Baseball, the Apartment Market Cycle, and a List

If you attend your fair share of apartment industry events, you’re quite familiar with this often-asked question: What inning are we in for this apartment market cycle?

It’s not a great question, since the answer varies a lot by metro, product segment and pretty much any other criteria you might use to slice and dice opportunity. It certainly feels like we’re about ready to call in the relief pitcher in some coastal markets where many of the most desirable properties have already traded at least once in the past few years, pricing is at record highs while cap rates are at record lows, and the best available building sites are reaching the condo cost zone. But other spots do look like areas with upside room.

To identify some locales where there’s perhaps comparatively more game left to be played, let’s look at a combination of these three metrics.

  • Occupancy has been on a significant upward trajectory during the past year. (That’s in contrast to the essentially flat occupancy seen in many already-full markets or even the slightly downward-moving occupancy registering in a few areas getting big volumes of new supply.)
  • Occupancy still has at least a little potential for further improvement, meaning it’s a bit below the national norm.
  • Construction isn’t accelerating at a pace that seems likely to make the recent occupancy lift particularly hard to sustain.

Counting them down from smallest to largest (in terms of total apartment stock), here are the 10 metros that may be in the earliest innings of the game:

Baseball & Apt MKTColumbia

The Box Score: After Columbia’s performance lagged behind those in other Carolinas markets during most of the recent past, some momentum emerged in the past year. While the Q1 2015 occupancy rate was only 92.2%, that figure was up 130 basis points year-over-year. Annual rent growth has accelerated to 3.7%. Although the employment growth pace remains modest, 1.6% annual expansion in the Bureau of Labor Statistics info for March, it won’t take much underlying demand support for near-term absorption to surpass the 800 or so apartments on the way.

In the Dugout: The Blowfish, metro Columbia’s collegiate summer baseball league team, will make a new suburban start in 2015, exiting the city of Columbia for nearby Lexington County. Yes, real estate folks, the move is really all about us, as the team’s previous home, Capital City Stadium, was sold as a redevelopment site for a student housing and retail project.


The Box Score: Staying in South Carolina, Greenville has ranked among this list’s best apartment sector performers in recent years. But the metro’s strong run appears far from over. Any future improvement in occupancy probably won’t be as big as the bump of 180 basis points seen in the past year, since the overall rate now is up to 95.0% and the metro will have to digest about 1,800 near-term completions (most of them specifically in the downtown area). Still, it’s hard to argue against this locale’s annual employment growth pace that topped 3.4% during early 2015 and annual rent growth rate of 5.7%.

In the Dugout: The Greenville Drive is a class A minor league team affiliated with the Boston Red Sox. Their mascot is a frog named Reedy Rip’It, inspired a decade ago by a then-nine-year-old girl’s drawing. Various YouTube videos reveal less-than-impressive dance skills.


The Box Score: Toledo is a slow-growth economy. Still, it’s helping stimulate household formation and housing demand at a time when the existing product base isn’t expanding. (Routine loss of product due to obsolescence suggests the total size of the apartment stock probably has been shrinking a bit.) That combination of influences yielded one of the country’s biggest occupancy jumps during the past year, with the overall rate up 250 basis points to 95.1%. Near-term completions will be minimal, as only about 400 units are under construction.

In the Dugout: Somebody in the Toledo Mud Hens organization got pretty creative last year, as the outfield at Fifth Third Field was turned in a 36-hole miniature golf course during the off season. The Mud Hens are a Triple-A affiliate of the Detroit Tigers.


New Orleans

The Box Score: Up 200 basis points over the past year, occupancy in New Orleans has climbed to 94.4%. A very mild job growth pace suggests the metro could be challenged a bit to process some 1,600 new units about to come on stream, with the urban core – where most of the construction is concentrated – likely to face the hardest time. But it looks like there’s the real opportunity for occupancy to firm further and for rent growth to kick into higher gear in some of the key suburban submarkets.

In the Dugout:  A Triple-A affiliate of the Miami Marlins, the New Orleans Zephyrs play at a 10,000-seat ballpark originally built in 1997. Funds from the state of Louisiana and Zephyrs ownership led to quick restoration and upgrades after the property was extensively damaged by Hurricane Katrina, allowing Zephyr Field to emerge as the first New Orleans professional sports facility back in use by Spring 2006.


The Box Score: Jacksonville’s job growth pace has accelerated to nearly 2.7% annually, producing demand that pushed apartment occupancy up to 94.5% as of early 2015, a year-over-year increase of 190 basis points. Ongoing construction is meaningful at roughly 2,300 units, but the coming year’s completions won’t be especially more aggressive than the delivery pace seen in the past year. Prospects for continued strong rent growth in class B product and accelerating rent growth in the class C niche are what really stand out in Jacksonville’s anticipated near-term performance.

