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The Pipeline toConfident DecisionsHow Construction and Lease-Up Information Helps Assess Market Supply and Demand

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Table of Contents

©2015 Axiometrics, Inc. ALL RIGHTS RESERVED

The Pipeline: Understand the Market ............................................................................................3

The Critical Uses of Pipeline Information ....................................................................................4

The Value of Identified Supply ..........................................................................................................5

Pipeline Reporting ..................................................................................................................................7

Conventional Apartment Properties ............................................................................................................7

Student Housing .......................................................................................................................................................12

Identifying Top Submarkets for Deliveries ............................................................................... 13

The Final Word: Painting the Complete Picture ..................................................................... 15

About Axiometrics ............................................................................................................................... 16


The Pipeline: Understand the MarketWe all remember studying the law of supply and demand in college, and we’ve experienced the law’s impact first-hand as our careers progressed as apartment and student housing developers, investors, lenders and managers. More often than not, it was not a positive experience.

Whether you’re planning or building a new project, or you own an existing property in a location where new supply is on the way, you need answers to know how to react as supply and demand changes.

For example:

• Developers looking to build in a particular submarket with a lot of new units under construction might wonder if they could be adding to overbuilding in the area. The rent one can charge – and therefore the profit margin – decreases if a market or submarket is overbuilt.

• On the other hand, a submarket with little new supply identified could mean pent-up demand, which would translate to higher rents and revenues. Or, it could mean there is no demand in the area and building would be futile.

• Demand can be analyzed by seeing how new supply in a submarket has been absorbed. A high absorption rate means new units are being leased quickly. A low absorption rate could depict a weakening leasing situation.

• Property owners and managers may rethink pricing and concession strategies to maximize renewals and new leases if they see several new properties with the latest amenities being built nearby.

Those are some of the reasons why dependable, timely and accurate pipeline information is important in the apartment industry. The best pipeline information includes a unit delivery schedule, complete with information about a property’s location, name, number of units, style of building (garden, podium, wrap, etc.), type of parking, developer, architect, construction start and completion dates, as well as the initial move-in date.

For properties in the lease-up phase, Axiometrics provides absorption rates, asking and effective rental rates, and concessions. The ability to compare those metrics to market and submarket trends for existing properties, particularly Class A, can be invaluable when determining investment and management strategy.


The Critical Uses of Pipeline InformationApartment and student housing markets don’t operate in a vacuum, and just studying the performance of stable properties does not paint the complete picture of a market’s viability. Though Competitive Pricing Survey (CPS) reports are the key to determining pricing – especially at the floor-plan level for stable properties – Axiometrics’ pipeline reports, including its reports on the performance of lease-up properties, fills in the blanks for evaluating development opportunities in submarkets and markets.

The pipeline reports provide answers that can help developers:

• Determine the feasibility of building in a certain location.

• Identify markets and submarkets to add to or subtract from their list of target markets and submarkets.

• Understand whether there is enough demand for a planned project, or if the market is overbuilt.

• Learn what types of floor plans and amenities that are under construction and thriving to help determine what to build.

• Find out asking and effective rents being charged by lease-up properties, to determine if rents are high enough to justify new construction.

• Discover if properties’ deliveries are delayed and their impact on the unit delivery schedule.

• See which competitors might be entering the market, and whether a smaller number of developers might have a stranglehold on the area.

• Begin further research on new apartment properties by determining which floorplans are dominant and have the best rent growth over time.


Pipeline data helps investors:

• Perform their due diligence on planned and existing apartment and student housing properties.

• Determine the viability of markets and submarkets that could provide the highest return on investment.

• Access information about developers and owners.

The information helps owners/managers:

• Develop pricing strategies based on asking and effective rents at the new properties.

• Market to current and potential new residents.

• Decide whether to upgrade amenities or renovate all or part of a property.

And, specifically in the student housing realm, pipeline data helps:

• Target universities for investment that might be facing a shortage of student housing.

• Find out which schools are developing university-owned housing and where privately owned properties are particularly flourishing, based upon their distance from campus.

• Determine the potential impact of new student-competitive apartment projects.

• Identify by distance from campus where the new supply is being delivered, its absorption rates, and asking and effective rental rates.


