Market Report

Insight from Pierce-Eislen

By Keith Loria on Feb 13, 2014 in News

The following article is excerpted from an article by Keith Loria in the January issue of Multi-Housing News. Find the the full story at Market Report: Ones to Watch. Pierce-Eislen is a subsidiary of Yardi Systems.

Ron Brock, vice president and general manager of Pierce-Eislen, located in Scottsdale, Ariz., says that his Top 10 list of markets to watch in the upcoming year is projected to have a combined 6 percent rent growth in the next 12 months.

He also believes his list is going to surprise some people, because some markets that were doing well this year are not going do very well next year.

“If you look at the Bay area of Northern California, it’s all very good. You have the East Bay market, the San Francisco Peninsula and the South Bay/Silicon Valley market,” he says. “There are good jobs there. Like everything else, a composition of jobs brings some good income.”

Austin, Texas is also on his list, and while Brock admits that it does seem to be overbuilding right now, the jobs being created are very attractive and pay handsomely, boding well for its future.

“Other markets to say “yes” to in 2014 are West Palm Beach, Boca Raton, suburban Atlanta, which is a surprise, Miami, Denver, Orange County and the Southwest Florida Coast,” Brock says. “West Palm Beach is interesting because job growth isn’t so much a factor, but it’s the empty nester crowd. Retirees go there and are willing to pay. Same thing with the Southwest Florida Coast­—people are showing up with money.”

The Miami office space market meanwhile is being driven by money from outside the country, most notably South America. Suburban Atlanta is seeing an increase in job creation, which is the complete opposite of what’s happening in urban Atlanta. Denver also keeps rolling with new jobs being added.

“Most of these markets are lifestyle markets. People don’t leave even if they lose their jobs: They move there because they like the environment,” Brock says. “Miami, Austin, all the Bay areas and the three Florida areas are included in that.”

On the cusp of cracking his Top 10 is Fort Worth, Texas, and he sees most of Texas doing well in 2014.

Brock had a lot to say about the markets that need to be watched with a careful eye and aren’t expected to do much in 2014.

New developments are on the rise, Brock says, due to the top end of the market, which is comprised of people with money, retirees and empty nesters who have income and wealth but just don’t want to own anymore, as well as young professionals, double income/no-kids households.

“On the other side of it—for renters by necessity—the jobs aren’t there,” he says. “There’s too much supply coming on and not enough demand. You can’t do much if you don’t have the jobs. Job creation is a tough one. If you believe what’s going on with Obamacare, it’s going to lead to job loss. These are going to be hit the hardest and already getting hit.”

Markets that he deems “in trouble” are Washington D.C./suburban Maryland, urban Chicago, urban Philadelphia, the Carolina Triangle, Tucson, Ariz., Baltimore, Northern Virginia, the Richmond/Tidewater Region, Albuquerque, N.M., and both urban and suburban Boston.

“The sequestration has clearly had a serious impact on some of these markets, and we can expect with Obamacare, there’s not going to be a huge increase in jobs in these markets,” he says. “It’s unpopular to talk about, but if you think of it as a bell-shaped curve, with really good and really bad, that group is on the wrong end of the curve.”