In the Dugout: The 2015 season is being billed as Pedro’s Last Dance for the Jacksonville Suns, a Double-A affiliate of the Miami Marlins. Owner Peter “Pedro” Bragan Jr will be selling the team this fall, after it has been held by the Bragan family for 31 years.


The Box Score: While overall occupancy in Memphis registered at just 93.6% as of Q1 2015, that figure was up 230 basis points on an annual basis. With only some 900 additional units under construction, this metro appears to be a solid candidate to post further occupancy momentum, even though the economic expansion pace is slow. Perhaps most notable in the Memphis outlook is that rent growth should return in the near term, after this spot was one of the few nationally to suffer mild pricing cuts (loss of 0.4%) during the past year.

In the Dugout: It’s a season of controversy for the Memphis Redbirds, a Triple-A affiliate of the St. Louis Cardinals, as BBQ nachos from local restaurant The Rendezvous have been replaced with an in-house-produced (apparently ghastly inferior) version.



The Box Score: With employment growth registering at the 2.8% mark, Indianapolis realized notable household formation and housing demand in the past year. While for-sale product affordability makes the metro a very heavy ownership market (a whopping 70% of all households are owners), rental demand proved strong enough to drive up apartment occupancy by 160 basis points to 93.0%. Ongoing construction of about 4,100 units is a lot for this metro, but it probably helps that a big block of the future product will come on stream in the urban core, where renting tends to be a lifestyle choice rather than a financial decision.

In the Dugout: The Indianapolis Indians, a Triple A-affiliate of the Pittsburgh Pirates, are an efficient machine. No, not the players (they’re OK), but the business organization. CNBC recently featured the team as an example of a group that knows how to pack in the fans and generate consistent profits.

Las Vegas

The Box Score: The big news in the Las Vegas apartment market of late was a drastic acceleration of annual rent growth to 5.7%. Helping facilitating that pricing upturn, occupancy climbed 150 basis points on an annual basis, reaching 93.4%. Building activity is starting to come back into the picture. Ongoing construction is at 2,000 units, and there’s a sizable wave of future supply identifiable on the drawing board. For now, however, the employment growth pace that’s been 3.3% annually for the past couple of years looks strong enough to keep occupancy moving in the right direction and to sustain robust rent growth.

In the Dugout: Here’s a shout-out to the branding and marketing team for the minor league baseball organization in Las Vegas. A Triple-A affiliate of the New York Mets, the team is known as the 51s (as in Area 51), and they come complete with a cartoon alien logo. And how’s this for promotion? The 51s have partnered with Comprehensive Cancer Centers of Nevada to provide fans complimentary sunscreen for day games.

San Antonio

The Box Score: Up 120 basis points year-over-year, San Antonio’s apartment occupancy rate stood at 93.1% in early 2015. Annual rent growth has gained some momentum of late, too, although the figure of 3.0% is still relatively modest by national standards. Ongoing building of just over 8,100 units in San Antonio is huge compared to construction volumes for the other metros examined here, but near-term deliveries won’t be more aggressive than the levels already routine for recent years. San Antonio’s real opportunity appears to lie in favorable prospects for tightening occupancy and accelerating rent growth in the class B and class C product niches.

In the Dugout: Texas Monthly magazine got it right when citing the San Antonio Missions for the state’s best mascot in minor league baseball. The Double-A affiliate of the San Diego Padres features Ballapeno, a sneering jalapeno pepper dressed like Alamo legend Davy Crocket. As a bonus, he has a sidekick/rival named Henry the Puffy Taco (presumably, no explanation needed).


Fort Worth

The Box Score: Fort Worth’s apartment market performance really took off during the past year. Occupancy climbed 170 basis points to reach 95.1%. And, annual rent growth surged to an all-time high of 6.6%. A factor really separating Fort Worth from the other sizable apartment markets in Texas is that it’s not an especially active building center. While about 4,500 units are under construction, that’s only a little more than half the product on the way in San Antonio, for comparison. (Fort Worth’s existing stock is only about 1,000 units larger than the San Antonio total.)

In the Dugout: The Texas Rangers are off to another shaky start in 2015. And, United League Baseball, the parent organization of the Fort Worth Cats, folded earlier in the year. So, if you want some quality ball in Fort Worth, turn to Texas Christian University’s team. They’ve been a powerhouse in recent years, going to the College Baseball World Series in both 2010 and 2014, and they’re again among the country’s top-ranked teams in 2015.

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