Corporation is expected to fill 225 new jobs in the Baton Rouge metro by yearend. Due in part to the second-consecutive year of jobs growth, metrowide apartment occupancy is expected to rise to 92.9% next year, an increase of 14 basis points even as 879 units are scheduled to come online. Multifamily construction will slow in 219 but continue to exceed the five-year average. 8 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

11 BIRMINGHAM 218 REVIEW The recent uptick in income and job growth underpinned healthy apartment fundamentals in Greater Birmingham during 218. While the median household income advanced 1.% and employment expanded 1.5%, absorption exceeded inventory growth to push up average apartment occupancy to a year-end postrecession high. At 93.9%, the occupancy rate was up 6 basis points annually. Contributing to the rise was a sharp drop in annual apartment deliveries. Only 261 market-rate units came online last year, down from 733 deliveries in 217. Landlords capitalized on the drop in construction and elevated rents considerably in 218. After advancing 1.6% in 217, monthly average effective rent rose 3.% last year to reach $94 in December. While rent was considerably higher in the Central Birmingham/Mountain Brook submarket, recent renovations to the city s aging core commercial properties attracted developers and renters. The submarket occupancy and effective rent growth remained above the metro average. 8, 1.5% YOY 8% 7% 6% 5% $94 3.% YOY 4% $25, 1,156,4 $125, $, $75, $, Index Value (Base Year 213 = ) 1, 7, 5, 2, $9 $9 $8 $8 $7 $ ** -2, AND 218 PERFORMANCE HIGHLIGHTS 3.9% BPS YOY 471, 76 Units $53, % 6 BPS YOY 261 Units 64.4% YOY 2.4% YE 218.4% YOY YE 218.9% YOY YE % YOY YE BPS YOY 95% 93% 92% 91% 9% AND DELIVERIES 2, 1, -1, 13 19** 219 PREVIEW Sustained hiring bodes well for the future of the Birmingham apartment market. As Alabama has become a popular destination for automobile manufacturers, Birmingham has enjoyed a share of this growth. German automotive supplier MollerTech is developing a $46 million manufacturing plant in Bibb County, creating 2 high-paying jobs when the facility comes on line this year. Beyond this year, hundreds of positions will be added when Mercedes-Benz USA LLC begins production at a new battery manufacturing plant in Bibb County that will bring over 6 positions and Grupo Antolin opens a manufacturing facility in Jefferson County. Overall, total nonfarm employment is forecast to grow 1.1% annually with 5,8 net positions added. The rising labor force will keep demand for apartments positive, as absorption is forecast to exceed the 318 market-rate units scheduled to complete by year-end. Apartment occupancy is forecast to rise an additional 1 basis points year over year to 94.% by the fourth quarter. Rising occupancy amid an increase in payrolls portends well for apartment operators as new Class A stock commands a near- % premium compared to Class B stock. Overall, Greater Birmingham s effective rent is forecast to advance 2.7% annually to $928 per month by year-end. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 9

12 CHARLESTON 218 REVIEW Charleston s strong economic and demographic tailwinds provided a solid boost to apartment demand, pushing up leasing activity to a 1- year high as 3,1 units were absorbed last year. To keep pace with rising demand, multifamily developers accelerated deliveries, up 3% from new supply volume in 217. The largest project to complete in the last 12 months was the 438-unit The Haven at Indigo Square, which was among the more than 2, rentals to come online in the popular Downtown/ Mount Pleasant/Islands submarket. Deliveries were also considerable in the Summerville/ Northwest Charleston submarket where new supply quickly leased, precipitated by the midyear opening of Volvo Car Corporation s factory in that area. While heightened absorption lagged brisk construction, the occupancy rate in Greater Charleston dropped basis points annually, ending the year at 93.5%. The average effective rent was $1,8 in December, appreciating 1.3% in 218 compared to.5% rent growth in 217. Meanwhile, total nonfarm employment advanced 2.3% with 8,3 new jobs added in ,3 2.3% YOY 9% 8% 7% 6% $1,8 1.3% YOY 5% 792,2 $18, $14, $, $6, $2, Index Value (Base Year 213 = ) 15, 12, 9, 6, 3, $1,3 $1, $9 $7 $ $ ** AND 218 PERFORMANCE HIGHLIGHTS 2.7% 9 BPS YOY 318,4 3,1 Units $63, % BPS YOY 4,37 Units 3.4% YOY 2.4% YE % YOY YE % YOY YE % YOY YE BPS YOY 96% 95% 93% 92% 91% AND DELIVERIES 4, 3, 1, 13 19** 219 PREVIEW Supporting employment growth and the multifamily market this year are Volvo Car Corporation, Mercedes-Benz USA LLC, and Boeing Company, as these high-profile companies ramp up hiring in the metropolitan area. Charleston-based employers are projected to add 5,3 new jobs during 219, a 1.5% annual increase. While the 1,6-acre Volvo Car campus has been in full production since September 218, Volvo will invest an additional $ million and hire another 2, workers by 221 to build the XC9 sport utility vehicle. Furthermore, Mercedes-Benz Vans in Ladson, which recently expanded to produce Sprinter vans, plans to employ 1,3 people in the Lowcountry by 22. Sustained hiring will buoy apartment fundaments this year as annual absorption and deliveries are on pace to surpass the historical five-year averages. Most of the new supply will deliver in the Downtown/Mount Pleasant/Islands submarket. This area appeals to both newcomers and younger Charlestonians due to its proximity to the College of Charleston, the waterfront, and nightlife. Overall, elevated deliveries will outmatch net absorption causing a -basispoint annual decline in the average apartment occupancy rate to 93.% at year-end. Despite lower-than-average occupancy, effective rent is forecast to accelerate 1.8% year over year to $1,99 per month by December. 1 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

13 CHARLOTTE 218 REVIEW Population growth in the Charlotte-Concord- Gastonia metropolitan area continued to outpace the national average, in large part thanks to consistent job gains that have made the city an attractive landing spot for talented young professionals. Just over 26, jobs were added to the metro area in 218, a gain of 2.2% year over year, led by 8, jobs added in the trade, transportation, and utilities sector. Population growth driven by metrowide hiring also encouraged developers to continue a multi-year trend of elevated construction that began in 214. Approximately 7,7 units were brought online in the metro, a number just five units short of the previous year and one that exceeds the five-year average. Occupancy fell 2 basis points during this period to 94.6% as demand trailed construction with 6,936 units absorbed annually. Despite a downturn in occupancy over the past three years, strong economic and demographic tailwinds encouraged operators to raise rents. Effective rent ended the year at $1,73 per month, improving annually 2.8%. 26,2 2.2% YOY $1,73 2.8% YOY 9.% 7.% 5.% 3.% $3, 2,63,3 $12, $9, $6, Index Value (Base Year 213 = ), 4, 3, 2, 1, $1,4 $1, $8 $ $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.1% 12 BPS YOY 1,8,3 6,936 Units 1 $64, % 2 BPS YOY 7,74 Units.1% YOY 2.% YE % YOY YE % YOY YE % YOY YE BPS YOY 98% 96% 92% 9% AND DELIVERIES 1, 8, 6, 4, 2, 13 19** 219 PREVIEW Construction in the Charlotte metro this year will be concentrated in the Uptown/South End submarket, home to both the metro s growing business district, as well as the city s most popular nightlife venues and shopping destinations. The area will continue to attract businesses and new residents alike, thanks to a bevy of corporate expansions taking place in the metro. Investment firm Dimensional Fund Advisors has announced plans to open its East Coast headquarters in the heart of the Uptown/South End submarket by March of this year and expects to add more than 3 new jobs to the area by 22. Job growth will slow over the next 12 months, with 2,4 jobs added to payrolls, a gain of 1.7%, but the metro s rate of hiring is still expected to exceed a number of other major metros in the country. Positive economic fundamentals will encourage apartment operators to continue accelerating rent growth in Charlotte, which is predicted to increase by 3.7% this year to $1,112 per month. Construction will remain steady in the metro with another 7,77 units scheduled to come online this year. Occupancy will fall 4 basis points to 94.2% due to demand trailing deliveries, with 6,525 apartment units expected to be absorbed this year. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 11

14 CHATTANOOGA 218 REVIEW Although Chattanooga was a late-recovery metro compared to neighboring Knoxville and Nashville, job gains have picked up over the last several years. Chattanooga employment expanded 2.5% in 218, following 2.6% growth one year prior. Part of the 6,6 jobs added in 218 were attributed to Volkswagen Group, one of Chattanooga s fastest-growing companies, hiring 1, workers last year. The surge in education and health care jobs reflected growing payrolls at Blue Cross Blue Shield Association, Erlanger Health System, and the University of Tennessee at Chattanooga. After a supply shortfall in 217, multifamily builders brought 942 market-rate rentals online, a 22% year-over-year increase. Elevated deliveries surpassed absorption, tamping down the metrowide occupancy rate 4 basis points annually. Even with the decline, the 95.4% year-end occupancy rate was above the five-year average of 95.%. The median household income in Chattanooga jumped 3.5%, helping to offset the 2.5% annual rise in monthly effective rent, which averaged $96 per month in December ,6 2.5% YOY 9% 8% 7% 6% 5% $96 2.5% YOY 4% 562, $12, $, $8, $6, $4, $2, Index Value (Base Year 213 = ) 9, 6, 3, $1, $8 $6 $4 $ ** -3, AND 218 PERFORMANCE HIGHLIGHTS 3.5% 1 BPS YOY 23,7 781 Units 2 1 $,1 95.4% 4 BPS YOY 942 Units 21.5% YOY 21.5% YE 218.6% YOY YE % YOY YE % YOY YE BPS YOY 96% 95% 93% 92% AND DELIVERIES 2, 1, -1, 13 19** 219 PREVIEW Metrowide employment is forecast to rise by 3,7 workers this year, a gain of 1.4% that will support continued apartment absorption. With around 3, employees, Volkswagen Group plans to add 1, employees over the next few years to build a third VW model at the Chattanooga plant. Chattanooga has been making headlines as having a fast-emerging technology sector with a strong start-up ecosystem. Chattanooga s innovation district, a 14-acre section in downtown, clusters startups, nonprofits, and government entities in hopes of providing a competitive advantage to startups. To date, the district has attracted 671 companies with 14, employees contributing $865 million to the local economy. Even outside the innovation corridor, tech companies are thriving. FreightWaves, a logistics data and content provider, plans to enlarge its Hamilton County facility filling 26 new technology jobs. Encouraged by persistent job gains, developers remain confident about Chattanooga s apartment market. While 765 units are scheduled for delivery this year, more than 1,8 units across 11 multifamily projects are in the planning stage. In the near term, the occupancy rate will fall basis points to 94.9% in December. Operators will keep pressure on monthly effective rent, up 2.1% annually, averaging $925 by year-end. 12 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

15 CHICAGO 218 REVIEW The growing economy in Chicago boosted the apartment market in 218. After expanding.6% in 217, employment increased 1.% last year. A significant share of the additions was in the professional and business services and the financial activities sectors. Jobs in these high-paying sectors contributed to 2.4% annual growth in median household income. The rise in payrolls contributed to the substantial increase of rental households over the past decade. Apartment developers moved to meet the demand by elevating activity, capped by more than 9, new units in 218. The apartment supply surge was heavily concentrated around the central business district, targeting young, collegeeducated professionals seeking walkable, transit-oriented locations within proximity to employment nodes. Leasing activity remained positive though trailed inventory expansion in 218, leading to a 2-basispoint dip in average occupancy to 94.1% by year-end. At the same time, effective rent increased 1.1% last year to $1,427 per month by December. 46, 1.% YOY $1, % YOY 6.5% 6.% 5.5% 5.% $, 9,539, $2, $1, $, Index Value (Base Year 213 = ), 75,, 25, $1, $1,4 $1,3 AND 95.% 94.5% 94.% $1,2 93.5% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.8% 12 BPS YOY 3,729, 7,49 Units 2 1 $71, % 2 BPS YOY 9,9 Units 1.9% YOY 23.8% YE 218.1% YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 15, 12, 9, 6, 3, 13 19** 219 PREVIEW Apartment development will remain elevated in Greater Chicago, especially around the central business district and neighborhoods north of downtown this year. Annual deliveries will reach a postrecession high with more than 9,4 units scheduled to come online by year-end. In The Loop submarket, nearly 2,9 units should begin lease-up this year to represent the largest share of additions in the metro. Demand for apartments is expected to persist as young professionals seek out their own space instead of co-habitating with family or friends as the average household size has contracted and the homeownership rate has decreased. Also underpinning demand for housing will be sustained employment growth. Employers are forecast to add 43,9 net jobs for a.9% annual increase. Part of the new jobs will come as technology companies expand their presence in the metro. Google is expanding its Midwest headquarters in The Loop submarket this year. Metrowide leasing activity is forecast to outpace inventory growth to lead to a -basis-point annual increase in occupancy to 94.6% by year-end. To help keep occupancy healthy, builders are scaling back activity with construction underway on 55 properties to start 219 that are scheduled to bring 6,7 units online next year. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 13

16 CINCINNATI 218 REVIEW in the Cincinnati metro increased 1.5% in 218, a gain of 16,4 jobs and a major improvement over the previous year. Many jobs were in low-wage positions, further emphasizing the positive impact of job growth on apartment demand. Apartment operators increased effective rent 2.2% to $925 per month through December. Sustained demand for multifamily units in the suburbs played a role in elevating construction in 218, which exceeded the five-year average. Apartment developers added 1,881 units last year compared to 1,791 units that were newly occupied. Notably, last year s new deliveries were dispersed between several popular neighborhoods beyond the urban core, such as those in the Southeast Cincinnati submarket, rather than being concentrated in the revitalized downtown. Despite demand shifting from one submarket to several others, metrowide occupancy remained stable at 95.2% as deliveries just slightly trailed demand. 16,4 1.5% YOY $ % YOY 9.% 7.% 5.% 3.% $15, 2,198,3 $6, $45, $3, Index Value (Base Year 213 = ) 25, 2, 15, 1, 5, $1, $9 $8 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.6% 6 BPS YOY 874,2 1,791 Units 2 1 $66, % BPS YOY 1,881 Units 22.5% YOY 16.8% YE 218.5% YOY YE 218.9% YOY YE % YOY YE BPS YOY 98% 96% 92% AND DELIVERIES 2, 1, ** 219 PREVIEW Construction in the Cincinnati metro is expected to slow in 219 with 971 units scheduled to come online. Over a dozen multifamily developments were under construction in 218, compared to just five developments that are under construction this year. Occupancy in the metro will fall 4 basis points to 94.8% by December as absorption trails construction for a second-consecutive year. Another trend to pay close attention to in 219 is hiring, which is also expected to slow compared to the previous year. Employers will expand payrolls by 1.% over the next twelve months, expanding payrolls by 11, jobs. Despite the expected decreases in occupancy and the rate of employment growth trailing compared to the previous year, operators in the metro will continue to apply upward pressure on rents in the metro, increasing effective rent by 2.% year-over-year to $943 in December. Several major multifamily developments are still scheduled to come online this year, including the 259-unit One41 Wellington and the 25-unit Residences at AG47 developments. Consistent with the previous year, deliveries are split near evenly between the urban core and surrounding suburban submarkets. 14 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

17 CLEVELAND 218 REVIEW Federal tax changes and locally implemented recruiting and training programs gave Cleveland-area business owners and employers confidence to augment payrolls in 218. Businesses and institutions filled 27, new jobs last year, a 2.5% annual increase. Downtown revitalization and persistent economic expansion in University Circle were also major job growth drivers. Companies in the professional and business services sector hired 9,7 workers, a 6.4% annual surge. The rate of expansion was nearly as great in the leisure and hospitality industry, where 6, new positions were filled, a 6.3% gain. In the education and health services sector, institutions grew payrolls 2.2% as 4, workers were hired, many at the health care centers concentrated in University Circle. Apartment absorption in the metro mirrored the brisk job growth. Renters newly occupied 2,477 apartments in 218, surpassing the number of completions and lifting occupancy 4 basis points to 94.9% in December. Concurrently, monthly effective rent rose 1.5% to $99. 27, 2.5% YOY $99 1.5% YOY 1% 9% 8% 7% 6% $2, 2,53, $, $8, $6, $4, Index Value (Base Year 213 = ) 3, 2, 1, $9 $9 $8 $8 AND 95.5% 95.% 94.5% 94.% $7 93.5% 13 19** 218 PERFORMANCE HIGHLIGHTS 4.8% BPS YOY 871,4 2,477 Units 1 $57, % 4 BPS YOY 1,915 Units 63.7% YOY 19.% YE 218.2% YOY YE 218.2% YOY YE % YOY YE BPS YOY AND DELIVERIES 3, 2, 1, -1, -2, 13 19** 219 PREVIEW Apartment deliveries totaling 514 units are scheduled for 219. Most of the new supply will be distributed among four projects in the urban core. All four apartment communities are high-rise buildings ranging in size from the 122-unit, 12-story Residences at Halle to the 31-unit 52-story Terminal Tower. Three additional apartment communities are expected to break ground metrowide in 219, representing a total of 839 units. Two of the three apartment communities will be in the Central Cleveland submarket and together will represent 516 units. Another 23 multifamily developments are in earlier stages of the planning process. More than 6,9 units will be added to local inventory if all 23 developments are realized. This year, net apartment absorption is projected to decrease to 153 units. The reduced demand will be influenced in part by decelerating employment expansion in 219. Annual job growth is forecast to moderate to.8% approximating the historical norm as 9, jobs are created. The supply imbalance will spur a 2-basispoint reduction in occupancy to 94.7% in December. During the same period, average monthly effective rent is forecast to rise 2.7% to $934. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 15