The Value of Identified SupplyAxiometrics pipeline data represents information, updated weekly, from actual projects in the planning, construction or lease-up phase. This means the property in question is known as Identi-fied Supply, which means just that – the property has been identified and has a name and address.

Identified Supply identifies and explains exactly what is under construction, what has been announced and what is in lease-up.

Other pipeline reports use the Modeled Supply methodology. In that system, analysts correlate current and historical apartment-fundamental data along with permitting numbers and other economic indicators to forecast how many new units will come to market in a given time frame.

Unlike Identified Supply, Modeled Supply is a purely statistical prediction. No boots are on the ground, and there is no property-specific information included.

To be fair, the Modeled Supply methodology is useful in several areas. Axiometrics, for example, uses Modeled Supply for its long-term forecasts; no properties have been identified for 2020 delivery, for example, so the model is necessary for that purpose. Axio also uses this methodology for its unique Supply/Demand Model.

Axiometrics’ pipeline team is charged with discovering and maintaining data on all new U.S. apartment and student housing construction properties in the pipeline. These properties are tracked daily by stage of development from planned, under construction, under construction and lease-up, and lease-up. Once through lease-up, these properties join the tens of thousands of other stabilized properties tracked by Axiometrics.

The team uses a multitude of sources and information-gathering techniques to obtain information about apartment and student housing properties being planned and under construction.


Pipeline ReportingConventional Apartment Properties

The right metrics need to be in the right package, which is why presenting pipeline information within thorough, easy-to-read reports is essential.

The Pipeline Delivery Schedule, for example, is a listing of each property in a market, complete with name, location, developer, number of units, pipeline status, date construction started and number of units delivered by quarter.

The map and table below, from AXIOPortal® and divided into two parts is just part of the delivery schedule for the burgeoning Seattle market:


And for those wishing a quarterly summary of deliveries by submarket, a report downloadable from AXIOPortal provides that information:


This report (which extends through 2018) shows that the majority of Seattle deliveries are headed for the Downtown/Capitol Hill/Queen Anne and North Seattle/Northgate submarkets and that 2017 will be the peak year for these deliveries as of Oct. 30, 2016. With annual effective rent growth of 4.5% in the Downtown submarket and 4.3% in North Seattle; occupancy at 95.5% and 96.3%, respectively; and job growth remaining strong in September 2016, it looks like there is demand for the apartments under construction – and maybe even more units than that.

Axiometrics is the pioneer among apartment and student housing market research companies to report on the delivery of units by quarter by property, market and submarket. The figures are updated weekly.

It’s great to know which properties are going into which submarkets, and it’s even better to know how well these properties are leasing up. The Lease-Up Performance report allows you to determine absorption and rental rates and concessions by property and submarket. Asking and effective rental rates are shown enabling you to determine if the pricing for a proposed project is feasible.

This report also aggregates all the lease-up properties in a submarket during any given month, providing an overview of the lease-up trends in the submarket.


When compared to stable apartments in Seattle and the Downtown/Capitol Hill/Queen Anne submarket, you see that the lease-up properties are charging more rent than the average for the stable properties in the area. The average effective rent in the Downtown submarket was $2,146 in September 2016, compared to the lease-up properties’ average of $2,497. For the market at large, the average rents were $1,777 for stable apartments and $2,177 at lease-up properties.

Meanwhile, the Property List report provides drilled-down information on each property in the pipeline – everything from developer, owner and architect to the exact latitude and longitude of the project. Transparency is evident, since every note is recorded by the pipeline researcher in the “Project Note” column.

For example, one property on the list that is scheduled to open late in 2016 has been tracked since the project was announced in December 2013. It noted a three-quarter delay to the start of construction and, finally, confirmation that it will be completed in 2017.

Here’s part of the Seattle Property List report in four images to show you all of the data tracked, which in October 2016 provided information on 249 projects in the works.



Student Housing

Student housing properties receive the same pipeline treatment as conventional apartments, with two crucial additions. First, a distance-from-campus column is included. Second, Axiometrics sepa-rates information about privately owned and university-owned student housing, as well as student-competitive properties, which are conventional apartment projects within 3 miles of campus.

The table below shows the pipeline for Texas A&M University, as listed in the University Report for the College Station school. It shows that 2017 will be a big year for opening properties, as of October 2016. One property is scheduled for 2018 delivery, and one late-opener still remains for 2016. Two student-competitive properties close to campus are under construction or in the planning stage.

