Play Ball!

Baseball’s opening day has arrived. This week, all 30 Major League teams will open their 2019 seasons. Excitement is electric in households across America. On opening day, every team is in first place. Hopes and dreams for a victorious year run deep.

Yet, there will ultimately be just one World Series winner come October. Speculation runs rampant as the season opens. Could the Boston Red Sox repeat last year’s extraordinary performance and World Series victory? Perhaps Houston or the LA Dodgers will prevail and take home the Commissioner’s Trophy. We certainly must consider the New York Yankees and their total of 27 World Series championships. Perhaps Cleveland can “go the distance” this year? And, we always want the Cubbies to win. Maybe even my home team, the Texas Rangers, will manage to make it to the top!

In the multifamily world, unlike baseball, there can be many winners – many winning markets where most multifamily assets experience favorable market performance. If multifamily markets were organized like Major League Baseball, who would come out on top in 2019? Based on 2019 projected rent growth*, here’s how the season will unfold…

American League – Division Champions – Houston, Minneapolis, Boston

AL West – Houston. Competition will be fierce between Houston, Dallas/Ft. Worth and Los Angeles, given their respective rent growth projections of 3.3%, 3.2% and 3.0%, respectively (all above the projected national figure of 2.4%), but Houston will take first place in the division. Seattle and Oakland will lag (1.7% and 0.1%, respectively); offense is strong in these two markets given very strong multifamily demand, but the on-the-field defense will be challenged by high levels of new supply.

AL Central – Minneapolis. Minneapolis’ multifamily market remains very attractive. The metro will win the division based on its projected 3.1% rent growth in 2019. Among the AL Central metros, Kansas City will end up in the cellar with only 0.7% projected growth. It’ll be a tight race between the other markets: Cleveland 2.5%, Detroit 2.2% and Chicago 2.1%.

AL East – Boston. Boston has been extraordinary on the baseball field and in the multifamily market for several years. The 2019 season will reflect that strength again with a 4.1% projected average rent increase. Tampa will come in second place with 2.8% projected growth. Baltimore and New York will trail the other metros with their respective 2.0% and 1.0% rent gains.

Toronto’s multifamily market is extraordinarily tight with a vacancy rate of only 1.2% and 2018 rent growth of 4.9%, conditions likely to prevail in 2019. However, we have no specific rent growth projections, so Toronto’s excluded from the competition. (Apologies to my Canadian friends, but, remember, the umpire has the final say.)

National League – Division Champions – Phoenix, Pittsburgh, Miami

NL West – Phoenix. The West division of the National League is a powerhouse set with star performers throughout its ranks. In the end, Phoenix will take the division championship with its 4.9% projected rent growth. San Diego’s 3.4%, Los Angeles’ 3.0% and San Francisco’s 2.6% projections will place all three of these markets above the national average. Denver will lag with 1.9% projected rent growth. Denver has powerful offense (demand), but defense is weakened by expected high levels of multifamily completions.

NL Central – Pittsburgh. Pittsburgh’s renaissance continues, and the market is positioned to easily take the division title with its 3.6% rent growth for 2019. Cincinnati and Chicago will come in second and third with their 2.5% and 2.1% growth forecasts while St. Louis will bring up the rear with 1.0%. Milwaukee’s in this division, too, but no rent projections are available. (A bit of trivia: at 1.6 million population, Milwaukee is the smallest metropolitan area to have a Major League team.)

NL East – Miami. Miami will easily take first place among National League East metros with its 4.0% projected rent growth. Philadelphia (3.4%) and Atlanta (3.0%) will come in second and third. Trailing will be two market giants – Washington, D.C. and New York City – strong on offense (demand) but challenged by defense (new supply). Their projected rent growth figures are 1.7% and 1.0%, respectively.

Playoffs – League Champions – Boston, Phoenix

The American League playoff battle among the division champions of Houston, Minneapolis and Boston plus the wild card market of Dallas/Ft. Worth will be fierce. But Boston’s 4.1% projected growth will put Bean Town on top and ready for the final series.

In the National League, with its 4.9% rent growth, Phoenix outperforms the other two division winners (Pittsburgh and Miami) as well as the wild card team of Philadelphia.

2019 Multifamily Market World Series – Phoenix

The final match – the 2019 Multifamily Market World Series – between Boston and Phoenix will be an exciting and very tight competition extending to game seven. While Boston has significant momentum from its prior year victory, Phoenix will win the top honors in 2019. Congratulations, Phoenix, for winning the first-ever Multifamily Commissioner’s Trophy!

By Jeanette Rice, Americas Head of Multifamily Research, CBRE.

*Rent growth projections come from CBRE Econometric Advisors and are based on their “baseline” economic scenario. The data represents metropolitan areas (metropolitan division or MSA whichever is smaller, except Dallas/Ft. Worth). The baseline economic scenario assumes a 2.2% GDP growth rate in 2019, job growth at 1.9 million net new jobs, 2.1% CPI increase and 3.1% 10-year Treasury yield in Q4. For additional information on CBRE Econometric Advisors data and subscription options, contact Ali Grimaldi (ali.grimaldi@cbre.com).