18 COLORADO SPRINGS 218 REVIEW Job growth in Greater Colorado Springs was booming as employment increased 4.% annually, outperforming most major metros. Part of the 11,6 net jobs created came from high-profile defense contractors. Among them, Parsons Corporation added 455 employees, growing its cybersecurity and other advanced technologies businesses. Healthy job creation, household formation growth of 1.9%, and rising incomes propelled the local housing market. Average multifamily effective rent appreciated 3.8% year over year to $1,64 per month in December. Meanwhile, household earnings grew at a brisk 3.3% annual pace, partially offsetting the impact of rent increases. Apartment occupancy rates, despite a 7-basis-point decrease, ended the year at a still-healthy 95.3% amid heightened deliveries. In the in-demand North Colorado Springs submarket, effective rent advanced 3.% year over year to $1,234 in December. Contributing to the submarket growth trailing the metro was a rise in concessions as the bulk of new inventory for the market came online in North Colorado Springs. 11,6 4.% YOY 8% 7% 6% $1,64 3.8% YOY 5% 739, $175, $125, $75, $25, Index Value (Base Year 213 = ) 12, 9, 6, 3, $1,4 $1, $6 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.2% 4 BPS YOY 279, 611 Units 3 2 $69, % 7 BPS YOY 997 Units 56.3% YOY 18.4% YE % YOY YE % YOY YE % YOY YE 218 BPS YOY 98% 96% 92% AND DELIVERIES 1, 1, ** 219 PREVIEW Multifamily construction velocity in Colorado Springs is expected to remain heightened this year, for a 2.6% inventory expansion. If all 1,3 units come online as planned, this will be the metro s largest 12-month inventory gain since 23. Developers continue to focus on the northern portion of the Springs where demand has been most prevalent. The largest project under construction is the FalconView apartment community which broke ground in May 218 and will complete 288 units by year-end in the North Colorado Springs submarket. Identified projects and permit volumes suggest new supply in Colorado Springs should remain elevated in the near term. As apartment demand moderates to peak construction volume, a 7-basis-point decrease in the average occupancy rate is anticipated, shifting the rate to 94.6% in the fourth quarter. Meanwhile, effective rent is forecast to rise 3.7% annually, reaching $1,13 per month by December 219. will expand by 5,3 new positions this year, up 1.8%. Children s Hospital Colorado, under construction near multifamily development at Briargate on the north side of the metro, plans to hire more than 6 positions to support the new $154 million campus, set for a spring 219 opening. 16 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

19 COLUMBUS 218 REVIEW A steady supply of renters and a strengthening economy kept demand consistent and rent elevated in the Columbus metro in 218. The presence of the state government and The Ohio State University supported reliable multifamily fundamentals, while the presence of major companies like Boeing, DuPont, and Honda Motor Company brought high-paying manufacturing jobs to the metro. Overall, Columbus-area employers expanded payrolls by 2, new in 218, a gain of 1.8% over the previous year. Median household income increased 2.3% over the same period, trailing the national average but still indicative of employers adding higher paying jobs to the metro. Apartment operators, recognizing substantial demand for multifamily housing across the metro, increased effective rent in every submarket. Metrowide, rent increased by a healthy 3.7% to $934 per month. Developers brought 4,431 units online in 218, outpacing the five-year average, while 3,897 units were newly leased. As a result, occupancy fell 2 basis points to 95.8%. 2, 1.8% YOY $ % YOY 9.% 7.% 5.% 3.% $15, 2,114,8 $9, $65, $4, Index Value (Base Year 213 = ) 32, 24, 16, 8, $1,2 $1, $8 $6 $4 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.5% BPS YOY 838,4 3,897 Units $65, % 2 BPS YOY 4,431 Units 31.3% YOY 17.% YE % YOY YE % YOY YE % YOY YE BPS YOY 98% 97% 96% 95% 93% AND DELIVERIES 5, 4, 3, 2, 1, 13 19** 219 PREVIEW In 219, the metro will experience both softening apartment demand and fundamentals. Hiring is expected to slow nationally, a trend that will impact the Columbus metro. Area employers are expected to take on 13,8 new hires, a gain of 1.2%. Corporate relocations by companies like Root Insurance, growing its Columbus presence with 463 new positions through 221, and Amazon, creating 1, jobs in the metro by the end of this year, will continue to generate demand for multifamily housing. Furthermore, the presence of numerous aging industrial facilities, prime targets for creative redevelopments, adds another incentive for companies attracted to the metro for its affordability and quality of life. A chief example is The Avenue, mixeduse development scheduled for completion in 219 that replaces the former Dixie International warehouse and will include 31 multifamily units. Deliveries will exceed the five-year average once more with 3,729 units added to inventory through December. Residents are expected to absorb 2,663 units this year, leading to a decline of occupancy by basis points to 95.3%. Annual rent growth will slow to 2.7%, reaching $959 per month, as operators account for new supply amid slowing leasing activity. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 17

20 DALLAS-FORT WORTH 218 REVIEW The Dallas-Fort Worth metro area remained a popular destination for business growth and new residents in 218. In-migration exceeded 83,7 people, and employment expanded 2.8% with the addition of 11, jobs, fueling apartment demand. Renters occupied 24,177 additional apartments in 218. A surge of 26,467 new units outpaced leasing activity, resulting in metrowide occupancy of 94.3% in December, 1 basis points lower than one year prior. The Intown Dallas submarket, the neighboring Oak Lawn/Park Cities submarket, and the high-growth Richardson and Frisco submarkets to the north had the distinction of having some of the highest rents and sharpest increases in apartment inventory last year. This potent combination blunted rent appreciation in the four submarkets where annual effective rent growth ranged from -.5% to.7%. Less intense multifamily development was present in most of the other areas of the Metroplex enabling more liberal rent increases. Metrowide monthly effective rent reached $1,13 per month by December, a 1.9% annual gain. 11, 2.8% YOY 8% 7% 6% 5% $1,13 1.9% YOY 4% $, 7,611,8 $1, $125, $, $75, Index Value (Base Year 213 = ) 1,,, $1,2 $1, $1, $9 $8 AND 95.% 94.5% 94.% 93.5% 93.% $7 92.5% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.4% BPS YOY 2,7, 24,177 Units 1 $69, % 1 BPS YOY 26,467 Units 7.7% YOY 19.1% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 3, 24, 18, 12, 6, 13 19** 219 PREVIEW This year will look much like last year in terms of economic growth and apartment fundamentals. Local employers are forecast to create 86,7 jobs, a 2.3% year-over-year gain. As State Farm, Liberty Mutual Group, and Toyota Motor Corporation wrap up their relocations to the area, newly announced developments indicate optimism about continued economic vitality. Centurion American Development Group plans to redevelop the Collin Creek Mall in Plano into a mixed-use development featuring at least 6, square feet of office space and a 3-room hotel. The $8 millionplus development may begin as early as this year. Hunt Realty Investments Inc. plans to break ground this year on a massive office, retail, and residential development on 2,544 acres in Frisco. In the multifamily market, development will gain momentum in 219. Builders are scheduled to deliver 27,7 apartments metrowide. Significant inventory growth is expected in the urban core and to the north in the neighboring Frisco and Allen/McKinney submarkets. Metrowide absorption is forecast to rise from 218, but will trail deliveries, resulting in a 1-basispoint reduction in occupancy to 94.2% by year-end. Average effective rent is expected to reach $1,132 per month by December, a 2.6% annual gain. 18 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

21 DENVER 218 REVIEW Thanks to historic levels of construction in the Denver-Aurora-Lakewood metro area, operators continued raising effective rent last year. Rent increased 2.6% year over year to $1,428 per month in the fourth quarter as operators felt assured that the market was far from overbuilt. Supporting this strategy was employers adding 35,6 new jobs to the market and outpacing the national average of 1.6% with 2.4% local employment growth. Hiring was aggressive in the professional and business services sector, where 7, jobs were added. Thanks to a bevy of new highpaying positions, reflected by the metro s median household income increasing in 218 by 3.7%, developers felt confident in ramping up deliveries, including in the metro s centrally located submarkets. Last year, 11,533 units were brought online, outpacing the five-year average by a significant margin. Likewise the 1,313 units leased by year-end in 218 amounted to a postrecession high for absorption. Occupancy fell by 2 basis points to 94.3% to account for supply-side pressure. 35,6 2.4% YOY $1, % YOY 7.5% 6.% 4.5% 3.% $, 2,943,2 $2, $2, $1, Index Value (Base Year 213 = ) 6, 48, 36, 24, 12, $1,6 $1,2 $8 $ ** AND 218 PERFORMANCE HIGHLIGHTS 2.4% 6 BPS YOY 1,145, 1,313 Units 2 1 $78, % 2 BPS YOY 11,533 Units 47.% YOY 21.7% YE % YOY YE % YOY YE % YOY YE BPS YOY 96% 92% 9% AND DELIVERIES 15, 12, 9, 6, 3, 13 19** 219 PREVIEW Absorption in the Denver metro will remain elevated in 219, outpacing the five-year average for demand, as an estimated 9,554 units are filled through December. Supply-side pressure will cause occupancy to fall 2 basis points to 94.1%, but this will not shy operators away from accelerating rent growth in 219. Effective rent is expected to jump by 3.3% this year to $1,475 per month. Multiple factors will keep demand and rent in the Denver metro elevated as another 1,775 units are scheduled to come online over the same period. Denver remains a top destination for young professionals, and subsequently for tech firms competing for top talent. For example, VF Corporation plans to add jobs to the metro over the next few years after relocating to Denver in early 219. Overall, employers are expected to expand their payrolls 1.5%, adding 22,8 jobs by the end of the year. Additionally, improvements like the commuter rail expansions being completed this year will encourage development adjacent to and beyond the metro s competitive Downtown/ Highlands/Lincoln Park submarket. More projects are scheduled to come online this year in the adjacent Five Points/Capitol Hill/ Cherry Creek submarket, such as the 329- unit Radiant development, further evidence of demand extending beyond Denver s competitive urban core. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 19

22 DES MOINES 218 REVIEW Apartment demand was positive in the Des Moines-West Des Moines metro, supported by the metro s status as a financial services hub. Low operating costs encouraged corporate growth, a key draw for young renters starting their careers. Cognizant Technology Solutions Corporation, for example, hired the first wave of 1, new workers the company plans to add through 222. Overall, the metro experienced a 2.9% surge in job growth during 218 with 1,7 new workers. About 3, jobs were added in the construction sector, driven by hotel development in Downtown Des Moines. Multifamily construction was also strong last year, with 1,282 units brought online. Deliveries decreased from 217 and still exceeded the 1,63 units absorbed. Supplyside pressure contributed to a decline in occupancy in 218. The average occupancy rate settled at 94.1%, a 3-basis-point drop from year-end 217. Operators reduced the rate of rent growth from the prior year to help sustain leasing activity, increasing effective rent.6% to $896 per month. 1,7 2.9% YOY $896.6% YOY 9% 7% 5% 3% 2.4% 4 BPS YOY $8, $6, $4, $2, Index Value (Base Year 213 = ) 12, 9, 6, 3, $9 $9 $8 $8 94.1% 3 BPS YOY 1,282 Units 54.6% YOY AND 96% 95% 93% $7 92% 13 19** 218 PERFORMANCE HIGHLIGHTS 1,63 Units 663,2 266, $7, % YE % YOY YE % YOY YE % YOY YE BPS YOY 1 AND DELIVERIES 3, 2, 1, 13 19** 219 PREVIEW Effective rent growth is expected to accelerate this year in the Des Moines metropolitan area, increasing by 1.6% to $91 per month in December. Apartment developers are expected to curb construction this year, a move to allow multifamily demand to catch up with deliveries. A total of 63 units are scheduled to come online in the metro this year, just outpacing the 593 net units that are expected to be absorbed by residents. Nominal supply-side pressure will have a negligible impact on occupancy, which is expected to remain stable at 94.1% by year-end. One of the most important trends to follow in the metro during 219 is the shift of apartment development away from the Downtown Des Moines and into the adjacent West Des Moines/Dallas County submarket. Multiple projects, including the massive 522- unit Roger s Farm West development, are scheduled to deliver units to this submarket through the end of the year. Hotel construction is also expected to continue surging in the Downtown and West Des Moines, and this spike in development will continue to bolster hiring in the construction sector this year. Overall, metro employers are expected to create 4,2 jobs annually, a gain of 1.1%. 2 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

23 DETROIT 218 REVIEW Metrowide apartment fundamentals were favorable amid sustained job growth in 218. Local payrolls expanded.9% last year as 18,6 workers were hired. Leisure and hospitality sector expansion led with 7,6 new jobs, a 3.7% gain. New dining establishments in revitalized areas of Downtown and Midtown Detroit contributed to much of this growth. Continued progress at District Detroit and major projects including the $313 million renovation of Detroit s Book Tower building buoyed the construction industry, which expanded 6.1% with 4,4 new hires. Approximately 4,3 new jobs were filled in the education and health services segment, a 1.4% annual gain. Many of the workers taking jobs in these lower-paying employment sectors were ideal candidates for apartment rentals. Renters occupied 1,541 additional apartments in the metro area in 218. This leasing activity outpaced new inventory, driving a 2-basis-point increase in occupancy to 96.4% by year-end. Average monthly effective rent concurrently rose 2.9% to $ ,6.9% YOY $ % YOY 8.5% 8.% 7.5% 7.% 6.5% 6.% $3, 4,325,9 $15, $9, $75, $6, $45, Index Value (Base Year 213 = ) 6, 4, 2, $1, $9 $8 $7 $ ** AND 218 PERFORMANCE HIGHLIGHTS 4.1% 4 BPS YOY 1,759,6 1,541 Units 1 97% 96% 95% 93% $61, % 2 BPS YOY 1,37 Units 34.6% YOY 18.7% YE 218.2% YOY YE 218.9% YOY YE % YOY YE 218 BPS YOY AND DELIVERIES 6, 4, 3, 1, -1, 13 19** 219 PREVIEW in the Detroit metro area is forecast to grow.6% in 219 as 11,4 jobs are created. Job growth should be broad based. Many leisure and hospitality jobs will continue to be filled as development at District Detroit continues. Emerging office space this year at District Detroit will draw numerous companies and the white-collar workers they employ. The influx of new workers will benefit nearby restaurants and retail stores. Blue-collar job growth is also anticipated in the near term, most notably at the Detroit Region Aerotropolis zone near the Detroit Metropolitan Wayne County Airport. Amazon.com Inc., Brose North America Inc., and Penske Logistics collectively plan to hire 2,3 workers over the next few years at the 6,-acre Aerotropolis. Net positive apartment absorption is expected this year, though leasing activity is projected to taper, in part because of decelerating job growth compared to the last several years. Net absorption of nearly 7 apartments is anticipated while builders complete 1,855 units, the greatest number of multifamily deliveries since 23. The excess inventory will fuel a 4-basis-point reduction in occupancy to a still-healthy 96.% in December 219. At the same time, average effective rent is forecast to reach $983 per month, a 2.8% year-over-year gain. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 21

24 EL PASO 218 REVIEW A spike in apartment construction added nearly 4,3 units to the El Paso metropolitan area from 212 through 217, with most units delivered in the high-earning submarkets of Northwest and Northeast where effective rents exceed the market average. Multifamily builders have begun to pull back construction activity; only 89 units came online this year. El Paso ranked No. 1 in the nation by Forbes as having the lowest cost of living and No. 6 nationally as one of the top cities where rental homes are growing faster than apartments. Also, more residents are becoming homeowners. These market conditions caused below-average absorption; and in conjunction with tapering deliveries, the occupancy rate dropped 1 basis points to end the year at 92.7%. The median household income grew 3.3%, which emboldened operators to concurrently raise effective rent, which accelerated 3.1% compared to.9% in the prior 12-month period. The average effective rent was $767 in December 218. On the jobs front, El Paso-based companies added 4,6 workers, a 1.5% year-over-year gain. 4,6 1.5% YOY $ % YOY 1% 8% 6% 4% 2% 849,8 $14, $11, $8, $, $2, Index Value (Base Year 213 = ) 1, 8, 6, 4, 2, $8 $7 $7 $ ** AND 218 PERFORMANCE HIGHLIGHTS 4.1% 3 BPS YOY 284,4 27 Units 2 1 $45, % 1 BPS YOY 89 Units 83.3% YOY 2.3% YE 218.5% YOY YE 218.9% YOY YE % YOY YE 218 BPS YOY 95% 93% 91% 89% AND DELIVERIES 1, 1, ** 219 PREVIEW Metrowide employment is expected to expand with 6,3 new workers in 219. The construction sector will be boosted by several large-scale developments that are underway. GECU, El Paso s largest credit union, is adding a 4,-squarefoot building to its headquarters located in East Central El Paso. Also supporting the construction trades this year is the 18-story WestStar at Hunt Plaza, soon to be the tallest office tower in El Paso. The $85 million building will support the downtown office market and is slated to complete in 22. A new entertainment complex is planned in Northeast El Paso at the former Cohen Stadium. Construction will begin on the -acre site in 219, and when complete will include a mixture of retail and dining, a water park, a hotel, and a performance stage. Multifamily development will yield 125 new apartments in 219. All deliveries will come online at Las Mansiones at Cimarron, marking completion of the project. Despite absorption remaining positive this year, leasing activity is expected to trail deliveries, resulting in a 2-basis-point decrease in occupancy to 92.5%, though remaining above the five-year average of 92.3%. Meanwhile, monthly effective rents are projected to average $781 at year-end, a 1.8% annual gain. 22 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

