To Our Valued Clients:

Apartment investments will maintain a positive outlook in 2018 as the combination of steady job creation, healthy demographics and an accelerating pace of household formation sustains renter demand. The consistent flow of newly developed units, a top of mind consideration for many investors, increased competition for Class A apartment assets in cities with disproportionate deliveries. The effects of the additions tend to be concentrated, and the deliveries will wane in the coming year, supporting sound performance metrics in most markets. Class B and C workforce housing will continue to outperform as vacancies in these properties remain at historical lows, enabling owners to justify strong rent growth.

The prospects for apartment investments in 2018 are particularly exciting. In addition to a bright economic outlook and elevated confidence levels among businesses and consumers, investors will benefit from increased clarity on tax laws. The revisions to the tax code are largely benign for commercial real estate, maintaining virtually all of the features most valued by our industry. Key provisions such as the 1031 tax deferred exchange, mortgage interest deductibility and depreciation rules changed little, empowering continuity in most investment strategies. In addition, changes to tax codes on pass-through entities could provide an incentive for many investors to re-position portfolios and allocate additional capital to the sector. This combination could invigorate investor sentiment, bolster decision making and raise market liquidity.