The university also has a Pipeline Report, which is similar to those for conventional apartment markets, but including more exact distance-from-campus metrics. As with the conventional-apartment reports, notes from every contact with each property are included. In one case, you’ll learn that the property scheduled to open in 2016 has been planned since 2012 and was purchased in February 2015, when the new owners announced that construction would start in 2015 for delivery in 2016.

Axiometrics is the innovator among research and analytics companies that track student housing nationally, and the pipeline information is a key element to Axio’s student housing metrics.


Identifying Top Markets and Submarkets for DeliveriesAxiometrics provides an analysis through monthly tables and charts that compare the top mar-kets and submarkets. The table below shows that while Houston and Dallas had the most new supply identified for 2016 delivery, New York has the most slated for 2017 delivery as of October 2016.

The submarket comparison demonstrates one reason for New York’s emergence in 2016 and 2017: The Kings County submarket – Brooklyn – has far and away the most supply identified for 2017 delivery, as of October 2016, and 30% of all the new units expected to enter the New York market that year.

These ranking tables allow developers, investors and managers to decipher trends in major markets. For example, most of the 15 submarkets listed in the table above are urban-core submarkets. Center-city areas look to reach a peak of deliveries in 2017 before likely tapering off in


2018.

These figures, which were current as of October 2016, change by the day, however, and developers still have time to begin construction on properties to open in late 2017. But that’s why continuous updating and monthly reporting are crucial: The November 2016 report might have identified construction starts that significantly increased the number of units expected to deliver in 2017 and 2018, or reflected delays that will push completion dates later.

It’s through this monthly reporting that developers, investors, owners and managers can keep up with current trends and make strategic decisions accordingly.


The Final Word:Painting the Complete PictureMany factors contribute to apartment and student housing development decisions. Choosing the right markets and submarkets in which to develop and invest is a combination of art and science. One must take into account fundamentals such as rent growth and occupancy, economic indicators such as job growth, and financial considerations such as cost of land, cost of construction and revenue growth at existing properties in the target locations.

But the picture isn’t complete without knowing about the pipeline. Just as football coaches have extensive game film and scouting reports on their opposition, apartment and student housing developers, investors and managers need to understand the construction pipeline in the markets and submarkets they are targeting.

Only with pipeline information at your disposal, can you keep up with the following issues:

• After the construction boom of 2013-2017, building may moderate in 2018 and 2019. In which markets and submarkets will this be the case?

• What will happen in very-late-emerging markets such as Las Vegas?

• Will student housing deliveries return to the 60,000-bed level of 2014 anytime in the near future after the pace of construction has simmered down since then?

The best way to ensure the right decision for your investment activities is to ensure you have the right information and data. Doing so can help you gain a better understanding of what you’re getting into which, in turn, can help reduce your risk and maximize your profit.


About AxiometricsIn today’s competitive and unpredictable apartment and student housing markets, the right information at the right time is critical when it comes to maximizing your revenues.

Axiometrics’ sole focus is monitoring the apartment and student housing sectors, giving you an in-depth look at volatile market trends. Our comprehensive and granular data-collection methods, combined with extensive analysis, provides you with superior industry information that boosts your assets’ performance by helping you make profitable – and intelligent – decisions, regardless of the market cycle.

Axiometrics’ data focuses on property floor plan performance, and extends to competitive assets, submarkets, markets, portfolios and companies. As an Axiometrics subscriber, you have access to quality research, updated monthly, encompassing tens of thousands of properties in the U.S.

Go Mobile! The groundbreaking AXIOMobile® smartphone app provides pipeline information in the palm of your hand. See properties in all stages of construction, along with the latest data on rents, occupancy and sales comps. Access is free with your AXIOPortal subscription.

Want to learn more about Axiometrics? Let’s Talk. We invite you to a no-obligation assessment of your current research and data-collection processes. For more information, call 214.953.2242 or email [email protected].

Axiometrics Inc.

14901 Quorum Drive, Suite 900

Dallas, TX 75254

The Pipeline to Confident Decisions - Axiometrics.com | …€¦ · · 2017-01-10The Pipeline to Confident Decisions ... ©2015 Axiometrics, Inc. ALL RIGHTS RESERVED ... • See

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