25 GREENVILLE SC 218 REVIEW The median single-family home price increased 5.4% in the Greenville metro area in 218, eclipsing the 4.% annual increase in household income during the same period. The disparity made apartments more attractive to renters, particularly as wage growth outpaced annual rent appreciation. By December, average effective rent was $915 per month, a 3.% year-over-year gain. Net absorption fell 51% from 217, but surpassed multifamily deliveries for the first time since 216. The excess demand pushed occupancy up 7 basis points in 218 to 94.7% in December. Builders delivered 7 units last year, down 71.9% from 217. In the local job market, employers in the metro area hired 6,4 workers, a 1.5% annual increase. Leisure and hospitality sector businesses expanded payrolls 6.1% with the addition of 2,7 workers. The sector was boosted by greater household discretionary income and the increasing awareness of the area s nightlife, entertainment, and recreational attractions. 6,4 1.5% YOY $915 3.% YOY 6.7% 6.4% 6.1% 5.8% 5.5% 5.2% 911,9 $12, $11, $, $9, $8, $7, Index Value (Base Year 213 = ) 16, 12, 8, 4, $1, $9 $8 $7 $6 AND 95.5% 95.% 94.5% 94.% 93.5% $ 93.% 13 19** 218 PERFORMANCE HIGHLIGHTS 2.8% BPS YOY 355,9 1,149 Units 2 1 $56, % 7 BPS YOY 7 Units 71.9% YOY 19.5% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 3, 2, 1, 13 19** 219 PREVIEW Local businesses are expected to hire 5,3 workers in 219, augmenting payrolls 1.2%. The continued job growth, coupled with a moderating increase in apartment stock, will keep apartment fundamentals moving in a positive direction. Multifamily developers have 582 apartments scheduled for delivery in 219. More than 8% of the new inventory will be in the Central Greenville submarket where leasing activity is brisk near inner-core office hubs. The late 219 completion of the fouracre Camperdown multi-use development downtown will generate job growth, further driving apartment demand. At the western edge of the metro, Clemson University will remain a significant demand driver. In 219, approximately 17,6 of the university s 25,6 students will need off-campus housing, and this trend is expected to increase annually through at least 222. In Anderson County, medical device manufacturer Anthrex Inc. plans to open its 2,-square-foot plant in late 219. The creation of 1, jobs at the facility through 225 will also fuel multifamily leasing activity. This year, net absorption is once again projected to surpass deliveries, resulting in a 1-basis-point increase in occupancy to 94.8% by year-end. The sustained apartment demand will enable operators to increase monthly effective rent 2.6% to $939 by December. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 23

26 HOUSTON 218 REVIEW The Houston apartment market began to stabilize coming out of Hurricane Harvey. At 93.8% in the fourth quarter of 218, average apartment occupancy was down 6 basis points annually. Even with the most recent decrease, occupancy was 13 basis points higher than the 1-year average. Contributing to the latest decline was more than 8,3 units coming online in 218. Apartment demand remained positive last year, though trailed the postrecession high absorption in 217 indicating many homeowners returned to residences following the recovery from Hurricane Harvey. Even with the slowdown in leasing activity, apartment operators kept pressure on rent as the job market rebounded. At $1,129 per month in December 218, effective rent advanced 4.% annually. Rent growth trailed the median household income increase of 4.4%. Contributing to the rise in income was the 6.4% growth in the professional and business services sector, where salaries were nearly 6% higher than the metro average. Overall, employment expanded 3.6% in , 3.6% YOY $1,129 4.% YOY 7.% 6.5% 6.% 5.5% 5.% $25, 7,83, $125, $, $75, $, Index Value (Base Year 213 = ) 125,, 75,, 25, $1,2 $1, $1, $9 $ ** AND 218 PERFORMANCE HIGHLIGHTS 4.1% 4 BPS YOY 2,6,8 3,719 Units $66, % 6 BPS YOY 8,313 Units 57.1% YOY 2.4% YE % YOY YE % YOY YE % YOY YE BPS YOY 95% 93% 92% 91% AND DELIVERIES 32, 24, 16, 8, 13 19** 219 PREVIEW Multifamily builders will continue to scale back deliveries this year to move supply and demand closer to equilibrium. Construction is scheduled to complete on 5,56 units by year-end, down a third from deliveries in 218. Deliveries may remain subdued in the near-term as multifamily permits were filed for 12,3 units in 218, down more than 2% from the preceding five-year average issuance. Apartment additions will remain concentrated in the Inner Loop with nearly half of all deliveries this year, where single-family housing starts and apartment deliveries continue to lag new household formation. Driving demand will be employment growth. Total nonfarm employment is forecast to expand 2.6%, or by 81, jobs, this year. Leasing activity is expected to remain positive in the area and across the metro as single-family home prices are forecast to rise 1.5% while existing single-family home sales dip.6%. Even with sustained rental demand, supply-side pressure is forecast to cause a 6-basis-point reduction in average apartment occupancy to 93.2% by year-end. Even with the decline in occupancy, effective rent is expected to rise 4.2% year over year. At $1,177 per month in December, average effective rent is forecast to be more than $3 less than the typical mortgage payment. 24 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

27 INDIANAPOLIS 218 REVIEW A solid supply-demand balance over the past five years fueled by a rapidly growing tech sector, particularly in the downtown area, has benefited Greater Indianapolis multifamily market. Developers completed 2,867 apartments last year, allowing the metro s apartment stock to meet healthy demand. Despite a 2-basis-point drop in the occupancy rate, it remained above the five-year average at 93.6% in the fourth quarter. Indianapolis employment, regularly outpacing national levels, expanded 2.% or by 21,2 jobs. Supported by sustained employment and median household income growth of 3.7%, effective rent advanced 3.2% annually to $854 per month in December. Downtown Indianapolis helped bolster metrowide apartment fundamentals, as an influx of deliveries in this area was met with pent-up demand. Downtown s occupancy rate rose from 91.2% to 94.%, which enabled operators in the urban core to keep rent growth on an upward trajectory, increasing 1.4% at year-end 218, following 3.9% one year prior. 21,2 2.% YOY 9% 8% 7% 6% $ % YOY 5% $2, 2,59, $, $8, $6, $4, Index Value (Base Year 213 = ) 3, 2, 1, $9 $8 $8 $7 $7 AND 94.5% 94.% 93.5% 93.% 92.5% $6 92.% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.1% BPS YOY 814,7 2,36 Units $62, % 2 BPS YOY 2,867 Units 4.% YOY 16.5% YE % YOY YE % YOY YE % YOY YE 218 BPS YOY AND DELIVERIES 5, 4, 3, 2, 1, 13 19** 219 PREVIEW Economic gains will foster sturdy rental demand in 219, resulting in accelerating rent growth and sustained multifamily development. Indianapolis employers are forecast to create 14, jobs by December, raising head counts 1.3%. Part of the additions will come as cloud computing company Appirio, which relocated its corporate headquarters from San Francisco to Downtown Indianapolis, expands their payroll from 1 to 6 employees by 22. Construction persists on projects reshaping Downtown Indy, including the 15-story Hyatt hotel, the $3 million Bottleworks District, IndyGo s three new rapid transit lines, and Indiana University Health s $1 billion downtown campus upgrade. Elevated multifamily construction is expected to outpace rental demand, tamping down the overall occupancy rate by 3 basis points to 93.3% in the fourth quarter. Operators will keep pressure on effective rent, forecast to reach $883 per month by December, advancing 3.3% from the start of this year. Demand again will be concentrated in the Downtown Indianapolis submarket, and contrary to the metro trend, occupancy will rise for the second-consecutive year, escalating 6 basis points to 94.6% by year end. Effective rent in this submarket will reach $1,335 per month by December, a 2.1% annual appreciation. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 25

28 INLAND EMPIRE CA 218 REVIEW The Inland Empire was among the top 1 metro areas in the country for multifamily rent growth and occupancy in 218. A number of factors fueled this performance. expanded at a rate considerably higher than the national average, the housing and employment markets continued a belated recovery from the Great Recession, and the metro area s lower rental obligation made it an attractive destination to renters priced out of the coastal markets. Effective rent advanced 4.5% during 218 to $1,476 per month in December. The large, affordable single-family rental market remained a viable alternative to apartment communities. During 218, multifamily occupancy decreased 1 basis points to a still-healthy 96.2%. Renters occupied 1,167 additional apartments in the two-county metro area compared to 1,41 deliveries. More than 57% of the new stock was in the neighboring Ontario/Chino and Corona submarkets. In the labor market, employers filled 37,7 new positions, equating to 2.6% year-over-year job growth. 37,7 2.6% YOY 6.5% 6.% 5.5% 5.% $1, % YOY 4.5% $, 4,651, $18, $16, $14, $12, Index Value (Base Year 213 = ) 8, 6, 4, 2, $1,6 $1,4 $1,2 $1, $8 AND 97.% 96.5% 96.% 95.5% 95.% $6 94.5% 13 19** 218 PERFORMANCE HIGHLIGHTS 4.% 8 BPS YOY 1,438,8 1,167 Units $6, % 1 BPS YOY 1,41 Units 47.8% YOY 29.3% YE 218.9% YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 4, 3, 2, 1, 13 19** 219 PREVIEW Local employers are projected to hire 16,4 additional workers in 219, a 1.1% annual gain. Through 223, the 55-plus age group population is forecast to grow 1.6% annually, which may bode well for health care job growth in response to the needs of this aging segment. Renters will have many new apartments to choose from in 219: apartment development will peak with 2,367 additional units. While inventory growth will continue to emerge adjacent to Los Angeles and Orange Counties, the majority of deliveries will shift inland as more than 1,4 units are completed among the neighboring Redlands and University City/Moreno Valley submarkets. Significant capital outlays are taking place in logistics centers in Moreno Valley, creating many jobs. Workers in this industry are a prime demographic for apartment rentals, which portends favorable conditions for multifamily fundamentals in and around Moreno Valley in the near term. Metrowide, apartment absorption this year is projected to rebound from 218, though will trail deliveries. By year-end, occupancy is forecast to be 96.1%, a 1-basis-point annual dip. Average monthly effective rent is expected to rise to $1,535 by December, a 4.% annual increase, outpacing 3.% average national rent growth. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 26

29 JACKSONVILLE 218 REVIEW Underpinned by sustained job creation and population increases within the key-renter cohort, Greater Jacksonville s apartment market continued to perform extremely well, surpassing most major metros. In 218, the employment base expanded 3.3% as 23, jobs were filled. Businesses in the trade, transportation, and utilities employment sector added 1,7 workers last year, aided by the growing Port of Jacksonville, America s third-largest seaport. Boosted by Mayo Clinic s ongoing campus expansions over the past three years, job gains were robust in the education and health care industry, which expanded by 3, new positions. Ongoing employment alongside an influx of younger adults, buoyed rental demand, particularly among new supply and existing Class A product. Though absorption was brisk overall, it trailed the 31% rise in annual new supply during 218. Consequently, the average occupancy rate dropped 3 basis points year over year to 94.7% in December. The median household income increased 6.5% from the start of year, counterbalancing the 5.3% annual rent growth. Monthly effective rent reached $1,24 at year-end , 3.3% YOY 9% 8% 7% 6% $1,24 5.3% YOY 5% $2, 1,545, $, $8, $6, $4, Index Value (Base Year 213 = ) 25, 2, 15, 1, 5, $1,2 $1, $8 $6 $4 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.1% BPS YOY 599,6 2,472 Units $64, % 3 BPS YOY 2,972 Units 31.3% YOY 19.% YE % YOY YE % YOY YE % YOY YE BPS YOY 96% 95% 93% 92% 91% AND DELIVERIES 4, 3, 2, 1, 13 19** 219 PREVIEW Apartment demand in Jacksonville is expected to heighten this year while the local economy maintains its momentum propelled by strong demographic tailwinds. Local payrolls are forecast to expand 2.3% in 219 as employers hire 17, workers. Part of the new recruits will come from Amazon.com Inc. The company is expected to bring an additional 2, jobs to the city by the end of 219. Mayo Clinic s Florida campus continues to grow, adding 52, square feet of medical space to its 4-acre facility. The most recent three-building project, part of a $3 million investment, will add 1, new jobs through 221. Over the next year, multifamily developers will add about 3,3 apartments to Greater Jacksonville, a 2.9% inventory expansion. Completions will continue to be skewed toward the suburban neighborhood of Baymeadows, home to large financial firms, back-office data centers, and customer care operations including State Farm, Wells Fargo & Company, Atlantic Coast Bank, and Concentrix. Deliveries are anticipated to remain elevated metrowide for the foreseeable future as permitting activity remains high. By year-end, the occupancy rate is projected to descend 3 basis points to 94.4%, partially due to three-consecutive years of rising apartment supply. Rent growth will concurrently taper to 4.% over the next 12 months, though remain above the U.S. average of 3.%. 27 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

30 KANSAS CITY 218 REVIEW Apartment builders focused multifamily development in the Central and North Overland Park submarkets during 218. Combined, these two areas accounted for more than 6% of new units metrowide. The largest development to finish last year was the 47- unit Union Berkley Riverfront apartments just blocks from Downtown Kansas City. Additional units came online at the 2-story Traders on Grand multifamily high-rise. Pent-up demand pushed up occupancy in these two submarkets which contrasted with the metro trend. Supply outpaced demand in Greater Kansas City with 3,817 new apartments added and 3,442 net units absorbed. The difference lowered metrowide occupancy 1 basis points year over year to 94.5% in December. Boosted by a 3.8% annual rise in household income and amenity-rich new supply, effective rent advanced 2.3% year over year to $941 per month at year-end. Kansas City businesses employed 14, additional workers, which in turn supported rental demand during the last year. Total nonfarm employment expanded 1.3% annually, building on the 1.6% growth during the preceding year. 14, 1.3% YOY 9% 7% 5% $ % YOY 3% $3, 2,141, $12, $9, $6, Index Value (Base Year 213 = ) 3, 2, 1, $1, $9 $9 $8 $8 AND 95.% 94.8% 94.6% 94.4% 94.2% $7 94.% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.2% BPS YOY 875, 3,442 Units $67, % 1 BPS YOY 3,817 Units 2.4% YOY 16.6% YE 218.3% YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 5, 4, 3, 2, 1, 13 19** 219 PREVIEW As multifamily deliveries taper from a recent peak, occupancy should increase as rental demand remains robust. Construction is scheduled to complete on 3,255 apartments, the bulk of which will be in the in-demand Central KC submarket. The success of luxury communities in the downtown area has been helped by Kansas City s foothold as a Silicon Prairie metro, drawing wealthy, educated millennials. Several new properties will reach lease-up along with other recent builds as leasing activity exceeds inventory growth this year. Near the world headquarters for Hallmark Cards Inc., the Gallerie development, the largest under-construction project, will deliver all 361 units by mid-219. Aboveaverage demand will spur a 4-basis-point year-over-year rise in the occupancy rate, set to hit a 1-year annual high of 94.9% in December. Sustained hiring will support the rise in occupancy as KC-based companies add a net 1,4 jobs, a.9% increase. Cerner Corporation will continue to elevate apartment demand in the South Kansas City/ Grandview apartment market with plans to add as many as 16, new information technology employees over the next decade to what will become a 4.7 million-square-foot Innovations Campus. During 219, operators will advance average effective rent 2.% to $96 per month by December. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 28

31 KNOXVILLE 218 REVIEW Knoxville effective rent increased in %, to $892 per month and placing the metro among the top ten in the country for annual rent growth. Local employers like Covenant Health, the University of Tennessee, and the U.S. Department of Energy continued to supply access to high-paying employment. Jobs increased by.7% with 2,8 new workers, as job growth was partially offset by layoffs affecting the education and health services sector. Developers delivered 544 units last year, close to the five-year average. Occupancy decreased 1 basis points to 95.9%, as the 471 units absorbed trailed deliveries. However, the negative shift in metrowide occupancy was concentrated in the North Knoxville submarket, where many residents were affected by multiple hospital closings. Construction was focused in the West Knoxville and Downtown/University/ South Knoxville submarkets, where access to attractive employment and high-end shopping destinations like the Market Square development drove demand. 2,8.7% YOY $ % YOY 9% 7% 5% 3% 3.3% 2 BPS YOY $12, $9, $6, $3, Index Value (Base Year 213 = ) 1, 7, 5, 2, $9 $8 $6 95.9% 1 BPS YOY 544 Units 16.2% YOY AND 98% 96% $ 92% 13 19** 218 PERFORMANCE HIGHLIGHTS 471 Units 889,7 371,4 $54,1 19.8% YE 218.9% YOY YE % YOY YE % YOY YE BPS YOY 1, AND DELIVERIES 1, 1, 13 19** 219 PREVIEW Multifamily deliveries in the Knoxville metro will surge in 219, nearly doubling the number of units brought online the previous year. Developers will deliver 1,82 units this year to take advantage of strong demand in the metro. Most new construction will be split between the Southwest Knoxville and the West Knoxville submarkets, including the 22-unit The Springs at Farragut and the 267-unit Overlook at Campbell Station developments. Absorption will trail deliveries by year-end as 882 net units are expected to be absorbed by renters metrowide. As a result of this supply imbalance, occupancy will decrease 3 basis points to 95.6%. Despite the added supply-side pressure, developers anticipate that job gains by major economic anchors will keep demand elevated. Hiring pushes expected this year include auto parts manufacturer Denso s plans to add 1, jobs to its Maryville campus through 22 and a scheduled Topgolf expansion that will add 325 jobs to the Knoxville metro through 221. Overall, employers are expected to expand their payrolls 1.1%, adding 4, new jobs through December. Empowered by persistent demand for multifamily and solid job gains, operators will increase effective rent 3.2% to $921, outpacing the projected national average for rent growth. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 29

