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Of the secondary markets — those with a population below 2 million — tracked by Marcus & Millichap, vacancy rates are just one indication of market potential for multifamily investment. Other factors to consider include employment growth and household formation. For example, New Haven's economic woes could be a more important factor than the apparent high demand for apartments.

Metro Area Vacancy Rate
New Haven, Conn. 3.7%
Cincinnati 4.5%
Sacramento, Calif. 4.6%
Fort Lauderdale 5.0%
San Antonio, Texas 6.1%
Salt Lake City 6.2%
Portland, Ore. 6.5%
Columbus, Ohio 6.8%
San Jose, Calif. 7.5%
Milwaukee 7.6%
Las Vegas 7.6%
National 6.5%
Source: Marcus & Millichap

Insight from: demographics


Corporations routinely list a number of site-selection criteria when choosing to either expand or relocate. In any metropolitan area, the percentage of residents who have attained a college degree is a major factor. Of the 15 largest metro areas, San Francisco currently boasts the highest percentage of residents age 25 or older with a bachelor's degree or higher — 37.3%. Statistics for Atlanta and St. Louis are based on the metropolitan statistical area (MSA), while the remaining markets listed here are consolidated metropolitan statistical areas (CMSAs), defined as regions comprised of more than one MSA.

City Adults age 25+ who possess college degrees
San Francisco 37.3%
Washington, D.C./Baltimore 37.2%
Boston 34.4%
New York 32.6%
Atlanta 31.4%
Chicago 30.7%
Dallas/Fort Worth 30.7%
Cleveland 28.7%
Philadelphia 27.8%
Detroit 26.2%
Houston 25.7%
Los Angeles 25.6%
Miami/Fort Lauderdale 25.1%
St. Louis 24.5%
Pittsburgh 24.2%
*Markets are the top 15 most populous metro areas, according to the 2000 U.S. Census.
Source: U.S. Census Bureau 2000 Current Population Survey


In six U.S. office markets, the addition of new office space has outpaced growth in employment — producing an excess inventory of available space. The worst offender is Atlanta, where the number of jobs grew by a healthy 14.6%. However, new development produced a 31.2% increase in office space. Markets are ranked from the most overbuilt to the least overbuilt.

Market Office Employment Growth* Office Inventory Growth Difference
Atlanta 14.6% 31.2% -16.6%
Denver 13.2% 22.6% -9.4%
Seattle/Puget Sound 15.1% 20.3% -5.2%
Boston 7.8% 11.6% -3.8%
Chicago 7.7% 9.5% -1.8%
Dallas/Fort Worth 19.3% 19.8% -0.5%
Los Angeles 6.1% 4.1% 2.0%
South Florida 15.9% 12.3% 3.6%
Washington, D.C. 20.3% 15.7% 4.6%
New York City 8.2% 1.8% 6.4%
*Based on growth in financial, insurance, real estate and services industries since 1995.
Source: CoStar Group


New York City's Fifth Avenue — arguably the most prestigious stretch of retail real estate in the world — ranked as the most expensive shop space in the summer of 2002. The area boasted asking rental rates of $922 per sq. ft., while Los Angeles' Rodeo Drive followed at a distant second at $240 per sq. ft. Bob Bach, director of research for Grubb & Ellis, says the high density of pedestrian traffic is one of the main reasons Fifth Avenue garners higher rents than any of its competitors.

Market Top Location Rental Rate
(per sq. ft.)*
New York City Fifth Avenue $922
Los Angeles Rodeo Drive $240
Chicago Michigan Avenue $225
Boston Newbury Street $150
San Francisco Union Square $144
Honolulu Kalakaua Avenue $78
Seattle Olive to University $70
Miami South Beach $65
San Jose Valley Fair, Santana Row $60
Washington D.C. Connecticut Avenue $50
*Rates are asking rents on an annual, triple-net basis.
Source: Grubb & Ellis


The total outstanding balance in the commercial mortgage market has mushroomed by 80% over the last seven years and is nearly $1.5 trillion. Although commercial banks are still by far the dominant capital source, the growth of CMBS is striking. In 1995, CMBS accounted for $41.9 billion, or 5%, of the total outstanding balance. By first-quarter 2002, CMBS had mushroomed to $239.7 billion, or 16%, of the total outstanding balance. The market share for savings institutions actually fell from 14% to 10% during the same period.

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