32 LAS VEGAS 218 REVIEW Las Vegas s apartment fundamentals continued to improve as the workforce and population expanded. Greater Las Vegas apartment operators advanced effective rent on average 6.5%, to lead all major metros for growth in 218. Even with the increase, year-end average effective rent of $1,11 per month was approximately $ less than the average mortgage payment in the metro. The cost of homeownership as well as the recovery from the Great Recession is driving residents to rent. The metro s homeownership rate is close to %, compared to the peak of 64% in 27. Leasing activity was robust, leading to a -basis-point annual rise in apartment occupancy to 95.2% in the fourth quarter of 218. Underpinning the demand was an uptick in job creation. After expanding 2.6% in 217, employment grew 3.5% last year. Hiring in the high-paying professional and business services industry led all sectors. New, high-end communities benefitted from these jobs, attracting residents with large units and top-notch amenities. 34,6 3.5% YOY $1,11 6.5% YOY 6.5% 6.2% 5.9% 5.6% 5.3% 5.% $25, 2,284, $1, $125, $, $75, $, Index Value (Base Year 213 = ) 45, 3, 15, $1,2 $1, $8 $ ** -15, AND 218 PERFORMANCE HIGHLIGHTS 4.3% 8 BPS YOY 839, 3,642 Units 1 $6, % BPS YOY 2,694 Units 15.5% YOY 2.2% YE % YOY YE % YOY YE % YOY YE BPS YOY 96% 92% 9% AND DELIVERIES 5, 4, 3, 2, 1, 13 19** 219 PREVIEW Developments across the Las Vegas metropolitan area bode well for the future of the apartment market. With numerous large projects underway, the construction sector will see continued growth over the next few years. The $4 billion Resorts World Las Vegas is expected to add 3, construction jobs while the new Las Vegas Raiders stadium will employ about 1, construction workers when the project hits its peak. Once complete, these projects will add jobs to the metro s key industry: leisure and hospitality. Another good sign for the industry was the 7% rise in discretionary spending across the U.S. in 218, especially as annual visitors have risen in recent years as more people are coming to spend money in Las Vegas. Overall, employment is forecast to expand 2.9% this year. The growing job market is also drawing people searching for work, as two-thirds of the population growth has come from in-migration. As these people seek housing, single-family rentals owned by institutional investors will continue to be a competitor for apartments. Apartment leasing activity is forecast to remain positive though trail inventory growth this year to shift occupancy down 3 basis points annually to 94.9% in the fourth quarter. At the same time, effective rent is forecast to grow 6.5% to $1,76 per month in December. 3 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

33 LEXINGTON 218 REVIEW Hiring improved last year, up by 1.% as 2,7 new jobs were added to the metro. The leisure and hospitality sector led hiring with employers expanding their payrolls by 1,7 new jobs. A downtown hotel construction boom focused around the nearly complete City Center development played a role in driving employment in this sector. This expansion of the labor force, along with rising annual incomes, was also essential in driving household formation in the metro, which in turn created more competition for multifamily as residents turned to homeownership. Developers strategized to limit the number of new deliveries being brought online; the only units that came online last year were included in the final phase of the 264-unit WaterStone at Hamburg development. Apartment operators also curbed rent growth to.9%; rent increased to $798. Just 24 multifamily units were delivered in 218 while net negative absorption of 67 units was recorded. As a result, occupancy fell by 2 basis points to 94.%. 2,7 1.% YOY $798.9% YOY 8.% 7.5% 7.% 6.5% 6.% 519, $, $8, $6, $4, $2, Index Value (Base Year 213 = ) 1, 8, 6, 4, 2, $825 $7 $675 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.3% 4 BPS YOY 211,8-67 Units $59, % 2 BPS YOY 24 Units 97.4% YOY 16.1% YE 218.8% YOY YE % YOY YE % YOY YE 218 BPS YOY 96% 92% 9% AND DELIVERIES 2, 1, 1, ** 219 PREVIEW Apartment operators will limit new deliveries in the Lexington metro this year as more residents begin to transition toward homeownership. Demand will remain positive, though, in the South Lexington submarket as the 312-unit Springs at Hamburg development comes online. This submarket goes against the greater trend as absorption will be negative metrowide this year, down 22 units compared to the 312 units being delivered. As a result, occupancy will shift down by 7 basis point to 93.3%, though this change in occupancy is in line with the 1-year average for the metro. Effective rent is expected to rise 1.% to $86 per month, driven in part by growing incomes among residents. Contributing to rising wages will be metrowide job growth, up 1.3% and in line with the national average as employers are expected to expand their payrolls by 3,6 workers. Playing a role in these job gains will be the opening of excavator company LBX s new $1 million facility, located in the Citation Business Park. The $241 million renovation and expansion of the Lexington Convention Center and Rupp Arena are expected to drive economic improvement as well, part of a strategic plan by the city to continue revitalizing Downtown Lexington. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 31

34 LOS ANGELES-NORTH 218 REVIEW Nonfarm payrolls expanded 1.4% annually in 218 with 61,2 additional workers in Los Angeles County. Multifamily developers in Los Angeles North concentrated deliveries among higher-rent areas namely the Burbank/Glendale/Pasadena submarket. A total of 2,151 apartments were delivered, a 72.8% annual increase. Absorption trailed deliveries, resulting in a 1-basis-point, year-over-year dip in occupancy to 96.3% by December. Despite the reduction, operators increased effective rent 4.2% annually to $1,951 per month, outpacing the 3.7% average countywide increase. A county board-approved 3% rent increase cap went into effect in late December that will last six months. The measure will apply to apartment communities built before 1995 in unincorporated areas and will affect approximately, apartments. The board will consider ending, extending, or expanding the measure later in 219. Similarly, the city of Glendale enacted a 6- day, 5% rent cap beginning in late December, subject to further consideration in 219. COUNTY 61,2 1.4% YOY 5.5% 5.% 4.5% 4.% $1, % YOY 3.5% COUNTY 1,186,3 $3, $2, $2, $1, $, Index Value (Base Year 213 = ) 125,, 75,, 25, $2,2 $2, $1,7 $1, $1,2 AND 97.% 96.5% 96.% 95.5% 95.% $1, 94.5% 13 19** 218 PERFORMANCE HIGHLIGHTS COUNTY 4.4% 1 BPS YOY COUNTY 3,455,2 1,64 Units $65, % 1 BPS YOY 2,151 Units 72.8% YOY 35.9% YE 218.2% YOY YE 218.9% YOY YE % YOY YE 218 BPS YOY AND DELIVERIES 6, 4, 2, 13 19** 219 PREVIEW Countywide employment is projected to grow.9% in 219 as 41, new jobs are filled. The median household income is forecast to increase 3.6% during the same period, nearly matching the rate of multifamily rent growth. Healthy apartment demand is expected in Los Angeles North over the next two years, though will trail a surge of deliveries. The emergence of new apartment stock in 219 will continue in the San Fernando Valley, accounting for more than three-quarters of deliveries in Los Angeles North. The multifamily development environment will be similar in 22 as more than 9% of the 3,4 multifamily units projected for delivery will be in the San Fernando Valley. Apartment absorption is forecast to rebound to 3,539 units in 219. Rising leasing activity is anticipated to lag the 4,46 completions, fueling a 1-basis-point reduction in occupancy to 96.2%. In comparison, countywide occupancy of 96.% is forecast for this year. While brisk apartment demand is anticipated for 22 in Los Angeles North, it is expected to follow deliveries, resulting in 96.1% year-end occupancy, a 1-basis-point annual decrease. Rent will continue to grow, despite the slight reduction in near-term occupancy. Effective rent is forecast to reach $2,23 per month in 219, a 3.7% year-over-year gain, followed by 3.5% annual growth in Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

35 LOS ANGELES-SOUTH 218 REVIEW Sustained demand and elevated deliveries marked the Los Angeles South multifamily market in 218. Builders completed 1,586 apartments last year. Many of these new apartment communities are within short driving distance of the new Los Angeles Stadium and Entertainment District in Inglewood. Greater housing options and a 1.4% increase in countywide employment spurred apartment absorption in Los Angeles South, which increased 46% year over year, though still lagged deliveries. Average apartment occupancy subsequently descended 1 basis points to 96.4% by December, prompting slower rent growth. After increasing 4.7% in 217, effective rent in Los Angeles South grew 3.9% last year to $1,988 per month. The Los Angeles County Board of Supervisors passed a 3% rent increase cap that went into effect in late December. The six-month long measure will affect approximately, pre-1995 apartments in unincorporated areas, and the board will consider it further in 219. COUNTY 61,2 1.4% YOY 6% 5% 4% 3% $1, % YOY 2% COUNTY 1,186,3 $3, $2, $2, $1, $, Index Value (Base Year 213 = ) 125,, 75,, 25, $2,2 $2, $1,7 $1, $1,2 AND 97.% 96.5% 96.% 95.5% 95.% $1, 94.5% 13 19** 218 PERFORMANCE HIGHLIGHTS COUNTY 4.4% 1 BPS YOY COUNTY 3,455,2 1,33 Units $57, % 1 BPS YOY 1,586 Units % YOY 41.8% YE 218.2% YOY YE 218.9% YOY YE % YOY YE BPS YOY AND DELIVERIES 3,2 2,4 1, ** 219 PREVIEW A gain in apartment absorption is anticipated in 219 as household income is predicted to rise at a faster pace and homeownership eludes many households. Approximately 34, additional households are forecast in Los Angeles County in 219, along with.9% annual job growth and 41, new jobs. Apartment absorption should approximate deliveries in Los Angeles South, resulting in December occupancy of 96.4%, the same as year-end 218. Just over half of the 1, units delivered this year will come online in the Long Beach submarket, where private development and capital expenditures are driving employment growth. Meanwhile, effective rent in Los Angeles South is forecast to reach $2,64 per month in December 219, a 3.8% annual gain. Several major projects underway will boost multiple job sectors when completed in the near term. These projects include the world s most expensive stadium complex, the Los Angeles Stadium and Entertainment District in Inglewood, estimated to reach $5 billion; the $1.5 billion Middle Harbor Project at the Port of Long Beach; and the $52 million Long Beach Civic Center project. Additionally, SpaceX may hire as many as 7 workers following completion of its manufacturing facility at the Port of Los Angeles. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 33

36 LOS ANGELES-WEST 218 REVIEW Elevated apartment completions in 218 marked the first year in an impending three-year supply wave in Los Angeles West. Builders delivered 9,382 apartments, more than one-third of which were in the urban core. While Downtown Los Angeles is more amenable to high-density multifamily development than most other parts of the county, notable development was present in other areas. Builders delivered more than 2, units in the Mid-Wilshire submarket, and just over 1, apartments came online among the coastal Santa Monica/Marina del Rey and Palms/Mar Vista submarkets. Renters newly occupied 8,457 units in Los Angeles West in 218, increasing from 5,164 units absorbed in 217. New supply outpaced absorption, spurring a 1-basispoint annual decrease in occupancy to 95.7% in December. Effective rent concurrently rose 3.% to $2,721 per month, lagging the countywide 3.7% annual increase. Household incomes advanced 3.2% during 218, while countywide employment expanded 1.4% as companies hired 61,2 new workers. COUNTY 61,2 1.4% YOY 5.% 4.5% 4.% 3.5% $2,721 3.% YOY 3.% COUNTY 1,186,3 $3, $3, $2, $2, $1, Index Value (Base Year 213 = ) 125,, 75,, 25, $3, $2, $2, $1, 13 19** AND 218 PERFORMANCE HIGHLIGHTS COUNTY 4.4% 1 BPS YOY COUNTY 3,455,2 8,457 Units 2 1 $71, % 1 BPS YOY 9,382 Units 1.2% YOY 45.5% YE 218.2% YOY YE 218.9% YOY YE % YOY YE BPS YOY 96% 95% 93% AND DELIVERIES 12, 9, 6, 3, 13 19** 219 PREVIEW Employers in Los Angeles County are projected to hire 41, workers in 219, a.9% year-over-year gain, while an additional 34, households are expected to form. A torrent of multifamily development will provide these additional workers and members of new households with a large selection of new apartments. Nearly 1,2 apartments are scheduled for completion this year in Los Angeles West, boosting inventory 2.6%. Downtown deliveries will comprise more than 35% of new inventory. Additionally, approximately one in five new apartments will emerge among the Santa Monica/Marina del Rey and Palms/Mar Vista submarkets to accommodate demand generated by major employment hubs. Renters are projected to absorb a net 9,337 apartments in Los Angeles West this year. The excess supply will foster a 1-basis-point annual reduction in occupancy to 95.6% by December compared to countywide occupancy of 96.%. Effective rent in Los Angeles County is forecast to rise 3.1% in 219 to $2,344 per month. Heightened competition from the numerous new multifamily developments in Los Angeles West will limit rent growth, resulting in $2,781 average monthly effective rent, a 2.2% annual increase. Restrained rent growth may persist in 22 as more than 7,9 units come online. 34 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

37 LOUISVILLE 218 REVIEW Louisville payrolls increased.6% as 4, net jobs were added last year. Companies in the trade, transportation, and utilities sector, Louisville s largest employment group, led job creation by adding 2, new workers. Part of the 1.3% lift came from hiring at United Parcel Service Inc. and its global Worldport packagehandling operation, along with the multiyear expansion of UPS s Centennial Ground Hub. Although annual growth metrowide dropped below 1%, sector gains hovered between.8% and 4.8%, dropping the unemployment rate to 3.7% in December. While long-term indicators still bode well for Greater Louisville s multifamily landscape, sustained deliveries and slowing economic and population growth last year started taking a toll. In the last four quarters, 1,529 apartments came online across the metro at the same time 1,19 apartments were newly occupied, resulting in a 3-basispoint drop in occupancy to 94.7%. Compared to the metro s five-year average rent growth of 2.1%, apartment rent in December 218 reflected a 1.6% annual appreciation. Monthly effective rent was $845 at year-end. 4,.6% YOY $ % YOY 1% 8% 6% 4% 2% $2, 1,32,7 $, $8, $6, $4, Index Value (Base Year 213 = ) 2, 15, 1, 5, $88 $84 $8 $76 $72 AND 95.4% 95.1% 94.8% 94.5% 94.2% $ % 13 19** 218 PERFORMANCE HIGHLIGHTS 3.7% 1 BPS YOY 539,4 1,19 Units 2 1 $59, % 3 BPS YOY 1,529 Units 7.9% YOY 17.1% YE 218.4% YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 2, 1, 1, 13 19** 219 PREVIEW Steady economic growth is expected this year keeping leasing activity healthy. Construction is scheduled to complete on 1,594 apartments this year, 65 units more than in 218. While deliveries will occur in four of the six submarkets, additions to the Northeast Louisville submarket are expected to lead the metro for the next two years. The largest development under construction in this dynamic, live-work-play hub of Louisville is the 47-unit Victory Knoll apartments set to begin lease-up during the second quarter and should complete in late 22. This in-demand area is within proximity of sizable employers including Honeywell International Inc., Papa John s Pizza headquarters, and pharmaceutical company Amgen Inc. Apartment leasing activity is expected to rise in 219, though fall short of new supply, causing a 3-basispoint decline in metrowide occupancy to 94.4% by year-end. Even with the downshift, effective rent will advance to $864 per month, up 2.2% year over year. A 3.4% concurrent rise in median income is forecast, providing headroom to raise rents. Local companies will ramp up hiring this year by adding 7, jobs for a 1.% increase. Louisville Forward, the city s economic development division, reports there is $12.6 billion of construction activity planned or underway in Louisville, an indication of longterm economic strength for the metro and its expanding apartment market. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 35

38 MEMPHIS 218 REVIEW Rent accelerated in the Memphis metropolitan area by 3.% to $829 in 218, outpacing both the national average and the metro s fiveyear average. Despite greater competition in the form of new multifamily product, there was sufficient demand between the Downtown Memphis and Germantown/ Collierville submarkets to encourage operators to continue raising rents. Hiring in the metro was led by 5,8 jobs added in the professional and business sector, and many of those companies were centrally located in Downtown Memphis or in the Germantown/ Collierville submarkets as these areas serve as economic hubs for the metro. Occupancy improved in both of those submarkets. Metrowide, however, occupancy fell 1 basis points to 94.3%, to offset supply-side pressure from new multifamily stock. Examples of notable multifamily developments that came online in over past year include the 27-unit Meridian Park and the 175-unit Patterson Flats. in Memphis improved by 1.5% for the year as employers hired 1, residents to fill positions across the metro. 1, 1.5% YOY $829 3.% YOY 8.% 7.5% 7.% 6.5% 6.% $2, 1,356,8 $6, $, $4, $3, Index Value (Base Year 213 = ) 16, 12, 8, 4, $88 $84 $8 $76 $72-4, AND 94.8% 94.4% 94.% 93.6% 93.2% $ % 13 19** 218 PERFORMANCE HIGHLIGHTS 4.3% 4 BPS YOY 52,3 8 Units 2 1 $54, % 1 BPS YOY 651 Units 25.3% YOY 18.2% YE 218.5% YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 1, 1, ** 219 PREVIEW Corporate redevelopment in the metro s urban core is expected to keep effective rent heading upwards, but overall rent growth is expected to slow this year, appreciating 1.9% to $845 per month. The number of multifamily deliveries this year will increase over the total units delivered in 218; 674 units are scheduled to come online in 219. The increase in competition will prompt operators to hedge rent growth compared to the previous year. Demand is also expected to soften this year as approximately 42 units are predicted to be absorbed metrowide in 219. Fewer employers expanding their payrolls and limited access to high-paying jobs is one factor that is expected to reduce wage growth this year and, subsequently, demand for apartments through December. Memphis employers are expected to expand payrolls by another 8,8 jobs in 219, down from the previous year, but in line with the projected growth at the national level of 1.3%. Major projects like the $412 million campus expansion planned by the St. Jude Children s Research Hospital will help to keep the metro s economic performance stable. The hospital s advance research center, located in Downtown Memphis, broke ground in 218 and is expected to support close to 5, construction jobs through Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

39 MILWAUKEE 218 REVIEW Apartment demand for multifamily was heightened in the Milwaukee-Waukesha-West Allis metro area last year as employment expanded. Employers added 7, new employees, a.9% gain in jobs that matched the five-year average in the metro. Consistent hiring, moderate rent growth, and rising home prices helped to foster demand for multifamily. So much so that the 3,343 units absorbed in 218 exceeded the metro s five-year average. Absorption in the metro also outpaced the 2,245 units delivered, so occupancy improved by 8 basis points to 96.%. Developers remained motivated to chase demand in the metro by delivering new multifamily projects, especially downtown. One of the largest projects completed in this submarket was Milwaukee s the new 35-story, 31-unit 7SEVENTY7 high-rise development. Additionally, operators capitalized on strong demand in the metro by keeping upward pressure on effective rent. After advancing 1.1% in 217, average effective rent advanced 1.3% to $1,89 per month in December of last year. 7,.9% YOY $1,89 1.3% YOY 8.% 7.5% 7.% 6.5% 6.% $2, 1,58,7 $, $8, $6, $4, Index Value (Base Year 213 = ) 16, 12, 8, 4, $1,12 $1,8 $1,4 $1, $96 AND 96.5% 96.% 95.5% 95.% 94.5% $92 94.% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.1% 3 BPS YOY 649,9 3,343 Units $63, % 8 BPS YOY 2,245 Units 32.7% YOY 2.7% YE 218.2% YOY YE 218.8% YOY YE % YOY YE BPS YOY AND DELIVERIES 5, 4, 3, 2, 1, 13 19** 219 PREVIEW Hiring in Milwaukee is expected to continue improving this year and will have a major impact on the metro s multifamily fundamentals. A large, growing population of educated professionals, especially those focused in the engineering and manufacturing industries, is expected to support demand for multifamily heading into the future. The workforce is forecast to expand 1.2% as employers metrowide add 1,2 workers to their payrolls. Corporate relocations and downtown revitalization efforts will play an important role in supporting this trend as well. Contributing to downtown renewal efforts will also be the addition of new, high-end hotels, like the chic, art-themed 219-room Saint Kate, a downtown hospitality development which is expected to open for business in mid Gains in job growth will come just in time as multifamily deliveries accelerate in 219, including the 269-unit Synergy at The District I. Residents are expected to newly lease 2,239 units this year, a decline from 218 but still in line with the five-year average in the metro. Supply-side pressure will cause occupancy to fall 4 basis points to 95.6%. During this same time, apartment operators are predicted to accelerate rent growth by 2.%. Monthly effective rent is forecast to end 219 at $1,111. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 37

40 MINNEAPOLIS-ST. PAUL 218 REVIEW Employers hiring in the Minneapolis-St. Paul-Bloomington metro drove substantial job growth in 218, sustaining demand for multifamily and supporting rent growth amid a surge of construction in the urban core. By creating 41,9 new jobs, employers expanded the workforce 2.1%, exceeding national job growth and the metro s fiveyear average. Businesses in the professional and business services sector led hiring with 9,4 new jobs, which in turn drove demand for multifamily near the metro s urban center. Additionally, elevated apartment deliveries contributed to hiring in the construction sector, which expanded 7.2% during the year, adding 5,7 jobs to the metro. Some of the additional workforce was hired to help bring 4,844 units online through 218. Renters absorbed 4,46 units last year, just trailing the new inventory to shift down occupancy 1 basis points annually to a still healthy 96.8%. Strong economic performance and persistent rental demand enabled operators to increase effective rent 3.1% to $1,277 per month by year-end. 41,9 2.1% YOY 8% 7% 6% 5% $1, % YOY 4% $, 3,654,3 $1, $125, $, $75, Index Value (Base Year 213 = ), 4, 3, 2, 1, $1,4 $1,3 $1,2 $1, $1, 13 19** AND 218 PERFORMANCE HIGHLIGHTS 2.2% 8 BPS YOY 1,419,8 4,46 Units 3 2 $78, % 1 BPS YOY 4,844 Units 15.9% YOY 19.5% YE 218.9% YOY YE % YOY YE % YOY YE 218 BPS YOY 98% 97% 96% 95% AND DELIVERIES 8, 6, 4, 2, 13 19** 219 PREVIEW Hiring in 219 is not expected to match the surge of new employment that occurred in 218, in large part due to a tight labor market with an unemployment rate expected to finish 219 below 2.%. However, the presence of over a dozen Fortune companies like UnitedHealth Group, CHS, Inc., and U.S. Bancorp will help to keep hiring positive in the metro as employers will add 27,7 new jobs over the next 12 months, a gain of 1.4%. Apartment demand is expected to soften over the next 12 months, and supply-side pressure will cause occupancy to fall 3 basis points year over year to 96.5%. However, the metro s strong pace of multifamily construction is not expected to fluctuate much in 219, and the 4,832 units scheduled for delivery will outpace the metro s five-year average. Most multifamily projects scheduled to come online in 219, including the 37-unit City Club development, are designed with the needs and preferences of successful working professionals in mind. The uptick of high-end projects delivered in the metro will lead to a slight drop in effective rent growth as the market becomes more competitive amid slowing demand. After advancing 3.1% in 218, operators expect to raise monthly effective rent on average 2.9% in 219 to $1, Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

41 NASHVILLE 218 REVIEW Demographic and economic tailwinds fueled Greater Nashville s apartment absorption and rent growth, particularly in the Central Nashville submarket. Nashville s population increased 1.8% year over year, more than twice as fast as the national average of.7%, as the metro remained a magnet for millennials. Nashville showed strong household formation of 2.3%, compared to the U.S. average of 1.9%. Meanwhile, the median household income was $66,474, up 3.6% annually. Last year, employers hired 16, workers, a 1.6% gain. Combined, these favorable market conditions supported brisk apartment development and demand in the Nashville area, though both decelerated from the peak levels posted in 217. Supplyside pressure spurred a 3-basis-point annual reduction in occupancy to 94.8%. Meanwhile, monthly effective rent advanced 1.6% to $1,129. Demand continues to gravitate toward Central Nashville, as leasing activity continued to keep pace with the supply infusion. Rent growth of 2.9% in the urban core outpaced the metro average, following negative growth during the prior two years. 16, 1.6% YOY 7% 6% 5% 4% $1, % YOY 3% $2, 1,953,8 $18, $14, $, $6, Index Value (Base Year 213 = ) 4, 3, 2, 1, $1,4 $1,2 $1, $8 AND 97.% 96.% 95.% 94.% $6 93.% 13 19** 218 PERFORMANCE HIGHLIGHTS 2.8% 2 BPS YOY 774,2 5,549 Units 2 1 $66, % 3 BPS YOY 6,31 Units 22.4% YOY 2.4% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 9, 6, 3, 13 19** 219 PREVIEW With a strong, creative workforce, and considerable in-migration of young talented people, Nashville has compiled an impressive list of attention-grabbing job announcements. Amazon.com Inc. plans to make Nashville the home of a new operations hub, investing $23 million, bringing 5, high-paying jobs, and occupying 1 million square feet of space in a forthcoming downtown skyscraper within seven years. At that head count, Amazon will become downtown s largest private employer, and plans to start hiring for the Nashville office in 219. The financial activities industry will be boosted over the next few years as AllianceBernstein L.P. plans to move its headquarters from Manhattan to Downtown Nashville, bringing more than 1, new jobs to the city, and Ernst and Young announced a 6-job expansion on Music Row. These job additions portend favorable apartment occupancy in the urban core, as new workers seek housing close to employment hot spots. Metrowide, employers in Nashville are forecast to add 15,9 workers during 219, a 1.6% annual increase and on par with last year. As absorption lags new supply, overall occupancy will drop 2 basis points to 94.6%, and the average monthly effective rent will rise to $1,167 by year-end. The average rent growth will end 219 at 3.4%, more than double the gain from one year prior. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 39

42 NEW ORLEANS 218 REVIEW Healthy apartment demand in Greater New Orleans last year helped push up occupancy to 95.%, an 8-basis-point, year-over-year increase. Leasing activity in the West Bank/West New Orleans submarket led the metro and accounted for more than half of all newly occupied apartments. Affordability was a significant motivator for renters to live in this area since the monthly effective rent was 72% below the top end of the apartment market. Beginning in fourth quarter, deliveries shifted from the fast-growing St. Tammany Parish to the city s urban core, home to most office jobs in the metro and the 2.4- mile Medical District. One such downtown development is the mixed-use 33-unit Canal Crossing high-rise which started lease-up in the fourth quarter and was slated to complete mid-219. Meanwhile, effective rent across the metro advanced 1.1% annually, averaging $975 per month in December. Following two years of negative job growth, the local economy expanded.9%, or by 5, net jobs, during ,.9% YOY $ % YOY 1% 8% 6% 4% 2% 1,277, $, $8, $6, $4, $2, Index Value (Base Year 213 = ) 16, 12, 8, 4, $1, $9 $9 $8 $ ** -4, AND 218 PERFORMANCE HIGHLIGHTS 4.7% 3 BPS YOY 525,6 894 Units $52, % 8 BPS YOY 265 Units 58.4% YOY 22.4% YE 218.1% YOY YE 218.8% YOY YE % YOY YE BPS YOY 96% 95% 93% 92% AND DELIVERIES 1, 1, ** 219 PREVIEW A rise in completions during 219 will expand apartment inventory 1.4% as developers concentrate on the Central New Orleans submarket, which will receive all the 1,151 new rentals scheduled to come online in the metro. Retail growth in Mid-City and the rising popularity of the linear park that runs through it have prompted a surge in residential development. Supporting rental demand in Mid-City is a 382-unit apartment community under construction at Conti and North Cortez streets with the first moveins slated for March. Housing demand in Mid-City is strong, driven in particular by the nearby University Medical Center and Veterans Affairs hospital, as well as access to the central business district via public transportation, or by bicycle along the Lafitte Greenway. Heightened multifamily completions that outmatch absorption will cause the metro occupancy rate to contract to 94.6%, 4 basis points below December 218 s rate. Effective rent growth is expected to accelerate 2.6% annually, reaching $1, by year-end. On the jobs front, 2,2 workers will be added to the labor force, a.4% growth. The construction sector will benefit from ongoing corporate projects such as Bayer AG s $975 million Luling plant expansion and Yuhuang Chemical s $1.9 billion methanol plant. 4 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

43 OMAHA 218 REVIEW Omaha employers more than doubled the number of new employees hired in the metro year over year, contributing to demand for multifamily housing in 218. The workforce expanded 1.5%, or by 7, jobs. In particular, hiring in the blue-collar segments contributed to an upswing in the workforce as 2, and 2,4 new employees were added in the construction and manufacturing sectors, respectively. The rising payrolls kept apartment leasing activity heading in the right direction,. However, absorption trailed inventory growth, causing occupancy to fall 1 basis points annually to a still healthy 95.5% by December. Apartment developers brought 1,89 units online last year, a slowdown from the nearly 2, additions in 217, which allowed demand to catch up to supply and keep occupancy as elevated as possible. Operators responded by keeping upward pressure on effective rent. The rate of effective rent growth was unchanged from the previous year, resulting in a 1.7% increase to $881 per month. 7, 1.5% YOY $ % YOY 9.% 7.5% 6.% 4.5% 3.% 945,8 $, $8, $6, $4, $2, Index Value (Base Year 213 = ) 1, 8, 6, 4, 2, $9 $8 $8 $7 $ ** AND 218 PERFORMANCE HIGHLIGHTS 2.7% 3 BPS YOY 375, 961 Units $65, % 1 BPS YOY 1,89 Units 45.4% YOY 16.1% YE 218.9% YOY YE % YOY YE % YOY YE BPS YOY 98% 96% 92% 9% AND DELIVERIES 2, 2, 1, 1, 13 19** 219 PREVIEW With space for development in Downtown Omaha becoming limited, development will spread to surrounding submarkets this year. Construction is expected to be concentrated in the Sarpy County submarket, where a new sewer line extension project will open up previously untouched stretches of land for development. One of several projects driving deliveries in this submarket is the 384-unit La Vista City Centre. Low unemployment will continue to play a major role in the Omaha metro s economic fundamentals; hiring will also slow this year. While the metro s moderate economic growth is not expected to accelerate, the presence of reliable economic anchors, ranging from Fortune companies like TD Ameritrade to military installations like Offutt Air Force Base, will encourage apartment operators to treat the metro s measured pace of economic growth as sustainable. Employers will expand the workforce by 5,2 jobs, equating to 1.% annual growth. Effective rent growth will improve, up 1.8%, due to the strong rebound in absorption expected through December. Effective rent will reach $897 by the end of the year. Residents will fill 2,121 additional units, outpacing the 1,75 new multifamily units scheduled to come online and bringing up occupancy 6 basis points to 96.1%. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 41

44 ORANGE COUNTY CA 218 REVIEW head counts in Orange County grew by 15,6 positions, a 1.% rise, following a broader Southern California trend of slowing job creation amid very low unemployment. Recent hiring has been more concentrated in low- and mid-paying sectors, creating some affordability concerns for the market. Still, the metro maintains a large concentration of higher-paid workers, most notably within the professional and business services sector, that seeks Class A rentals. Apartment operators recorded net absorption of 2,926 units; concurrently, multifamily builders placed 4,339 new apartments into service. A 1-basis-point annual dip in occupancy, which ended the year at 95.8%, stemmed from the supply imbalance. While homeownership remained out of reach for most residents, landlords advanced effective rent 2.7% to $2,67 per month, though rent growth showed signs of cooling off in most submarkets. While moderating rent growth traced the national trend, rising cost created distress among some renters as evidenced by occupancy among Class C properties at 2 basis points higher than Class A and Class B stock. 15,6 1.% YOY $2,67 2.7% YOY 5.5% 5.% 4.5% 4.% 3.5% 3.% $, 3,198,6 $3, $3, $2, $2, $1, Index Value (Base Year 213 = ), 4, 3, 2, $2,3 $1,9 $1, $1, $7 1, AND 96.4% 96.% 95.6% 95.2% 94.8% $3 94.4% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.% 3 BPS YOY 1,59,6 2,926 Units $86, % 1 BPS YOY 4,339 Units 9.6% YOY 28.6% YE 218.1% YOY YE 218.8% YOY YE % YOY YE BPS YOY AND DELIVERIES 6, 4, 2, 13 19** 219 PREVIEW Apartment demand will heighten across Orange County amid steady hiring during 219. Residents are forecast to newly occupy 4,13 apartments during the next four quarters, up from 2,926 net units absorbed in 218. Rental demand is expected to be greatest in the South Irvine and the East Anaheim/Orange submarkets, accounting for half of all net units absorbed. Buttressing some of the demand in the area will be job growth. Overall, O.C.-based employers will accelerate hiring as the metropolitan division workforce increases by 17,9 personnel, a 1.1% gain. Builders continue developing apartment communities in the Platinum Triangle, an area surrounded by Angel Stadium, Honda Center, and the city s ARTIC transportation hub. This year four massive, amenity-rich projects are under construction: Core, Jefferson Rise, Jefferson Edge, and Rev at Platinum Park. These communities are part of a total 16 multifamily developments across the metro scheduled to bring 4,835 rentals to the local apartment market, marking a decade-long peak. The occupancy rate will dip 2 basis points to 95.6% amid the supply-side pressure. With advancing payrolls and household incomes predicted to rise 3.5%, average rent will continue its upward trajectory. Effective rent is anticipated to finish 219 at $2,123 per month, up 2.7% annually. 42 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

45 ORLANDO 218 REVIEW expansion and multifamily occupancy and rent growth in the Orlando area topped most metro areas in the U.S. last year. Employers added, workers to local payrolls in 218, a 3.9% year-overyear gain. The leisure and hospitality sector, the metro area s largest employment segment and prominent barometer of apartment demand, expanded 5.5% with 14,3 new hires. In-migration totaling 61,9 persons and a 3.8% annual surge in the number of households drove the need for basic services, including those provided by the education and health services sector. in the sector advanced 5.1% as 7,9 new positions were filled during the year. Apartment operators recorded net absorption of 7,54 units in 218. During the same period, builders ramped up deliveries, placing 7,56 new apartments into service. A 1-basis-point annual dip in occupancy stemmed from the supply imbalance. By year-end, metrowide occupancy was a stillhealthy 96.3%. Meanwhile, effective rent reached $1,229 per month, a 6.5% gain., 3.9% YOY 7.% 6.5% 6.% 5.5% $1, % YOY 5.% $4, 2,621,3 $16, $13, $, $7, Index Value (Base Year 213 = ) 6, 4, 2, $1,3 $1,2 $1, $1, $9 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.% BPS YOY 967,2 7,54 Units $58, % 1 BPS YOY 7,56 Units 4.8% YOY 25.1% YE % YOY YE % YOY YE % YOY YE BPS YOY 97% 96% 95% 93% 92% AND DELIVERIES 12, 9, 6, 3, 13 19** 219 PREVIEW Orlando s job growth and apartment fundamentals will outpace most metro areas in 219. Metrowide effective rent this year is forecast to rise 4.9% to $1,289 per month in December. Employers are expected to create 41,2 jobs, a 3.1% annual gain. The leisure and hospitality industry will be buoyed by this year s opening of Margaritaville Resort Orlando and the new Star Wars attraction at Disney s Hollywood Studios. Apartment communities in the Kissimmee/Osceola County and South Orange County submarkets will be the primary beneficiaries of the jobs generated from these attractions. The construction sector will be supported by the 6,898 apartments completed this year, and in the longer term, a $1.9 billion highway project by Central Florida Expressway Authority that will create approximately 11, jobs through 223. Multifamily deliveries are expected to surpass demand this year, prompting 96.2% occupancy by year-end, down 1 basis points from 218. Many of the 7,7 students enrolled at Central Florida University will need housing when the downtown campus opens in August 219. Long-term apartment demand will be generated by the thousands of jobs created following completion of downtown s 68- acre Creative Village. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 43

46 PHILADELPHIA 218 REVIEW Philadelphia s expanding workforce and rising wages boosted the apartment market in 218. After growing 1.3% in 217, employment increased 1.5% last year. While hiring was mixed across employment sectors, a metro-leading 15,2 net positions were added in the professional and business services sector. These high-paying jobs contributed to Philadelphia leading wage growth for the country. Operators capitalized on this by accelerating rent growth while keeping concessions rates below many other major Northeast markets. At $1,293 per month in December, average effective rent advanced 2.4% last year, up from 2.1% growth in 217. The rise comes as more than 4,8 units came online, continuing the elevated annual deliveries in the last five years. Deliveries were concentrated in the Center City submarket, home to the metro s central business district. Demand persisted in the area, though trailed inventory growth to push occupancy down. This trend was reflected in the metro, where occupancy lowered 1 basis points annually to 95.4%. 43, 1.5% YOY $1, % YOY 7.% 6.5% 6.% 5.5% $, 6,116,4 $2, $1, $, Index Value (Base Year 213 = ), 4, 3, 2, 1, $1,4 $1,3 $1,2 $1, $1, 13 19** AND 218 PERFORMANCE HIGHLIGHTS 3.8% BPS YOY 2,388,7 4,216 1 $73, % 1 BPS YOY 4,815 Units 8.2% YOY 21.% YE 218.2% YOY YE 218.8% YOY YE % YOY YE BPS YOY 96% 95% 93% 92% AND DELIVERIES 9, 6, 3, 13 19** 219 PREVIEW Limited available single-family home supply amid continued job creation bodes well for the apartment market in Philadelphia. Recently, few single-family homes have been for sale, construction of new homes has been muted, and single-family permitting issuance has dropped. These are some factors limiting the aging millennials ability to exit the renter pool due in part to intense bidding over a limited amount of properties. While the real estate market is keeping residents out of homeownership, apartment operators are expected to see a sharp rise in leasing activity. Also contributing to housing demand will be expansions by Comcast in the Center City submarket and Penn Medicine in the Southwest submarket. Overall, total nonfarm employment is forecast to grow.9%, or by 27, net jobs, this year. The slowdown in hiring comes as unemployment is near multi-decade lows. Annual absorption metrowide is forecast to exceed the nearly 5,3 market-rate units scheduled to come online by the end of December. This shift will move average apartment occupancy up 2 basis points annually to 95.6% in the fourth quarter, the highest year-end level in more than a decade. With apartment occupancy elevated, average effective rent is forecast to increase 2.5% year over year to $1,326 per month in December. 44 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

47 PHOENIX 218 REVIEW Apartment demand has exceeded development in the Phoenix metropolitan area, boosting apartment fundamentals in 218. Builders brought more than 8,2 units online last year. Deliveries drastically elevated in the Deer Valley and the North Tempe/University submarkets, both of which became home to major corporate expansions and relocations in recent years that included USAA and State Farm. Even with metrowide deliveries up by more than a third from 217, the latest inventory growth trailed leasing activity as occupancy elevated 8 basis points annually to 95.4% in the fourth quarter of 218. The rising labor force along with robust population growth contributed to the demand for housing. expanded by 3.5%, or 71,3 jobs, last year, more than double the 1.6% national average increase at the same time. With higher payrolls and rising occupancy, operators were able to capitalize by accelerating rent growth. After advancing 4.2% in 217, average effective rent increased 5.5% last year to reach $1,45 per month in December. 71,3 3.5% YOY $1,45 5.5% YOY 6.5% 6.% 5.5% 5.% 4.5% $, 4,884, $1, $125, $, $75, Index Value (Base Year 213 = ) 8, 6, 4, 2, $1,2 $1, $8 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.6% BPS YOY 1,781,7 1,63 Units 1 $63, % 8 BPS YOY 8,23 Units 37.2% YOY 19.8% YE % YOY YE % YOY YE % YOY YE BPS YOY 96% 92% 9% AND DELIVERIES 12, 9, 6, 3, 13 19** 219 PREVIEW Greater Phoenix s strong in-migration and employment growth should sustain positive momentum for the apartment market in the near term. Many of these new residents come to Greater Phoenix for job prospects and housing affordability, increasingly from pricey coastal markets, particularly those in California. Part of what is luring transplants is the economy s shift from consumptiondriven industries to growth by major financial services firms and tech companies. Deloitte, Infosys Limited, Intel Corporation, Northern Trust Corporation, and USAA are in different phases of completing expansions in the metro that will create more than 1, jobs each. Overall, employment is forecast to expand 2.3%, or by 49,6 new jobs, this year. Many are higher-paying jobs that should help maintain robust income growth, allowing operators to maintain upward pressure on rent. Average effective rent is forecast to rise 4.2% this year to $1,89 per month in December. Annual rent growth is expected to moderate from 218 as operators compete for renters as deliveries remain elevated with more than 8,3 units coming online this year. The influx is expected to shift down occupancy 3 basis points annually to an average of 95.1% in the fourth quarter. Even with the downshift, occupancy will be 7 basis points higher than the five-year average. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 45

48 PORTLAND 218 REVIEW Apartment demand remained brisk, particularly in Downtown Portland, buttressed by expanding employment and a continued influx of well-educated, young professionals. The Portland area gained 28,6 jobs last year, a 2.4% infusion of workers, as the pace of hiring heightened following the 2.2% job growth in 217. Last year, household formation outpaced sturdy population gains; yet many residents opted to rent since the median monthly mortgage exceeded the average apartment rent by $1,. Occupancy averaged 94.9% in December, down 2 basis points year over year as multifamily developers completed 5,18 apartments for the highest yearly output in more than 1 years. Deliveries among the Central Portland and the East Portland submarkets comprised 52% of all new apartment stock. Absorption in the two submarkets outpaced deliveries by more than 26%, pushing up occupancy in both areas. Healthy apartment demand metrowide kept rent growth positive amid a barrage of new inventory. Effective rent rose 1.7% annually to $1,32 per month at year-end. 28,6 2.4% YOY 9% 7% 5% 3% $1,32 1.7% YOY 1% $, 2,496,8 $2, $2, $1, $, Index Value (Base Year 213 = ) 4, 3, 2, 1, $1,7 $1,4 $1, $8 $ *Estimate Source: Real Capital Analytics AND 96.5% 96.% 95.5% 95.% 94.5% $2 94.% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.6% 3 BPS YOY 971,8 4,1 Units $77, % 2 BPS YOY 5,18 Units 14.% YOY 2.5% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 7, 6, 4, 3, 1, 13 19** 219 PREVIEW Solid economic indicators, including employment, population, and income growth that far exceed the national averages, will help drive apartment demand in Portland during 219. Portland-area businesses will add 22,4 jobs to the employment base over the one-year forecast period. Referred to as the Silicon Forest, Portland s technology sector plays a major role in the local economy. Intel Corporation continues to invest as much as $ billion at its current campus, in addition to its multibillion-dollar D1X expansion. Additionally, construction is well underway at Nike s 1.4 million-squarefoot expansion of its Beaverton campus. Nike will soon occupy 3 acres of contiguous real estate, one of the largest corporate campuses in the U.S. Portland s 1.8% employment gain in 219, alongside sturdy population growth, particularly among the key renter cohort, will underpin heightened apartment demand. Net absorption will rise to 6,418 apartment units this year, helping to push up occupancy 6 basis points to 95.5%. Occupancy will continue to be tightest among Class C product, a notable 19 basis points ahead of the other asset classes. Household income is set to rise 4.3%, helping to offset the 2.8% annual rise in effective rent growth, expected to reach $1,357 per month in December. 46 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

49 RICHMOND 218 REVIEW With apartment occupancy rising in recent years, multifamily developers ramped up deliveries across the Richmond metropolitan area. Construction completed on more than 1,9 market-rate units last year, up nearly 51% from additions during 217. Even with the uptick in supply, leasing in newly constructed buildings averaged around 15 units per month. The new stock attracted renters in the 18- to 34-year-old key cohort as young professionals continued to move to Greater Richmond in part because of its low cost of living and abundance of jobs. Payrolls grew 2.% in 218, up from.5% expansion in 217. Accelerated hiring sustained demand across all apartment stock, as leasing activity was positive though trailed inventory growth last year. Supply-side pressure led to a 1-basispoint annual dip in apartment occupancy to 95.8% in the fourth quarter of 218. Even with the decline, occupancy was 14 basis points higher than the five-year average. Apartment operators capitalized on healthy occupancy by advancing effective rent on average 4.% annually to $1, per month. 13,3 2.% YOY $1, 4.% YOY 7.5% 7.% 6.5% 6.% 5.5% $25, 1,39,2 $125, $, $75, $, Index Value (Base Year 213 = ) 3, 2, 1, $1, $1, $9 $8 $7 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.% 8 BPS YOY 52,7 1,752 Units $67, % 1 BPS YOY 1,934 Units.7% YOY 18.7% YE 218.7% YOY YE % YOY YE % YOY YE BPS YOY 97% 96% 95% 93% 92% AND DELIVERIES 3, 2,8 2, 1, ** 219 PREVIEW New apartment inventory will continue to attract renters and sustain leasing activity in Greater Richmond this year. Builders are scheduled to bring more than 2,4 units online by year-end, the greatest annual additions in more than a decade. Developers are particularly involved with conversion of former industrial and office buildings in Richmond s emerging neighborhoods around downtown, where Virginia Commonwealth University students and young professionals are leasing high-end apartments. VCU is a major demand driver for the apartment market with only about a quarter of the 31, students living on campus. With VCU enrollment and residents in the key renter age increasing, renters should seek out the new stock as annual net absorption is forecast to remain positive metrowide. Also sustaining demand is the forecast 1.2% expansion in the workforce. Even with positive leasing activity, absorption is expected to fall short of inventory growth to lead to a 7-basis-point decline in average occupancy to 95.1% in the fourth quarter. At the same time, effective rent growth should moderate. Average effective rent is forecast to reach $1,84 per month in December, up 3.2% from one year prior. While down from the 4.% increase in 218, Richmond effective rent growth will exceed the 3.% U.S. average rise in 219. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 47

50 SACRAMENTO 218 REVIEW Though the Sacramento metro s job growth slowed annually, hiring in key industries like health care helped sustain demand for multifamily housing. Health care giant Kaiser Permanente opened its new Downtown Commons medical office, contributing to the 5,7 new jobs in the sector. Overall, the workforce grew by 1.3%, a total of 12,6 new hires. These growing employment hubs attracted developers as apartment construction was focused in the Central Sacramento and Roseville/ Rocklin submarkets. In particular, access to Sacramento s emerging urban core drew renters to these submarkets. The metro s occupancy fell 3 basis points during 218 to 96.4% due to supply-side pressure. Added competition from a surge of new supply, 1,68 units, encouraged apartment operators to hedge rent growth to minimize vacancies, bringing effective rent up 4.3% annually to $1,388 per month. Rent increased faster than the national average but slowed compared to the previous year, when rent accelerated 5.7%. 12,6 1.3% YOY 8% 7% 6% 5% $1, % YOY 4% $, 2,346,3 $1, $125, $, $75, Index Value (Base Year 213 = ) 45, 3, 15, $1,6 $1,4 $1,2 $1, $8-15, AND 97.% 96.5% 96.% 95.5% 95.% $6 94.5% 13 19** 218 PERFORMANCE HIGHLIGHTS 4.% 1 BPS YOY 853, 1,93 Units 2 1 $67, % 3 BPS YOY 1,68 Units 16.2% YOY 24.5% YE 218.6% YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 2, 1, 1, 13 19** 219 PREVIEW Demand for apartments will support strong rent growth in the Sacramento metro this year while employers are expected to add 1,7 jobs, a gain of 1.1%. Also driving demand for apartments in the metro will be rising enrollment at University of California Davis and continued hiring in the health care industry. A new UC Davis Medical Center is expected to add 2 jobs to the metro as the hospital reaches completion by 22. Additionally, city officials estimate that ongoing projects by Sutter Health, Kaiser Permanente, and Adventist Health could bring over 1, new jobs to the metro over the next two years. With Sacramento still offering opportunities for new construction, developers expect to bring more units online in 219. Notable developments scheduled to come online include the 34-unit Talavera Ridge and the 3-unit Fiddyment Ranch. The 1,678 units scheduled for delivery across Greater Sacramento will exceed the expected absorption, causing occupancy to fall 7 basis points to a still healthy 95.7%. With rent still well below the median monthly mortgage payment, apartment operators will keep upward pressure on rent. Metrowide rent is forecast to increase 5.% annually to $1,457 per month in December. 48 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

51 SALT LAKE CITY 218 REVIEW Utah s business-friendly atmosphere continued to boost job growth in 218. expanded 2.8% in 218 as employers hired 19,9 workers. Businesses in the trade, transportation, and utilities sector contributed 5,9 new workers, expanding the sector 4.1%. The segment was underpinned by United Parcel Service Inc. and Amazon.com Inc., each filling 1, jobs at new distribution facilities. Household formation outpaced population growth last year. Approximately 6,8 new households emerged in the metro area, and the median household income increased 2.9% during 218. The influx of households and the rise in discretionary income helped spur 4.1% annual growth in the leisure and hospitality industry as 2,6 new jobs were filled. Job growth and household formation in turn fueled apartment demand. Renters newly occupied 2,626 apartments while builders delivered 2,823 units. The supply imbalance resulted in a 1-basispoint annual decrease in vacancy to 95.6% in December. Meanwhile, monthly effective rent advanced a healthy 4.% to $1, ,9 2.8% YOY 7.% 6.5% 6.% 5.5% 5.% $1,128 4.% YOY 4.5% $8, 1,226,3 $18, $16, $14, $12, $, Index Value (Base Year 213 = ) 3, 2, 1, $1,2 $1, $1, $9 $8 AND 96.5% 96.% 95.5% 95.% 94.5% $7 94.% 13 19** 218 PERFORMANCE HIGHLIGHTS 2.8% 3 BPS YOY 416, 2,626 Units $74, % 1 BPS YOY 2,823 Units 15.2% YOY 18.1% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 3,6 3, 2,4 1,8 1, ** 219 PREVIEW Continued job growth and household formation amid rising single-family home prices will benefit the local multifamily market in 219. Businesses are projected to grow payrolls 1.6% with the addition of 11,6 workers while 6,6 more households call the Salt Lake City metro area home. The median single-family home price in the metro area already 21% higher than the median national price is projected to rise 2.7% in 219, making the typical monthly mortgage % higher than the average apartment rent. Renters are expected to occupy 2,34 additional apartments this year. A significant shift in new inventory will emerge in the South Salt Lake/Murray submarket, where more than 1,3 units will be delivered this year, well positioned near expanding employment hubs in Silicon Slopes. Net absorption across the metro will fall short of the 2,539 apartments delivered, resulting in year-end occupancy of 95.5%, a 1-basis-point reduction from 218. Effective rent is forecast to reach $1,163 per month by December, a 3.1% annual gain, compared to the 3.% increase nationwide. Metrowide, developers have 23 apartment communities in various stages of the planning process which will yield in excess of 7, units if all are realized. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 49

52 SAN ANTONIO 218 REVIEW Multifamily inventory growth and demand in 218 decelerated from the year before, but remained robust. Builders completed 5,849 units in the San Antonio metro area in 218, consistent with the five-year average. Continued job growth and 17,6 additional households last year contributed to net absorption of 4,265 apartments. Average apartment occupancy was 93.3% in December, down 6 basis points from year-end 217. More than 4% of the new inventory emerged among the neighboring Far West San Antonio and Far Northwest San Antonio submarkets, areas with abundant developable land and proximity to employment centers in Northwest San Antonio. Meanwhile, metrowide monthly effective rent reached $947 in December, a 1.7% year-over-year gain. Household income rose 3.% in 218, enhancing the affordability of apartment rent, which was typically about 33% less than the median monthly mortgage. In the labor market, employers hired 13, workers in the metro area, a 1.2% annual increase. 13, 1.2% YOY $ % YOY 6.7% 6.4% 6.1% 5.8% 5.5% 5.2% $2, 2,534, $12, $, $8, $6, $4, Index Value (Base Year 213 = ) 4, 3, 2, 1, $1, $9 $8 $7 AND 94.5% 94.% 93.5% 93.% $6 92.5% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.3% BPS YOY 922, 4,265 Units 1 $6, % 6 BPS YOY 5,849 Units 11.7% YOY 18.9% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 8, 6, 4, 2, 13 19** 219 PREVIEW Businesses and institutions in the metro area are forecast to hire 21,8 workers in 219, a 2.% annual gain. Diversification in the labor market and the metro s perpetually strengthening health services and cybersecurity industries are expected to shield the area from a nationwide economic pause in 22. According to Moody s, while job contraction will be present in many metro areas, employment in the San Antonio area is projected to rise 1.3% in 22. Among those aiding job growth will be Ernst & Young, which plans to hire 9 highly paid workers through 223. In the manufacturing sector, CGT U.S. Ltd will fill 275 new positions by year-end 22 at its facility in New Braunfels. Job growth this year will foster continued apartment demand and rent growth. Metrowide occupancy of 93.% is forecast by year-end 219 as renters occupy 3,246 additional apartments while builders deliver 4,1 new units. Effective rent growth is expected to accelerate to a 2.2% year-over-year rate, resulting in average $968 monthly effective rent in December. Beyond 219, multifamily supply growth will subside, though remain brisk. At the outset of 219, developers had 23 apartment communities in various stages of planning, representing more than 6,4 units. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

53 SAN DIEGO 218 REVIEW Developers ramped up construction to meet pent-up rental demand in the Downtown San Diego/Coronado submarket. The 1,875 rentals added to downtown inventory were part of a total 4,437 apartments delivered across the metro. Most notable was the completion of Park 12 apartments. With 718 rental units, the $4 million residential tower is Downtown San Diego s biggest-ever apartment community. The recent surge of deliveries was necessary as metrowide rental demand increased 14% year over year, reaching 3,962 net move-ins. Heightened demand in downtown was insufficient to overcome supply-side pressure in Greater San Diego, causing occupancy to drop 1 basis points to 96.2%. Still, occupancy was tight, especially in the Class C product. Meanwhile, effective rent accelerated from 3.9% in 217 to 4.2% in 218. The average effective rent was $1,944 per month in December. Continued job growth underpinned sturdy apartment fundamentals. A total of 21,9 jobs were added to the market, a gain of 1.5% annually. Hiring activity was at its strongest in the professional and business services sector which expanded a metro-leading 12,4 jobs. 21,9 1.5% YOY 7% 6% 5% 4% 3% $1, % YOY 2% $, 3,368, $3, $2, $2, $1, $, Index Value (Base Year 213 = ) 45, 3, 15, $2,3 $1,9 $1, $1, $7 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.3% 4 BPS YOY 1,186,4 3,962 Units $75, % 1 BPS YOY 4,437 Units 48.5% YOY 3.9% YE 218.6% YOY YE % YOY YE % YOY YE BPS YOY 98% 97% 96% 95% 93% AND DELIVERIES 6, 4, 3, 1, 13 19** 219 PREVIEW Occupancy will be on the upswing in the San Diego metropolitan area this year as job creation continues to expand. Total nonfarm employment is forecast to increase by 15,6 jobs, a 1.% year-over-year gain. Part of the economic growth will come as General Dynamics-NASSCO hires 8 to 1, workers in 219 to begin building a new class of oiler ships for the Navy, work that signals a sharp upturn for the San Diego shipyard. In El Cajon, Sycuan Casino is hiring more than 7 new positions for its $226 million expansion, a boost to the hospitality sector. Supporting the construction trades, multifamily developers will be underway on 26 properties with 4,19 units scheduled to come online over the next four quarters. For the thirdconsecutive year, apartment development will be concentrated in the Downtown San Diego/Coronado submarket. Even with San Diego s steady stream of new rentals, leasing activity across the metro will outpace deliveries to push up occupancy 2 basis points. The 96.4% occupancy rate will place San Diego among the top 1 major metro areas. Operators will take advantage of vigorous demand by raising rent 4.% this year, following 4.2% appreciation in 218. Average effective rent will exceed $2,2 per month in December. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 51

54 SAN FRANCISCO 218 REVIEW A slowdown in deliveries amid sustained demand for housing elevated average apartment occupancy in the San Francisco- Oakland metro. After a building boom during the previous two years, more than 3,9 market rate units came online in 218. Additions were down 26% annually, as some residential projects in the early phases of planning switched from multifamily to hotel or stalled completely following the passage of Prop C. For those apartment projects that came online, operators experienced quick lease-up. Unlike Class B and C assets, occupancy elevated among Class A stock, even with the new inventory. This shift helped elevate metrowide occupancy 3 basis points annually to 96.2%. Driving demand for rentals, especially among the amenity-rich Class A product, was the influx of highly paid workers in the tech industry and a lack of available affordable singlefamily housing. Total employment expanded 1.7% in 218. Operators capitalized on rising payrolls and occupancy, as average effective rent advanced 2.8% annually to $2,67. 39,9 1.7% YOY $2,67 2.8% YOY 5.% 4.5% 4.% 3.5% 3.% $2, 4,769,8 $4, $3, $3, $2, Index Value (Base Year 213 = ), 75,, 25, $3, $2, $2, $1, 13 19** AND 218 PERFORMANCE HIGHLIGHTS 2.8% 2 BPS YOY 1,774, 5,86 Units 1 $14, % 3 BPS YOY 3,915 Units 26.% YOY 3.6% YE 218.6% YOY YE % YOY YE % YOY YE BPS YOY 97% 96% 95% AND DELIVERIES 12, 9, 6, 3, 13 19** 219 PREVIEW With apartment occupancy rising in recent years, multifamily developers have ramped up activity in the Bay Area, which will lead to a postrecession high of market-rate deliveries in 219. After a construction boom in San Francisco, apartment construction activity has shifted to the East Bay. Of the more than 1,3 units scheduled to come online metrowide by year-end, twothirds are in the East Bay. Deliveries will be concentrated in Downtown Oakland as the area is emerging as a favorable live-workplay environment. The East Bay is expected to be a growing center for demand as nearly 1.6 million square feet of office space is currently under construction or renovation in the area. Continued hiring will help fill those offices as metrowide employment is forecast to grow 1.1%, or by 27, jobs, by year-end. With more job openings than qualified area residents to fill them, the Bay Area is attracting workers from across the country and the world. These transplants will help shift up annual absorption. Even with the rise, leasing activity should trail inventory growth to lower average occupancy 3 basis points annually to a still-healthy 95.9% in the fourth quarter. At the same time, apartment operators are forecast to elevate monthly effective rent on average 2.9% to $2,748 by year-end. 52 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

55 SAN JOSE 218 REVIEW Apartment fundamentals remained healthy in the San Jose-Sunnyvale-Santa Clara metro thanks to strong hiring across multiple sectors and enduring demand driven by the metro s longtime reputation as a major national tech hub. grew 3.1%, nearly doubling the national average last year, after local employers brought on 34, new hires. Additionally, job gains drove apartment demand and absorption remained positive while trailing deliveries. By the end of last year, 2,745 additional units were filled annually compared to the 3,57 units completed, which brought occupancy down by 1 basis points to 95.4%. Additionally, high rents fueled elevated occupancy in Class C properties in this market. Most developments were underway in the Central San Jose and North San Jose/Milpitas submarkets, where demand was driven by proximity to the metro s expansive tech sector. Despite metrowide absorption easing in 218, apartment operators were confident enough to raise effective rent on average 4.1% to $2,755 per month by December as the median home price advanced 15.3% at the same time. 34, 3.1% YOY $2, % YOY 5.% 4.5% 4.% 3.5% $2, 2,1,4 $, $4, $3, Index Value (Base Year 213 = ) 45, 3, 15, $3, $2, $2, $1, 13 19** AND 218 PERFORMANCE HIGHLIGHTS 2.8% 2 BPS YOY 667, 2,745 Units 2 1 $12, % 1 BPS YOY 3,57 Units 1.4% YOY 27.5% YE 218.4% YOY YE 218.7% YOY YE % YOY YE BPS YOY 97% 96% 95% AND DELIVERIES 7, 5, 2, 13 19** 219 PREVIEW Both construction and absorption are expected to reach postrecession highs in 219 as operators accelerate deliveries to capture the metro s remaining demand. More than 6, units are scheduled to be delivered this year. With renters seeking to be close to the metro s tech-oriented urban core, construction will be concentrated in the Central San Jose market. Developers also anticipate strong demand in the Santa Clara and Mountain View/Palo Alto/Los Altos submarkets. Major developments in these submarkets like the 476-unit Gateway Village and the 583-unit The San Antonio Rd. are scheduled for completion by the end of the year. Metrowide deliveries are expected to trail leasing activity as residents with high-paying jobs are attracted to modern amenities available in new multifamily housing. This trend will shift up occupancy 2 basis points annually to 95.6% in December. Operators will capitalize by keeping upward pressure on rent. San Jose effective rent growth is expected to continue exceeding the national average, rising 3.6% this year to $2,854 per month. At the heart of the metro s enduring positive apartment fundamentals remains both the metro s status as a leader for tech employment and a shortage of affordable single-family options. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 53

56 SEATTLE-TACOMA 218 REVIEW Sustained job creation in recent years has led to robust demand for housing across the Seattle-Tacoma metro. Developers responded in kind by maintaining elevated apartment construction. Nearly 1,3 units came online in the last year, up 2.4% from deliveries during 217. Most development targeted employment nodes in the South Lake Union/Queen Anne and the Downtown Seattle submarkets. A preference for urban living and proximity to work kept demand for this apartment stock strong, especially as the cost of homeownership metrowide rose more than 13% annually. While healthy, leasing activity trailed inventory growth as apartment occupancy lowered 1 basis points annually to 95.1% in the fourth quarter of 218. With occupancy near the five-year average, operators maintained upward pressure on rent. Average effective rent advanced 2.4% annually to $1,653 in December 218. Rent growth trailed income growth, leading to the rent share of wallet lowering to 23.3% in 218. As incomes rose, so did employment, expanding 2.8% in ,7 2.8% YOY $1, % YOY 6.% 5.5% 5.% 4.5% 4.% $, 3,941, $3, $2, $2, $1, Index Value (Base Year 213 = ) 75,, 25, $1,8 $1,6 $1,4 $1,2 AND 96.% 95.5% 95.% 94.5% $1, 94.% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.3% 9 BPS YOY 1,538, 9,228 Units 2 1 $85, % 1 BPS YOY 1,294 Units 2.4% YOY 23.3% YE % YOY YE % YOY YE % YOY YE BPS YOY AND DELIVERIES 16, 12, 8, 4, 13 19** 219 PREVIEW Multifamily developers will show continued faith in the Seattle-Tacoma apartment market as deliveries rise this year. Construction is scheduled to complete on approximately 14, units by year-end, up more than a third from 218 additions. While development will remain concentrated around the downtown area, nearly 2, units are scheduled to come online in the Redmond submarket. Helping drive housing demand is Microsoft s expanding Redmond campus. The project is expected to be completed in 222 and will create room for 8, additional employees. In the near term, growth by Amazon.com Inc. will move head counts to more than 75, workers in the Puget Sound area this year. Overall, employment is forecast to expand 1.6% this year. While growth will be down from 218, the local expansion will exceed the 1.3% national increase at the same time. The rising payrolls will contribute to an increase in rental activity. Annual leasing activity though is expected to trail the influx of new inventory. Average occupancy is forecast to slip 1 basis points year over year to 95.% in the fourth quarter. Apartment operators will respond in kind, by tapering effective rent growth. Monthly effective rent is forecast to advance 1.6% to $1,679 by yearend. 54 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

57 SOUTH FLORIDA 218 REVIEW The expanding labor force in South Florida contributed to housing demand in 218. Employers added 62,7 net jobs last year. Underpinning the rise in employment were the numerous projects in various stages of development, leading to 15, workers added to the construction industry. Part of the construction jobs were needed to work on one of the largest apartment pipelines in the country. Builders brought more than 1, units online metrowide in 218. The new inventory facilitated leasing activity, though supply-side pressure shifted occupancy down 1 basis points annually to 95.%. Driving apartment demand were population growth, the surge in hiring, and the increase in income. While employment has traditionally been driven by low-wage industries, employment growth diversified with more than 6, jobs added last year in white-collar industries. Metrowide median household income elevated 5.4% in 218, outpacing rent growth. At $1,548 in December, average monthly effective rent advanced 2.9% from one year prior. 62,7 2.4% YOY $1, % YOY 6.5% 6.% 5.5% 5.% 4.5% $, 6,319, $2, $2, $1, $, Index Value (Base Year 213 = ), 8, 6, 4, 2, $1,8 $1,6 $1,4 $1,2 $1, 13 19** AND 218 PERFORMANCE HIGHLIGHTS 3.5% 7 BPS YOY 2,373, 8,927 Units $57,22 95.% 1 BPS YOY 1,156 Units 13.6% YOY 32.5% YE % YOY YE % YOY YE % YOY YE BPS YOY 97% 96% 95% 93% AND DELIVERIES 16, 12, 8, 4, 13 19** 219 PREVIEW Apartment deliveries should remain elevated this year, highlighting developers confidence in the South Florida market. Construction is scheduled to complete on nearly 12, units by year-end, up more than 18% from 218 additions. This year will mark peak deliveries in more than two decades. While additions again will be concentrated in the Downtown Miami/South Beach submarket, new inventory will rise in the nearby Coral Gables/South Miami and West Miami/Doral submarkets. Part of the additions include the 816-unit Park-Line MiamiCentral in the Coral Gables/South Miami submarket. The 3- and 33-story towers represent one of the largest apartment projects in the metro to finish this year. Even with the deluge of deliveries, forecasted employment growth of 2.1% should drive leasing activity higher than inventory growth. Demand for new product will also persist as growth in the professional and business sector and the education and health services sector is expected to outpace the national average through the forecast period. Healthy demand should shift average apartment occupancy up basis points annually to 95.5% metrowide in the fourth quarter and slightly above the five-year average. At the same time, average effective rent is forecast to rise 3.7% to $1,66 per month in December. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 55

58 ST. LOUIS 218 REVIEW As job growth accelerated, heightened apartment deliveries and demand characterized the St. Louis apartment market in 218. Employers expanded the labor force by 16,8 positions, a 1.2% gain, up from.6% job growth in 217. Rental demand surged to 3,656 newly occupied units. During this same time, construction was on an upward trajectory as builders delivered 2,196 apartments by December, a 27% year-over-year increase. About eight out of 1 completions were in the neighboring Central West End/ Forest Park, St. Louis City, and Mid St. Louis County submarkets. Heightened apartment development in these central city submarkets was prompted in part by corporate relocations such as Nestlé USA, Centene Corp s Clayton expansion, and ongoing development at the National Geospatial-Intelligence Agency West. Across the metro, heightened leasing activity offset supply-side pressure, spurring a -basispoint annual increase in occupancy. The 94.1% occupancy rate in December was the highest year-end rate since 21. Meanwhile, average effective rent reached $881 per month in the fourth quarter,.9% higher than one year prior. 16,8 1.2% YOY $881.9% YOY 1% 8% 6% 4% 2% $2, 2,812, $, $8, $6, $4, Index Value (Base Year 213 = ) 3, 2, 1, $9 $9 $8 $8 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.3% 4 BPS YOY 1,183,3 3,656 Units $66, % BPS YOY 2,196 Units 26.7% YOY 15.9% YE 218.1% YOY YE 218.8% YOY YE % YOY YE 218 BPS YOY 95% 93% 92% 91% AND DELIVERIES 4, 3, 1, -1, -3, 13 19** 219 PREVIEW Job seekers will continue to find employment opportunities in the St. Louis metropolitan area as local employment is forecast to expand 1.% by year-end. The construction sector will be supported by ongoing downtown developments at Ballpark Village, Union Station, and the CityArchRiver project. In May 219, Amazon.com Inc. will employ 1, full-time workers when its first Missouri fulfillment center opens in St. Peters. Centene Corporation will complete three phases of expansion from 219 to 221 at its corporate office in St. Louis. The extra space will support 2, new permanent jobs and boost apartment demand in the Mid St. Louis County submarket. Over the long view, Boeing s St. Louis plant will assemble the new T-X Trainer jet for the U.S. Air Force under a $9.2 billion contract, a win the company said would support an additional 1,8 direct and indirect jobs at its North County campus. The rising labor force and incomes will boost the apartment market as effective rent is forecast to increase 2.1% over the course of the year, averaging $899 per month by the fourth quarter. Absorption will moderate following peak construction output in 218. Consequently, the occupancy rate is predicted to lower to 93.5%. Despite a 6-basis-point contraction, the occupancy rate will remain above the five-year average of 93.3%. 56 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

59 TAMPA-ST. PETERSBURG 218 REVIEW The 2.3% job growth in the Tampa-St. Petersburg-Clearwater metro sustained apartment demand and rent growth. Driven by hotel construction, health care expansions, and elevated multifamily deliveries, the metro s construction sector grew 8.4% as employers added 6,2 new jobs last year. Builders brought 5,177 apartment units online in 218, firmly outpacing the five-year average, to meet the demand generated by a growing population. Additionally, the metro s large portion of renters over the age of drove demand for high-end multifamily. Renters filled 4,679 units while supply-side pressure pushed down occupancy by 1 basis points year over year to 95.2% in the fourth quarter of 218. Construction was focused in the Central Tampa submarket, as Downtown Tampa serves as the metro s economic center and a primary source of job growth. Thanks in part to sustained demand in the metro s costliest submarket, operators felt empowered to raise up effective rent metrowide 4.4% annually to $1,162 per month in December. 3,6 2.3% YOY 218 PERFORMANCE HIGHLIGHTS 8% 7% 6% 5% $1, % YOY 4% $, 3,168, $1, $125, $, $75, Index Value (Base Year 213 = ), 4, 3, 2, 1, $1,4 $1, $8 $ 3.2% BPS YOY 1,293, 4,679 Units $ ** AND 2 1 $57, % 1 BPS YOY 5,177 Units 16.5% YOY 24.2% YE % YOY YE % YOY YE % YOY YE BPS YOY 98% 96% 92% 9% AND DELIVERIES 8, 6, 4, 2, 13 19** 219 PREVIEW Demand for apartments and room for rent growth will characterize the Tampa-St. Petersburg-Clearwater metro as companies and institutions continue to expand their payrolls this year. Employers are expected to add 3, new jobs in 219, an annual gain of 2.2%, nearly as significant as the growth that occurred in 218. Construction on the 519-room JW Marriott Hotel is already underway in the metro, anchoring the highly anticipated Water Street Tampa development. Hiring ahead of the hotel s 22 scheduled opening is expected to drive job growth in the leisure and hospitality sector. An increasingly competitive multifamily market will also encourage apartment operators to moderate rent growth and new construction to help drive leasing activity in the metro. Rent growth will soften to 4.% as effective rent increases to $1,29 per month by the end of the year. Fewer units are expected to be absorbed this year, 3,858 units metrowide. Over the same period, a smaller number of units are scheduled to be delivered compared to 218, approximately 4,32 units through December. The minor supply imbalance will impact occupancy, which will fall 1 basis points to 95.1% by year-end. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 57

60 TUCSON 218 REVIEW The rising work force boosted apartment fundamentals in the Tucson metropolitan area in 218. Total nonfarm employment expanded 2.6% last year, up from 1.% growth in 217. While gains were broad based, higher-wage jobs added in white-collar industries led to a 2.1% increase in the median household income. The ascent in payrolls along with rising apartment occupancy enabled apartment operators to keep Tucson annual effective rent growth among the highest in the country. Average effective rent increased 5.2% in 218 to $777 per month in December. Renters were not deterred by robust rent growth. Annual leasing activity exceeded the 221 marketrate units to come online to cause average occupancy to rise 1 basis points last year. At an average of 94.5% in the fourth quarter, occupancy reached its highest year-end level in more than a decade. Also creating apartment demand was a surge in population growth, driven largely by in-migration that totaled 11,3 people in 218. This contributed to households rising 1.8%, or by 7,2 units, last year. 1, 2.6% YOY 7.% 6.5% 6.% 5.5% $ % YOY 5.% 1,42,9 $, $8, $6, $4, $2, Index Value (Base Year 213 = ) 12, 9, 6, 3, $9 $8 $7 $6 $ $ ** -3, AND 218 PERFORMANCE HIGHLIGHTS 4.2% 2 BPS YOY 416,9 29 Units 7 2 $,1 94.5% 1 BPS YOY 221 Units 7.5% YOY 18.6% YE % YOY YE % YOY YE % YOY YE 218 BPS YOY 95% 93% 92% 91% 9% AND DELIVERIES 2, 1, 1, 13 19** 219 PREVIEW expansion in Greater Tucson is forecast to continue to outpace the nation, leading to sustained demand for housing. The local labor force is expected to grow 2.1% this year, outpacing the projected 1.3% U.S. increase at the same time. Part of the additions in Tucson will come with the completion of the new divisional headquarters for Caterpillar Inc. this year. The Fortune company is expected to bring more than 6 jobs with average annual salaries of $9, over the next several years. Another major employer adding high-paying jobs includes Raytheon, which announced 2, jobs will be created in the metro by 223. These jobs as well as overall employment growth will attract new residents as in-migration is forecast to grow to 13,8 transplants this year. While the homeownership rate is expected to rise to prerecession levels, the increase is not expected to heavily affect multifamily fundamentals. Apartment leasing activity is forecast to remain positive, though slightly trail the 229 market-rate units scheduled to come online by year-end. The imbalance will cause a 1-basis-point dip in occupancy to 94.4% in the fourth quarter. Monthly effective rent is forecast to increase 3.9% to $87 by year-end. 58 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

61 TULSA 218 REVIEW Job growth and decelerating apartment development in Tulsa kept apartment fundamentals moving in a positive direction in 218. Local employers created 1, jobs last year, a 2.2% year-over-year increase. Companies in the professional and business services sector led hiring with 3, new workers, a 5.8% surge. The sector was boosted by 3 newly created jobs at Alorica in Tulsa. In the trade, transportation, and utilities sector, 2, workers were hired, equating to 2.8% annual growth. Another high-growth segment was the leisure and hospitality industry, which gained 1, workers, a 2.4% increase. Major contributors to the segment s growth included Gathering Place Park and Osage Casino Hotel, each filling 2 new positions. expansion sustained apartment demand, as renters newly occupied 875 apartments metrowide. Coupled with a slowdown in apartment deliveries, multifamily occupancy advanced 8 basis points during the year. By December, average apartment occupancy was 92.4%. Effective rent rose.7% during the same period to $691 per month. 1, 2.2% YOY 1% 9% 8% 7% $691.7% YOY 6% 998,2 $6, $, $4, $3, $2, Index Value (Base Year 213 = ) 12, 9, 6, 3, $72 $68 $64 $6 $ ** -3, AND 218 PERFORMANCE HIGHLIGHTS 3.1% 12 BPS YOY 44, 875 Units $56, % 8 BPS YOY 352 Units 78.% YOY 14.7% YE 218.5% YOY YE % YOY YE % YOY YE 218 BPS YOY 95% 93% 92% 91% AND DELIVERIES 2, 1, 1, 13 19** 219 PREVIEW Apartment deliveries will rebound in 219. Builders have 893 units scheduled for completion this year in the metro area. Multifamily developers, wanting to avoid a supply excess, are expected to request permits for 265 units this year, down from the 777-unit average during the last five years. Beyond 219, groundbreaking at nine apartment communities is anticipated, representing more than 1,2 new multifamily units. Two-thirds of the new stock would be in the Central Tulsa submarket near employment hubs. This year, metrowide leasing activity is anticipated to trail deliveries by 15%, resulting in a 1-basispoint dip in occupancy to 92.3% by December. Meanwhile, effective rent is forecast to reach $73 per month, a 1.7% annual increase. is projected to expand.9% in 219 with 4, new workers. The transportation and warehousing subsector will be underpinned by 1, new jobs following the completion of a 2.5 million-square-foot Amazon.com Inc. fulfillment center in Tulsa in mid-219. The manufacturing sector will receive a boost late this year as Whirlpool Corporation finishes its $55 million expansion at its Owasso factory and hires 1 new workers. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 59

62 VENTURA COUNTY CA 218 REVIEW Economic growth was strong in the Oxnard- Thousand Oaks-Ventura metropolitan area, gaining 7,2 jobs, or 2.4% year over year. Hiring accelerated from the 1.1% expansion in 217 as the education and health care industry gained 2, jobs in 218 for a 4.7% annual increase. The construction sector expanded at the greatest rate, a 7.3% increase, as 1,2 workers were hired. The industry was supported by developments that included St. John s Pleasant Valley Hospital in Camarillo and the 27-acre mixed-use project at Portside Ventura Harbor. With payrolls rising, the monthly jobless rate marked a 2-year low of 3.5% in December. The favorable economic conditions prompted a 3.6% rise in household income, which bolstered the multifamily market. Average effective rent rose 3.5% annually to $1,897 per month. After no units came online in 217, a surge in rentals to meet rising demand spurred a 2-basis-point annual dip in occupancy to 96.%, though the rate remained above the five-year average of 95.8%. 7,2 2.4% YOY 7% 6% 5% 4% $1, % YOY 3% 86,2 $3, $2, $2, $1, $, Index Value (Base Year 213 = ) 8, 6, 4, 2, $2, $1,7 $1, $1,2 AND 96.5% 96.% 95.5% 95.% $1, 94.5% 13 19** 218 PERFORMANCE HIGHLIGHTS 3.5% 8 BPS YOY 279,8 753 Units 1 $84, % 2 BPS YOY 87 Units 26.8% YE 218.4% YOY YE % YOY YE % YOY YE 218 BPS YOY AND DELIVERIES 1, ** 219 PREVIEW With the median single-family home mortgage in Ventura County approximately $1,8 higher per month than the average multifamily rent, apartments are expected to remain an attractive living choice for the foreseeable future. Working to meet elevated apartment demand, builders are active in the Ventura, Oxnard, and Thousand Oaks submarkets, with the new Ventura stock accounting for three-fourths of the deliveries this year. One of the largest projects to complete will be Portside Venture Harbor, delivering 3 waterfront apartments. Additional units will come online at Ventura Triangle, an 11-acre parcel located along the Highway 11 technology corridor. Ventura County s slow-growth policies will likely return multifamily construction velocity to a modest number of deliveries at the start of 22. The downshift in construction should bode well for apartment owners as leasing activity is forecast to exceed deliveries, resulting in a 1-basis-point annual increase in occupancy to 96.1% in the fourth quarter of 219. Operators will accelerate rent growth, increasing 3.9% annually, to reach $1,971 per month in December. The rise in rent and occupancy will place Ventura County among the top 1 major apartment markets. Job growth of 1.2% is forecast, as local companies recruit 3,6 workers by year-end. 6 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

63 VIRGINIA BEACH 218 REVIEW While annual household growth in the Virginia Beach-Norfolk-Newport News metro area increased at a slower pace than the U.S. in 218, local household formation growth of.9% outpaced the.4% population increase. The 6,3 additional households last year aided apartment absorption as renters newly occupied 1,767 units. During the same period, 1,424 new apartments were delivered, 52% of which were in the Virginia Beach West submarket within convenient driving distance of Naval Air Station Oceana and employment hubs in Norfolk. Builders completed nine multifamily developments across the metro in 218, one of the most notable the 24-story former Bank of America building in Norfolk renovated into the 264-unit Icon Norfolk tower. Metrowide leasing activity outpaced deliveries and spurred a 3-basis-point increase in occupancy to 94.8% in December. By yearend 218, effective rent averaged $1,4 per month, a 1.6% annual increase. In the labor market, payrolls expanded 1.4% last year as employers hired 1,8 workers. 1,8 1.4% YOY 7.5% 7.2% 6.9% 6.6% $1,4 1.6% YOY 6.3% $2, 1,734, $, $8, $6, $4, Index Value (Base Year 213 = ) 15, 12, 9, 6, 3, $1, $1, $1, $9 $ ** AND 218 PERFORMANCE HIGHLIGHTS 3.2% 8 BPS YOY 672,8 1,767 Units 1 $66, % 3 BPS YOY 1,424 Units 25.2% YOY 18.9% YE 218.4% YOY YE 218.9% YOY YE % YOY YE BPS YOY 95% 93% 92% 91% AND DELIVERIES 4, 3, 2, 1, 13 19** 219 PREVIEW Continued employment expansion is anticipated in 219, albeit at a slower rate than last year. The single-family home market, more affordable than many other parts of the country, will remain an attractive alternative to renting an apartment. These factors will contribute to apartment demand diminishing in 219 as leasing activity is forecast to trail the 1,3 scheduled apartment completions by a wide margin this year. The Virginia Beach West submarket will again have a high concentration of multifamily development; approximately 45% of new stock in Hampton Roads will emerge in the submarket. The metrowide supply imbalance will drive a 6-basispoint annual decrease in average occupancy to 94.2% by year-end, still higher than the average during the previous five years. Operators will keep upward pressure on rents, increasing average monthly effective rent to $1,54 by December, a 1.4% increase from one year prior. In the labor market, local payrolls are forecast to expand.9% in 219 as 7, jobs are created. The manufacturing sector will be boosted as Global Technical Systems begins hiring the first of 1, workers late this year at its new factory in Virginia Beach and Huntington Ingalls Industries fills 7, positions through 223. Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market. 61

64 WASHINGTON, D.C. 218 REVIEW Persistent demand for housing propelled apartment development in the Washington, D.C., metropolitan area. While household formation rose, the high cost of homeownership kept many residents in apartments. Developers worked to meet the demand as more than 11,3 units came online in 218, outpacing the 1-year annual average. Deliveries were concentrated around employment nodes, highlighting renters preference for live-work-play locations. Employers added 57,4 net jobs last year for a 1.7% expansion, up from 1.2% growth in 217. The rise helped boost metrowide absorption, which exceeded inventory growth to lead to a 4-basispoint annual increase in average apartment occupancy to 95.5% in the fourth quarter of 218. Occupancy reached its highest yearend level in more than a decade. Apartment operators capitalized on elevated occupancy by accelerating rent growth. After advancing.7% in 217, average effective rent increased 1.6% annually to finish at $1,78 per month in December ,4 1.7% YOY $1,78 1.6% YOY 6.5% 6.% 5.5% 5.% 4.5% $, 6,33, $2, $2, $1, $, Index Value (Base Year 213 = ) 8, 6, 4, 2, $1,8 $1,7 $1,6 $1, 13 19** AND 218 PERFORMANCE HIGHLIGHTS 3.3% 3 BPS YOY 2,388,8 13,325 Units $11, % 4 BPS YOY 11,319 Units 16.9% YOY 2.1% YE 218.9% YOY YE % YOY YE % YOY YE BPS YOY 96% 95% 93% AND DELIVERIES 2, 15, 1, 5, 13 19** 219 PREVIEW Multifamily developers are working to meet housing demand by elevating apartment deliveries this year. Construction is scheduled to complete on nearly 15,7 units. Development is shifting to the Navy Yard/ Capitol South submarket, an area popular among renters seeking high-amenity Class A units near employers and entertainment options. Underpinning the demand, D.C. has one of the highest concentrations of millennial residents in the nation. Part of what is attracting them is the growing tech industry in the metro. Amazon Web Services is headquartered in the Reston/Herndon submarket and will expand in the metro with HQ2 in the Crystal City/Pentagon City submarket. The expansion will create 25, jobs with an average wage of $1,. The additions are a part of 1.2% forecasted employment growth this year. Even with annual leasing activity rising, absorption is forecast to trail inventory growth to lead to a 2-basis-point, year-over-year decline in average occupancy to 95.3% in the fourth quarter of 219. Occupancy will still be well above the 1-year average. With healthy occupancy amid an expanding inventory, apartment operators are expected to keep upward pressure on rent growth. Average effective rent is forecast to reach $1,747 per month by year-end, a 2.3% annual increase. 62 Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 218 are estimated values, while 219 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

65 DISCLAIMER AND SOURCES SOURCES: Berkadia Research; Axiometrics Inc.; California Homebuilding Foundation; CoStar Group Inc.; Real Capital Analytics, Inc.; Inc.; National Association of Realtors; Tetrad; U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; U.S. Census Bureau; U.S. Department of Commerce; U.S. Department of Housing & Urban Development; U.S. Department of the Treasury; Federal Reserve Bank of Atlanta; Federal Reserve Bank of St. Louis. Cover photo courtesy of Don Russell, ProDigital Photography. DISCLAIMER: The information contained within Berkadia research publications have been obtained from sources believed to be reliable; however, we make no guarantee, warranty, or representation regarding the accuracy of the information presented. Stated projections, assumptions, opinions, and estimates may not represent actual, current, or future performance and are subject to revision. The information provided is intended as a supplement for readers and clients. Readers and clients are responsible for conducting a careful, independent investigation of specific markets, properties, and trends in order to determine their specific needs and use of the information. Unless noted otherwise, data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals, unless noted otherwise. Current-quarter and current-year numbers are estimated values, while figures for future years are forecast projections. The apartment sales information represents transactions of apartment properties with a sales price of $2.5 million or more, unless otherwise indicated. Apartment market data criteria and methodologies vary by market. a Berkshire Hathaway and Jefferies Financial Group company

66 a Berkshire Hathaway and Jefferies Financial Group company CORPORATE OFFICE 521 Fifth Avenue 2th Floor New York, NY 1175 P: