Market Insight Multifamily Report I Mid-Year 2018

MID-ATLANTIC & NEW YORK METRO MULTIFAMILY ADVISORY TEAM MARKET INSIGHT MULTIFAMILY REPORT I MID-YEAR 2018

The Cushman & Wakefield Mid-Atlantic & New York Metro Multifamily Advisory Team provides in-depth coverage of primary and secondary cities across these regions. In addition to analyzing multifamily rent and sales trends, this report examines employment data, job growth trends, key economic announcements, and development pipeline news.

IN THIS EDITION: REGIONAL TRANSACTION LEADERS:

NEW YORK METRO NEW YORK METRO ► Northern New Jersey BRIAN WHITMER ► Central New Jersey ► Fairfield County, CT PHILADELPHIA METRO ► Westchester County, NY KAREN IMAN ► Long Island, NY WASHINGTON DC METRO PHILADELPHIA METRO JORGE ROSA (Which includes Southern New Jersey, Delaware, Center City Philadelphia, and Eastern Pennsylvania Counties)

WASHINGTON DC METRO ► Washington DC ► Baltimore ► Richmond ► Hampton Roads (Virginia Beach MSA) NEW YORK METRO ► Northern New Jersey ► Central New Jersey ► Fairfield County, CT ► Westchester County, NY ► Long Island, NY

SELECTION OF RECENT TEAM ACTIVITY

CLOSED CLOSED CLOSED OBSERVER PARK NOB HILL THE CAMBIUM Hoboken, NJ Syracuse, NY Larchmont, NY 224 Units / Built 1989 761 Units / Built 1969-1974 78 Units / Built 2016-2017

NEW YORK METRO TEAM

ANDREW J. MERIN BRIAN J. WHITMER RYAN W. DOWD MARK C. PHILLIPS EXECUTIVE VICE CHAIRMAN EXECUTIVE MANAGING DIRECTOR ASSISTANT DIRECTOR FINANCIAL ANALYST D 201 460 3358 D 201 508 5209 D 201 508 5278 D 201 508 5290 [email protected] [email protected] [email protected] [email protected] MARKET INSIGHT Mid-Year 2018 NORTHERN NEW JERSEY 3

NORTHERN NEW JERSEY

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION New Jersey’s labor market has remained on its course of modest growth. The following are select announcements from 2018: At 4.4%, the state’s unemployment rate improved since one year ago, The long-stalled $5 billion while private sector employment has increased by 54,200 jobs in that American Dream Meadowlands a megamall located in East Rutherford is expected to open in April time. Office-using employment has risen by 9,300 jobs over the last 12 2019. When the opens, visitors will months, mostly within the professional and business services sub-sector. 3 million square foot complex be able to do much more than just shop. American Dream will However, since the previous month, office-using employment has surged feature Big Snow America, the first indoor ski and snowboard by 2,300 jobs, which should correlate with improved occupancy levels park in the Western Hemisphere. An eight acre, glass-domed, in the state. DreamWorks water park, and a same-sized Nickelodeon Universe Theme park, will also be featured at the complex. NORTHERN NEW JERSEY JOB GROWTH TRENDS North American Properties plans to build a 418-acre development 1,980,000 2.00% on the Raritan River in Sayreville, NJ. The property will be over 5 1.80% a 1,960,000 million square feet of mixed use space to be completed by 2021, 1.60% costing $2.5 billion. 1,940,000 1.40% Jersey City proposed issuing a $170 million bond to purchase a 100- 1,920,000 1.20% acre parcel on the City’s West Side from Honeywell International Inc. Seen as the largest development in Jersey City since the early 1,900,000 1.00% a 1980s, the purchase would allow the city to control the amount of 0.80% 1,880,000 affordable housing that is constructed on the site. 0.60% 1,860,000 0.40% 1,840,000 0.20%

1,820,000 0.00% 2014 2015 2016 2017 2Q2018

Total Employment YOY % Job Change Source: REIS OUTLOOK • Northern New Jersey remains an attractive residential location as the high rental rates in New York City and the surrounding boroughs JOB GROWTH & UNEMPLOYMENT RATE continue to drive residents to New Jersey’s communities. • The Hudson River Waterfront continued to attract relocations of tech, financial and consumer products firms, and has reported year-over- +1.4 -70 year positive office absorption. % YOY BPS YOY • Transit-oriented locations continue to post the lowest vacancies and highest rent growth, attracting the attention of institutional capital. Average Q2 employment Average Q2 unemployment increased by 5,730 jobs increased to 4.4% MARKET INSIGHT Mid-Year 2018 NORTHERN NEW JERSEY 4

MULTIFAMILY TRENDS DEVELOPMENT / INVENTORY Second quarter asking rent growth from 2017 to 2018 was 2.8%. Vacancy According to REIS, 6,129 units will be delivered in 2018, an increase from the increased 80 bps year over year. 5,952 units delivered in 2017. Deliveries are expected to fall to 3,964 units in 2019 following the surge of development over the past few years. Notable 2018 completions included the 381-unit Ellipse, the 397-unit Marin +4.3 +80 Residences and 221-unit 333 Grand located in Jersey City, the 245-unit % YOY BPS YOY One Theater Square located in Newark, and the 334-unit Mew Edison Lofts located in West Orange. Average asking rent Vacancy increased to an increased to $1,903 average of 4.5% DEMOGRAPHIC FUNDAMENTALS Northern New Jersey is comprised of some of the wealthiest communities METRO VACANCY & RENT GROWTH RATES in the nation with residents having an average household income of over Asking rent growth was 2.8% as of 2Q 2018 and has averaged 4.4% over $110,000. the past three years and 3.8% over the past five years. 2010: 4,002,616 Vacancy increased YOY in 2018 to 4.5%. Vacancy has averaged 4.0% over POPULATION 2017: 4,147,515 the past five years, and is expected to tick up slightly as new inventory is 2022: 4,189,490 added to the apartment stock. 2010: 1,456,069

$2,200 6.00% HOUSEHOLDS 2017: 1,517,200 2022: 1,555,422 $2,000 5.00% AVERAGE 2010: $100,285 HOUSEHOLD 2017: $110,340 $1,800 4.00% INCOME 2022: $125,298

$1,600 3.00%

$1,400 2.00% MULTIFAMILY FORECAST

$1,200 1.00% The following are Cushman & Wakefield’s projections over the near term:

$1,000 0.00% 2013 2014 2015 2016 2017 2Q2018

Average Rent % Rent Growth % Vacancy Source: REIS

PIPELINE % RENTS VACANCY GROWTH MARKET INSIGHT Mid-Year 2018 NORTHERN NEW JERSEY 5

INVESTMENT ACTIVITY MOST ACTIVE MARKET PLAYERS As of the second quarter 2018 Northern New Jersey’s total volume is $1.8 TOP NORTHERN NJ BUYERS - 2018 billion, a decrease of 15% YOY. Cap rates have declined slightly since this RANK BUYER TOTAL VOLUME NO. TRANSACTIONS time last year, down 10 basis points to an average of 5.1%. Investment activity was dominated by private buyers making up 64% of the activity. 1 Equity Residential $146,000,000 1 2 Kushner Companies $101,666,667 1 YTD SALES VOLUME 3 LaSalle $87,450,000 1

Rolling 12-mo. Total Quarterly Vol 4 AJH Management $74,000,000 1

4,000 5 Greystar $69,400,000 1

3,500 TOP NORTHERN NJ SELLERS - 2018 Millions 3,000 RANK SELLER TOTAL VOLUME NO. TRANSACTIONS 1 JP Morgan $146,000,000 1 2,500 2 Greystar $101,666,667 1 2,000

Millions 3 URSA Development Group $87,450,000 1 1,500 4 Mesirow Financial $74,000,000 1

1,000 5 Intercoastal Group $70,500,000 1

500

0 CAP RATES Q1 '14 Q1 '15 Q1 '16 Q1 '17 Q1 '18 The market’s mid-quartile spread is 4.5% to 5.3% over the past 12 months. Per unit pricing feel slightly YOY while the average cap rate continued its Source: Real Capital Analytics downward trend.

$300,000 6.00% NOTABLE SALES $250,000 5.75% • Equity Residential purchased The Rivington in Hoboken from JP Morgan for $608,333 per unit. The 240-unit mid-rise apartment $200,000 community was built in 1999 and was recently renovated in 2017. 5.50% $150,000 • LaSalle purchased The Jordan in Hoboken from URSA Development 5.25% for $550,000 per unit. The 159-unit mid-rise apartment community $100,000 was built in 2016. 5.00% • Kushner Companies purchased Prospect Place in Hackensack from $50,000 Greystar for $282,407 per unit. The 360-unit was built in 1998 and renovated in 2001. $0 4.75% 2014 2015 2016 2017 2Q2018

Avg. Price Per Unit Avg. Cap Rate Source: Real Capital Analytics MARKET INSIGHT Mid-Year 2018 NORTHERN NEW JERSEY 6

SUBMARKET OVERVIEW Every submarket experienced positive YOY rent growth with the average asking rents increasing most significantly in Hudson County (6.6%) and Bergen County (5.1%) submarkets. Passaic, Union, and East Essex Counties continued to demonstrate their stability with vacancy rates remaining flat YOY at 3.4%, 3.6% and 3.8% respectively.

$3,500 6.5%

RENTS & VACANCY BY SUBMARKET 6.0% $3,000

5.5%

$2,500 5.0%

$2,000 4.5%

4.0% $1,500

3.5% $1,000

3.0%

$500 2.5%

$0 2.0% Hudson County Bergen County West Essex County Morris County Passaic County Union County East Essex County

Submarket Average Rent Submarket Average Vacancy

Source: REIS MARKET INSIGHT Mid-Year 2018 CENTRAL NEW JERSEY 7

CENTRAL NEW JERSEY

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION New Jersey’s labor market has remained on its course of modest growth. The following are select announcements from 2018: At 4.4%, the state’s unemployment rate improved since one year ago, while private sector employment has increased by 54,200 jobs in that a 1 million square feet of redevelopment targeted for the former time. Office-using employment has risen by 9,300 jobs over the last 12 Fort Monmouth by the end of 2018 as Monmouth County officials months, mostly within the professional and business services sub-sector. continue to make progress on ambitious plans to erect housing, However, since the previous month, office-using employment has surged shops and other development on the 1,200-acre parcel of land by 2,300 jobs, which should correlate with improved occupancy levels in that lies within the boundaries of three beach towns: Eatontown, the state. Oceanport and Tinton Falls. Bell Works, the redevelopment of the historic 2 million square foot CENTRAL NEW JERSEY JOB GROWTH TRENDS a Bell Labs building in Holmdel, continued to make progress with the opening of Bell Market. The food hall was created by the restaurant 1,120,000 2.40% group RBC Hospitality Group, and features five eateries. About 3,500 people currently work at Bell Works and 7,000 are expected 2.20% 1,100,000 to work in the building by 2020.

2.00% 1,080,000

1.80% 1,060,000 1.60%

1,040,000 1.40%

1,020,000 1.20% MULTIFAMILY TRENDS 1,000,000 1.00% 2014 2015 2016 2017 2Q2018 Second quarter asking rent growth from 2017 to 2018 was 1.3%. Vacancy has remained flat year over year. Total Employment YOY % Job Change

Source: REIS +1.3 +0 % YOY BPS YOY Average asking rent Vacancy remained flat JOB GROWTH & UNEMPLOYMENT RATE increased to $1,400 averaging of 2.7% +1.4 -70 % YOY BPS YOY Average Q2 employment Average Q2 unemployment increased by 3,370 jobs increased to 4.4% MARKET INSIGHT Mid-Year 2018 CENTRAL NEW JERSEY 8

CENTRAL NEW JERSEY RENT GROWTH & VACANCY RATES DEMOGRAPHIC FUNDAMENTALS Central New Jersey is located halfway between New York City and Asking rent growth was 1.3% as of 2Q 2018 and has averaged 3.2% over the Philadelphia drawing residents who commute to both Pennsylvania and the past three years and 2.6% over the past five years. New Jersey suburbs. The area is known for its high concentration of research Vacancy remained flat YOY in 2018 at 2.7%. Vacancy has averaged 2.6% and pharmaceuticals companies. over the past five years, and is expected to continue its stability. 2010: 2,367,234 $1,450 4.00% POPULATION 2017: 2,418,433 $1,400 3.50% 2022: 2,479,565 $1,350 3.00% 2010: 854,732 $1,300 HOUSEHOLDS 2017: 878,349 2.50% $1,250 2022: 909,332 2.00% $1,200 AVERAGE 2010: $109,992 1.50% 2017: $123,620 $1,150 HOUSEHOLD 1.00% INCOME 2022: $141,904 $1,100

$1,050 0.50%

$1,000 0.00% MULTIFAMILY FORECAST 2013 2014 2015 2016 2017 2Q2018 The following are Cushman & Wakefield’s projections over the near term. Average Rent % Rent Growth % Vacancy Source: REIS

DEVELOPMENT / INVENTORY PIPELINE % According to REIS, 732 units will be delivered in 2018, a significant RENTS VACANCY decrease from the 2,063 units delivered in 2017. There are currently no GROWTH deliveries anticipated for 2019. Major recently completed development projects in Central New Jersey NOTABLE SALES include the 273-unit Woodmont Metro at Metuchen and 227-unit Link at Aberdeen Station. • Asset One Corp purchased Woodmont Square in Bridgewater from Woodmont Properties for $325,500 per unit. The 100-unit mid-rise apartment community was built in 2012. • KRE JV Verde Capital Partners purchased Atlantic Pointe in Middletown from Bertram Associates for $184,221 per unit. The 304-unit mid-rise apartment community was built in 1981 and renovated in 1999. MARKET INSIGHT Mid-Year 2018 FAIRFIELD COUNTY 9

FAIRFIELD COUNTY, CT

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION Despite strong national economic progress, Fairfield County shed nearly The following are select announcements throughout 2018: 8,000 jobs since the start of 2017—a year-over-year drop of 1.4% in total employment. Similarly, the unemployment rate in the county contracted The SoNo Collection, which calls for 728,000 square feet of retail by 30 basis points (bps) from one year ago, registering 4.3% at mid-year a space, is currently under construction in Norwalk. The SoNo 2018. The dip in overall employment and the unemployment rate point to Collection will result in and estimated 2,485 retail jobs once the a shrinking labor force participation rate. mall is opened in 2019. Charter Communications broke ground in July 2018 on a CONNECTICUT JOB GROWTH TRENDS 532,000 square foot world headquarters in Stamford near the a Transportation Center. This location will be home to over 1,600 employees once complete. 440,000 2.00% Norwalk Hospital is moving ahead with a redevelopment plan for the historic Norwalk YMCA property, a hybrid health center and 438,000 1.50% a assisted living facility. Maplewood Senior Living is working with Norwalk Hospital to build the five-story center that will cost more 436,000 1.00% than $100 million and total some 250,000 square feet.

434,000 0.50%

432,000 0.00%

430,000 -0.50%

428,000 -1.00% 2014 2015 2016 2017 2Q2018 MULTIFAMILY TRENDS Total Employment YOY % Job Change Second quarter asking rent growth from 2017 to 2018 was 1.8%. Vacancy Source: REIS rose to 5.9% year over year as new deliveries reached stabilization.

JOB GROWTH & UNEMPLOYMENT RATE +1.8 +30 % YOY BPS YOY +0.2 -30 Average asking rent Vacancy increased to an increased to $2,146 average of 5.9% % YOY BPS YOY Average Q2 employment Average Q2 unemployment increased by 1,080 jobs decreased to 4.3% MARKET INSIGHT Mid-Year 2018 FAIRFIELD COUNTY 10

FAIRFIELD COUNTY RENT GROWTH & VACANCY RATES DEMOGRAPHIC FUNDAMENTALS

Asking rent growth was 1.8% as of 2Q 2018 and has averaged 2.7% over the Fairfield County is home to a well-educated, affluent, largely white-collar past three years and 2.3% over the past five years. population which is drawn to the area due to the abundance of blue chip employment opportunities in Fairfield County, as well as the close proximity Vacancy increased slightly YOY in 2018 to 5.9%. The market has decreased to New York City. over time with vacancy rates averaging 6.9% over the past three years and 6.3% over the past five years. 2010: 916,830 POPULATION 2017: 953,453 $2,400 8.00% 2022: 971,638 2010: 335,546 $2,200 7.00% HOUSEHOLDS 2017: 351,286 6.00% $2,000 2022: 360,915 5.00% AVERAGE 2010: $129,174 $1,800 4.00% HOUSEHOLD 2017: $142,393 $1,600 INCOME 2022: $160,987 3.00% $1,400 2.00% MULTIFAMILY FORECAST $1,200 1.00% The following are Cushman & Wakefield’s projections over the near term: $1,000 0.00% 2013 2014 2015 2016 2017 2Q2018

Average Rent % Rent Growth % Vacancy

Source: REIS PIPELINE % RENTS VACANCY GROWTH

DEVELOPMENT / INVENTORY NOTABLE SALES According to REIS, 325 units were delivered in 2018, a decrease from the 514 units delivered in 2017. Deliveries are expected to keep pace with 2018 • Friedkin Realty purchased Element One in Stamford from Spinnaker in 2019 with 672 units anticipated to be completed. RE Partners for $426,230 per unit. The 183-unit mid-rise apartment community was built in 2016. The majority of new completions in Fairfield County have been concentrated in the Stamford submarket. The newest community to be • AJH Management purchased Crowne Point at the Reserve in Danbury delivered in Stamford is the 325-unit Atlantic Station North, a 26-story from Harbor Group for $232,833 per unit. The 466-unit mid-rise high-rise located right off interstate 95. apartment community was built in 2007 and renovated in 2011. MARKET INSIGHT Mid-Year 2018 WESTCHESTER COUNTY 11

WESTCHESTER COUNTY, NY

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION Educational and Healthcare services continued to be a predominate The following are select announcements throughout 2018: driver of employment in the first half of 2018, adding approximately 3,100 Regeneron Pharmaceuticals is moving forward with its plans to jobs year-over-year. Despite the strong growth in these sectors, overall a build a research and development campus at 555 Saw Mill River employment in the county declined by 1,644 jobs from one year ago. With Road in Greenburgh. The 1 million square foot campus will be fewer people working, the unemployment rate increased 10 basis points built over 35 acres of land, employing around 2,500 workers. (bps) to 4.6% over the last twelve months. Danone North America, the parent company for brands such as a Dannon yogurt and Evian water, moved its headquarters from WESTCHESTER COUNTY JOB GROWTH TRENDS Greenburgh to downtown White Plains. Danone’s relocation brought its 400 employees to the new facility in White Plains. 460,000 2.50% Fareri Associates, in collaboration with Westchester County, are 455,000 moving planning to build a $1.2 billion biotech lab in Valhalla. It 2.00% a is estimated that the project will create about 12,000 new jobs, 450,000 including 4,000 temporary construction jobs and another 8,000 jobs once the project is completed. 1.50% 445,000

440,000 1.00%

435,000 0.50% 430,000

425,000 0.00% 2014 2015 2016 2017 2Q2018

Total Employment YOY % Job Change Source: REIS MULTIFAMILY TRENDS After rising 6.1% from 2015 to 2016, asking rents were relatively flat in 2017, but rose 3.8% in 2018. As rents rose, vacancy ticked up to 5.8%. JOB GROWTH & UNEMPLOYMENT RATE + + + + 3.8 240 1.2 10 % YOY BPS YOY % YOY BPS YOY Average asking rent Vacancy increased Average Q2 employment Average Q2 unemployment increased to $2,252 to an average of 5.8% increased by 950 jobs decreased to 4.6% MARKET INSIGHT Mid-Year 2018 WESTCHESTER COUNTY 12

WESTCHESTER COUNTY RENT GROWTH & VACANCY RATES DEMOGRAPHIC FUNDAMENTALS

Asking rent growth was 3.8% as of 2Q 2018 and has averaged 3.0% over Westchester County, well known for its strong demographics, is located the past three years and 2.3% over the past five years. in the southeastern portion of New York State, directly north of New York City. The county is one of the most affluent in the country with an average Vacancy increased YOY in 2018 to 5.8%. The market remains extremely household income more than $139,000. stable with vacancy averaging 3.6% over the past five years. 2010: 949,115 $2,400 7.00% POPULATION 2017: 975,508 $2,200 6.00% 2022: 985,061 2010: 347,231 $2,000 5.00% HOUSEHOLDS 2017: 359,447 $1,800 4.00% 2022: 370,143 AVERAGE 2010: $127,282 $1,600 3.00% HOUSEHOLD 2017: $139,642 $1,400 2.00% INCOME 2022: $157,126

$1,200 1.00% MULTIFAMILY FORECAST $1,000 0.00% 2013 2014 2015 2016 2017 2Q2018 The following are Cushman & Wakefield’s projections over the near term:

Average Rent % Rent Growth % Vacancy Source: REIS

PIPELINE % RENTS VACANCY GROWTH DEVELOPMENT / INVENTORY According to REIS, 1,355 units will be delivered in 2018, an increase from the 671 units delivered in 2017. Deliveries are expected to fall to 882 units NOTABLE SALES in 2019. Ares Management purchased Ridgeview Apartments in Elmsford from Notable 2018 completions included the 324-unit Modera Hudson Riverfront Frank Palazzolo for $243,510 per unit. The 416-unit garden-style apartment and the 330-unit Danforth River Tides at Greystone located in Yonkers. community was built in 1990 and renovated in 2013. MARKET INSIGHT Mid-Year 2018 LONG ISLAND 13

LONG ISLAND, NY

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION Employment totals on Long Island increased slightly since the first quarter, The following are select announcements throughout 2018: gaining 2,900 jobs in that time. While the Long Island economy added The LIRR Expansion Project will being late this year with 10 major fewer jobs than this time last year, employee count reached a new peak— a construction projects initiating the transformation of the busiest 1.4 million jobs, marking the seventh consecutive quarter of occupational stretch of the nation’s busiest commuter railroad. The $2.6 billion growth. Year-over-year, the Long Island unemployment rate has remained project seeks to improve service options and reliability for LIRR unchanged at 4.3%, while the U.S. unemployment rate fared better, and is riders by adding a third tack to the 9.8-mile LIRR Main Line now trending 50 bps (basis points) lower than the local economy. between Floral Park and Hicksville. New York Arena Partners is moving forward with plans for a $1 LONG ISLAND COUNTY JOB GROWTH TRENDS billion redevelopment of Belmont Park. The project will include a 18,000-seat arena for the New York Islanders, 435,000 square a feet of mixed-use space made up of retail, an entertainment 1,360,000 1.60% complex, and a new hotel. This project is expected to create 1,350,000 1.40% 12,300 construction jobs and 3,100 permanent jobs. 1,340,000 Altice USA, one of the largest broadband communications and 1.20% video services operators in the U.S., announced that the company 1,330,000 a 1.00% is building new 40,000 SF state-of-the-art TV and digital studios 1,320,000 for its leading hyperlocal News 12 Network Group in Bethpage. 0.80% 1,310,000 0.60% 1,300,000 0.40% 1,290,000

1,280,000 0.20%

1,270,000 0.00% 2014 2015 2016 2017 2Q2018

Total Employment YOY % Job Change Source: REIS

MULTIFAMILY TRENDS JOB GROWTH & UNEMPLOYMENT RATE Second quarter asking rent growth from 2017 to 2018 was 2.7%. Vacancy increased to 3.5% since the end of 2017. +1.0 +0 % YOY BPS YOY +2.7 +50 Average Q2 employment Average Q2 unemployment % YOY BPS YOY increased by 3,270 jobs remained flat at 4.3% Average asking rent Vacancy increased to increased to $2,105 an average of 3.5% MARKET INSIGHT Mid-Year 2018 LONG ISLAND 14

LONG ISLAND RENT GROWTH & VACANCY RATES DEMOGRAPHIC FUNDAMENTALS

Asking rent growth was 2.7 % as of 2Q 2018 and has averaged 4.8% over Long Island is known for its affluence and high quality of living. This the past three years and 4.2% over the past five years. affluence is especially pervasive among the hamlets and villages on the North Shore of Long Island also known as the ‘Gold Coast’ and among Vacancy increase slightly YOY to 3.5%, however the market remains opulent pockets of the South Shore. extremely stable with vacancy averaging 3.0% over the past three years and 3.1% over the past five years. 2010: 2,832,884 POPULATION 2017: 2,864,836 $2,200 9.00% 2022: 2,886,616

8.00% 2010: 948,449 $2,000 HOUSEHOLDS 2017: 965,730 7.00% 2022: 990,169 $1,800 6.00% AVERAGE 2010: $118,406 5.00% $1,600 HOUSEHOLD 2017: $130,617 4.00% INCOME 2022: $147,588

$1,400 3.00%

2.00% MULTIFAMILY FORECAST $1,200 1.00% The following are Cushman & Wakefield’s projections over the near term:. $1,000 0.00% 2013 2014 2015 2016 2017 2Q2018

Average Rent % Rent Growth % Vacancy

Source: REIS PIPELINE % RENTS VACANCY GROWTH DEVELOPMENT / INVENTORY

According to REIS, 541 units will be delivered in 2018, an increase from the NOTABLE SALES 247 units delivered in 2017. Deliveries are expected to fall to 400 units in 2018. The only Class A trade in Long Island so far in 2018 has been Fairfield Properties’ purchase of The Cornerstone in Farmingdale from Terwillger Notable 2018 completions included the 112-unit Shipyard at Port Jeff and Bartone Properties for $370,238 per unit. The 42-unit community Harbor located in Port Jefferson and the 178-unit Vanderbilt located in was built in 2016 and is located next to the Farmingdale Metro-North Rail Westbury. Station. PHILADELPHIA METRO Southern New Jersey, Delaware, Center City Philadelphia, and Eastern Pennsylvania Counties

SELECTION OF RECENT TEAM TRANSACTIONS

CLOSED CLOSED MARKETING CHRISTINA MILL THE ISLE WINDSOR AT HARPER’S CROSSING Newark, DE Philadelphia, PA Langhorne, PA 228 units / Built 1992 156 units / Built 2017 377 Units / Built 2005

PHILADELPHIA METRO TEAM

KAREN IMAN ROBERT NATION MANAGING DIRECTOR ASSISTANT DIRECTOR D 215 963 4136 D 215 963 4141 [email protected] [email protected] MARKET INSIGHT Mid-Year 2018 PHILADELPHIA METRO 16

PHILADELPHIA METRO

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION The Philadelphia MSA added 14,390 jobs in the first half of 2018 and The following are select announcements from 2017: 32,060 jobs since Q2 2017, representing a 1.3% annual increase. The Brandywine Realty Trust and Drexel University broke ground on Schuylkill unemployment rate for the Philadelphia Metro averaged 4.0% in the a Yards, a $3.5 billion dollar development along the river in University City. 2nd quarter according to the Bureau of Labor Statistics, down 70 basis The mixed-use development’s 15 to 20 year master plan will consist of points from 4.7% in the 2nd quarter of 2017. nearly seven million square feet and is one of three sites Philadelphia presented to Amazon as an HQ2 candidate. PHILADELPHIA METRO JOB GROWTH TRENDS a Comcast Technology Center topped off at 1,121 feet, making it the tallest 2,600,000 2.0% building in Philadelphia and the ninth tallest building in the United States.

1.8% The 60-story building will house both Comcast Employees and other 2,550,000 technology companies, a Four Seasons Hotel, and is expected to attract 1.6% 4,000 new jobs to Center City. Liberty Property Trust owns the property 1.4% 2,500,000 with Comcast. 1.2% 2,450,000 1.0% a 2400 Market Street is nearing completion. The $230 million redevelopment 0.8% will house the global headquarters of Aramark, who will occupy 300,000 2,400,000 0.6% SF. Fitler Club, a new private lifestyle club, will occupy 75,000 SF. The

0.4% club will offer members amenities such as an indoor pool, boutique 2,350,000 0.2% hotel, high end restaurant, movie theater, event space, fitness center, and bowling alley. 2,300,000 0.0% Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Total Employment YoY % Increase

Source: REIS Q2 2018

JOB GROWTH & UNEMPLOYMENT RATE

OUTLOOK +1.3 -70 The Philadelphia MSA is projected to add 32,110 jobs in 2018, a 1.25% % YOY BPS YOY increase over 2017. This is a decline from the 37,840 jobs added in 2017 and Employment Unemployment 47,020 jobs added in 2016. Employment growth is projected to continue to slow, averaging only about 10,000 additional jobs per year between 2018 increased by 32,060 jobs decreased to 4.0% and 2022.

Q3 2017 Q4 2017 Q1 2018 Q2 2018 EMPLOYMENT 2,559,800 2,565,570 2,571,670 2,579,960

EMPLOYMENT (% Change) 0.5% 0.2% 0.2% 0.3%

UNEMPLOYMENT RATE (%) 5.1% 4.3% 4.7% 4.0% MARKET INSIGHT Mid-Year 2018 PHILADELPHIA METRO 17

MULTIFAMILY TRENDS DEVELOPMENT / INVENTORY Asking rent increased 1.9% in the first half of 2018, while effective rent According to REIS, 1,678 units were built in the Philadelphia MSA the first half increase 1.6%. Since Q2 2017, asking rent has increased 4.1% and effective of 2018, and an additional 3,229 units are scheduled to deliver by the end of the rent has increased 3.4%. Vacancy is currently 4.3%, up 40 basis points since year, for a total of 4,907 new units. This is an increase over the 2017 record of the beginning of the year, and up 60 basis points since Q2 2016. 4,461 new deliveries. Construction is expected to slow moving forward, as only 2,301 units are scheduled to deliver in 2019, and 1,435 in 2020. Notable new deliveries in the first half of 2018 includeThe Ludlow I (322 units), +4.1 +0.7 1213 Walnut (322 units), Hanover North Broad (339 units), Madison at Ellis % YOY % YOY Preserve (251 units), and The Alexander (277 units). Average asking rent Vacancy increased increased to $1,317 3.7% to 4.3% DEMOGRAPHIC FUNDAMENTALS The Philadelphia MSA has experienced steady population and household METRO VACANCY & RENT GROWTH RATES income growth over the past several years. Household income growth has After 0.9% first quarter rent growth, asking rents in the Philadelphia MSA rose been particularity strong, averaging 2.6% per year over the past three years. 1.0% in the second quarter to post a 1.9% increase halfway through 2018 and Household income growth is projected to be 4.4% in 2018 and then average a 4.1% increase over the past year. Over the past five years, both asking and 3.6% from 2018 through 2020. effective rents have increased over 3.0% per year, and REIS projects continued rent growth over the next five years. According to REIS, Philadelphia has not YOY % HOUSEHOLD YOY % had a single quarter of negative rent growth since REIS began tracking the POPULATION INCREASE INCOME INCREASE market in the early 90s. 2015 5,348,810 0.2% $153,732 3.6% Vacancy rates have increased from 3.7% to 4.3% over the past year, steadily 2016 5,360,250 0.2% $155,448 1.1% increasing each quarter. Over the past five years, vacancy rates have 2017 5,379,790 0.4% $160,436 3.2% consistently remained between 3.6% and 4.3% in the Philadelphia MSA. REIS projects vacancy rates to increase slightly but remain below 5.0% over the 2018 5,388,020 0.2% $167,439 4.4% next five years. 2019 5,391,010 0.1% $174,275 4.1%

$1,400 7.0% 2020 5,391,180 0.0% $179,424 3.0% 2021 5,393,710 0.0% $186,161 3.8% $1,200 6.0%

$1,000 5.0% MULTIFAMILY FORECAST $800 4.0% The following are Cushman & Wakefield’s projections over the near term:

$600 3.0%

$400 2.0%

$200 1.0% RENTS VACANCY $0 0.0% Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

Avg. Rent YoY % Inc. Vacancy Rate Source: REIS Q@ 2018 Data MARKET INSIGHT Mid-Year 2018 PHILADELPHIA METRO 18

INVESTMENT ACTIVITY MOST ACTIVE MARKET PLAYERS Philadelphia’s total volume increased to $1.21 billion in 2017 after a down year in 2016. 2018 volume is on pace to match 2017, with 10 deals worth nearly TOP FIVE PHILADELPHIA BUYERS – FIRST HALF 2018 $600 million closing in the first half of the year. 2018 YTD has the highest NO. price per unit average in recent years, bolstered by the $572k/unit sale of Evo RANK BUYER TOTAL VOLUME TRANSACTIONS at Cira Centre South in University City. Cap rates have continued to gradually 1 MapleTree Investments (Temasek) $197,500,000 1 increase since the 2016 low of 5.27%. 2 Eagle Rock Advisors $80,000,000 1 2018 2013 2014 2015 2016 2017 3 AJH Management $67,700,000 1 YTD1 4 Alterra Property Group / New York Life $49,300,000 1 $ VOLUME (B) $0.75 $1.04 $1.58 $0.80 $1.21 $0.57 5 Chelsea Management $43,000,000 1 $ PER UNIT (AVG) $119,751 $116,868 $196,771 $153,335 $158,903 $200,938

# OF SALES 21 33 28 16 21 10 TOP FIVE PHILADELPHIA SELLERS - FIRST HALF 2018 NO. # OF UNITS 6,286 8,863 8,011 5,275 7,621 2,853 RANK SELLER TOTAL VOLUME TRANSACTIONS Brandywine Realty Trust / AVG. SIZE (M) $35.80 $31.40 $56.30 $50.55 $57.67 $57.33 1 $197,500,000 1 Harrison Street RE Capital CAP RATE 6.21% 5.93% 5.29% 5.27% 5.33% 5.37% 2 Lowe Enterprises $127,400,000 3 Chart excludes transactions under $20mm and portfolios 3 Fairfield Residential $80,000,000 1 12018 data only includes the first and second quarter Wynnewood Park Apartments (Family 4 $49,300,000 1 Owned) 5 UBS $43,000,000 1 NOTABLE SALES Transaction rankings exclude portfolio sales • The largest sale of the first half of 2018 was Evo at Cira Centre South in University City. Mapletree Investments (subsidiary of Temasek) purchased the property from Brandywine Realty Trust and Harrison CAP RATES Street Real Estate Capital for $197,500,000 ($572,464 per unit). The In the first half of 2018, cap rates in the Philadelphia MSA averaged 5.37%, a 4 345-unit property was built in 2015 and had large units averaging basis point increase over 2017. Cap rates reached a low of 5.27% in 2016, and 1,308 SF. were over 6.00% as recently as 2013.

• Ramblewood Village, which Eagle Rock Advisors purchased from $250,000 6.25% Fairfield Residential, sold for $80,000,000 ($158,730 per unit). The 504-unit property is adjacent to the Ramblewood County Club in Mt $200,000 6.00% Laurel, NJ. $150,000 5.75 • AJH Management purchased Foster Square from Lowe Enterprises for

$67,700,000 ($191,785 per unit). The 353-unit property is connected $100,000 5.50% to Voorhees Town Center, a 600k+ SF mall in southern NJ. $50,000 5.25%

$0 5.00% 2013 2014 2015 2016 2017 2018 YTD Avg. Price Per Unit Avg. Cap Rate Note that our cap rate / price per unit date excludes transactions under $20mm and portfolio sales. MARKET INSIGHT Mid-Year 2018 PHILADELPHIA METRO 19

SUBMARKET OVERVIEW SELECT SUBMARKET NEWS As expected, Center City remained the most expensive rental submarket in the first half of Center City 2018, with average rents of $2,253. Due to the high concentration of new deliveries, Center City • National Real Estate Development completed the first also has the highest vacancy rate at 10.2%, while several submarkets with no new construction residential tower in its $250 million East Market development. remained under 2.0% vacant. Seven submarkets posted year-over-year rent growth greater The Ludlow consists of 322 units with outdoor amenity space than 5.0% since Q2 2017, led by West Philadelphia with 13.6% growth. above two stories of podium retail. Retail tenants include Iron Hill Brewery & Restaurant, Wawa, City Fitness, Little Baby’s TOP FIVE SUBMARKETS TOP FIVE SUBMARKETS TOP FIVE SUBMARKETS Ice Cream, District Taco, and Mom’s Organic Market. A second ASKING RENT ($) ASKING RENT (YOY % INCREASE) VACANCY (%) residential tower, unofficially named Ludlow II, has topped off and is expected to begin leasing this summer. The second Center City $2,253 West Philadelphia 13.6% Foxchase/Lawndale 1.5% tower will have larger units, an outdoor swimming pool, and Central Chester $1,532 North/Frankford/ 7.7% East Delaware County 1.7% have an extended stay option provided by ROOST Apartment Holmesburg Hotel. Moreland/Abington/Upper $1,484 Olney/Oak Lane 6.2% Moreland/Abington/ 1.8% • 1213 Walnut was completed in the first quarter of 2018. The 322- Dublin Upper Dublin unit high-rise in the bustling Midtown Village neighborhood Bala-Cynwyd $1,464 Bala-Cynwyd 6.1% Somerton/Bustleton 1.9% is owned by Goldenberg Group, Hines and ASB Real Estate Investments. The property includes amenities such as a Upper/Lower Merion $1,480 Cherry Hill/Evesham/ 5.9% Torresdale/Bensalem 2.0% Medford rooftop deck, elevated dog park, and indoor/outdoor fitness center.

RENTS & VACANCY BY SUBMARKET • Lincoln Square, a massive mixed-use development owned by Kimco Realty and Alterra Property Group, has begun leasing and is nearing completion in South Philadelphia near $2,500 0.10 the southern edge of Center City. The property consists of 322 apartment units and abundant amenity space on top of 100,000 SF of retail. Retail tenants expected to open later this

$2,000 0.08 year include Sprout’s Farmer’s Market, Target, and Starbucks.

North Delaware County $1,500 0.06 • In Newtown Square, Equus Capital Partners completed the 251-unit Madison at Ellis Preserve. The property is part of the 218-acre master planned Ellis Preserve, a corporate campus $1,000 0.04 which is being transformed into a mixed-use community.

Bala Cynwyd

$500 0.02 • Construction is underway on three new properties in Bala Cynwyd as developer Cross Properties continues to invest in the western suburbs. The three new developments – The Mayer, The Grant, and The Kelley – will total 264 units and are $0 0.00 all located near the intersection of Bala Ave and Union Ave. Cross Properties also recently built The Square in Ardmore and redeveloped Palmer Apartments in Wynnewood.

Source: REIS WASHINGTON DC METRO ► Washington DC ► Baltimore ► Richmond ► Hampton Roads (Virginia Beach MSA)

SELECTION OF RECENT TEAM ACTIVITY

CLOSED UNDER CONTRACT MARKETING MERIDIAN AT CARLYLE PARK VUE OF ALEXANDRIA THE FLATS AT WEST BROAD VILLAGE Alexandria, VA Alexandria, VA Richmond, VA 403 Units / Built in 2001 196 Units / Built 1965 339 Units / Built 2009

WASHINGTON DC METRO TEAM

JORGE ROSA ANTHONY (TJ) LIBERTO SENIOR DIRECTOR DIRECTOR D 703 286 3002 A D 703 286 3007 [email protected] [email protected] MARKET INSIGHT Mid-Year 2018 WASHINGTON DC 21

WASHINGTON DC METRO

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION The Washington metro economy continued to post strong job creation The following are recent metro area expansion announcements: numbers through the first half of 2018. Since the beginning of the year, the region has added 32,700 new nonfarm payroll positions and is a In April, JP Morgan announced its plans for a major expansion into on track to add 54,000 by year’s end. Notable sectors continuing to the DC Metro region where it will open a regional headquarters and that growth include Professional and Business Services, Construction, hire up to 700 new employees. and Education/Healthcare which have added 15,700, 7,100, and 2,000 jobs, respectively. Expansionary job creation helped the metro’s a Accenture is expanding its presence in DC’s innovation hub as it unemployment rate decline to 3.5%, 40 basis points (bps) below the plans to add 1,000 highly skilled technology jobs by 2020. national rate of 3.9%. Bureau of Labor Statistics In March, Supernus Pharmaceuticals announced it will be moving a its headquarters from Rockville to Gaithersburg and will add 160 jobs by 2020. WASHINGTON MSA JOB GROWTH TRENDS Micron will invest $3 billion to expand its plant in Manassas, Va and a will add 1,100 high paying jobs by 2030. 5.0% 3,450,000 In April, Appian announced its plan to move from Reston to Tysons a Corner as part of a plan to add 600 jobs. 3,350,000 4.0% MicroStrategy announced in March it will remain in Northern a Virginia for another 13 years and add 300 jobs at its headquarters 3,250,000 in Tysons Corner. 3.0% 3,150,000

3,050,000 2.0%

2,950,000 1.0% 2,850,000 2016 2017 YTD 2018 2,750,000 0.0% Feb Mar Apr May Jun Jul Employment 3,272,400 3,310,200 3,360,200 Employment (% Change) 5.23% 1.16% 1.51% 2017 2018 YOY % Job Change Source: BLS Unemployment Rate (%) 3.60% 3.30% 3.50% Source: BLS NOTE:Note: 2018 2017 data data is preliminaryis preliminary as it isas subject it is subject to subsequent to subsequent BLS adjustments BLS adjustments and corrections and corrections JOB GROWTH & UNEMPLOYMENT RATE OUTLOOK While job growth cooled slightly through the first half of 2018, the Washington MSA area remains in expansion phase as it has diversified away from its reliance on federal spending and is now growing a significant +1.5 -40 share of private sector jobs. Job growth is on track to surpass the annual % YOY BPS YOY historical average of 31,000 jobs with the total expected addition of 54,000 in 2018.Looking ahead, jobs are projected to be created primarily July 2018 employment increased Unemployment decreased to in the private sector with job growth averaging 39,500 annually over 53,670 jobs since July 2017 3.5% as of July 2018 the next five years. This job growth will continue to keep the regional unemployment among the best in the country for large metro areas.

Source: Bureau of Labor Statistics Generated on: June 10, 2015 (12:40:07 PM) MARKET INSIGHT Mid-Year 2018 WASHINGTON DC 22

MULTIFAMILY TRENDS DEVELOPMENT / INVENTORY With the supply pipeline beginning its decline rent growth is returning to The 36-month pipeline continues to moderate with the majority currently the Washington metro region apartment market as rents grew 1.72% year- under construction. According to Axiometrics 773 units have delivered so over-year. Historic levels of demand have kept vacancy in check as well, far in 2018 with an additional 5,394 expected to deliver by the end of the generally flat over the year and currently 4.40%. year. The pipeline picks up in 2019 where an estimated 15,296 units that are currently under construction are due to deliver.

+1.72 -10 DEMOGRAPHIC FUNDAMENTALS % YOY BPS YOY The Washington MSA continues to experience population growth with Average effective rent Vacancy decreased an increase of 2.3% since July of 2017.Of the major regions that comprise increased to $1,716 to 4.40% the MSA, Northern Virginia is projected to witness the highest expansion with average growth of 1.08% through 2022. A diversified and expanding economy will continue to attract people to the metro region with population METRO VACANCY & RENT GROWTH RATES growth expected to remain steady in the region, with an anticipated average Rent growth has been rather subdued over the last several years due to growth of .92% over the next five years. an outsized pipeline. Since 2012 rent growth has averaged 1.76% annually. YOY % Household YOY % However, with the pipeline dissipating growth is expected to rebound with Population Increase Income Increase projected average annual rent growth of 3.63% from 2018 through 2021. 2014 5,931,470 0.98% $172,160 3.43% Record levels of demand have kept the vacancy rate stable in the 2015 5,987,560 0.95% $177,515 3.14% Washington metro, with current vacancy down 10 basis points YOY to 4.40%. Vacancy has dropped below the average of 4.74% annually from 2016 6,061,790 1.24% $180,186 1.52% Axiometrics 2012 to midyear 2018. Demand is projected to remain strong with annual 2017 6,125,590 1.05% $184,147 2.21% Effective Rent vacancy projected to average only 4.25% from 2018 through 2021. 2018 6,182,580 0.93% $189,486 2.88% Year Average Rent Vacancy Rent % Increase YOY $1,750 6.00% 2019 6,240,230 0.93% $194,077 2.44% 2012 $1,529 4.70% 1.68% $1,700 5.00% 2020 6,296,900 0.91% $196,785 1.41% 2013 $1,528 5.10% -0.07% 2021 6,354,280 0.91% $201,480 2.39% 2014 $1,544 4.90% 1.05% $1,650 4.00% 2015 $1,581 4.70% 2.40% 2022 6,412,200 0.91% $206,964 2.72% 2016 $1,634 4.70% 3.35% $1,600 3.00% 2017 $1,670 4.70% 2.20% $1,550 2.00% 2018 $1,716 4.40% 1.72% MULTIFAMILY FORECAST $1,500 1.00% The following are Cushman & Wakefield’s projections over the near term:

$1,450 0.00%

$1,400 -1.00% 2013 2014 2015 2016 2017 2018

Average Rent Vacancy Rent % Increase YOY PIPELINE % RENTS VACANCY Source: Axiometrics GROWTH MARKET INSIGHT Mid-Year 2018 WASHINGTON DC 23

Q1 $6,326,805,851 INVESTMENT ACTIVITY MOST ACTIVE MARKET PLAYERS Q2 $7,241,614,535 Transaction velocity has been robust through the first half of 2018 with TOP WASHINGTON DC BUYERS - 2017 Q3 $7,932,962,984 the mid-year total at $5.5 billion. Activity through the first two quarters 2013 Q4 $8,561,618,431 is double the volume at the same time last year. The pace of this strong RANK BUYER TOTAL VOLUME NO. TRANSACTIONS Q1 $980,321,250 start to 2018 is expected to continue through the second half of the year. 1 JP Morgan, L3C Cap Prtnrs LLC $642,017,776 7 Q2 $1,936,726,253 2 Strata Equity Group $604,000,000 12 Q3 $2,932,120,161 YTD SALES VOLUME 2014 Q4 $4,022,195,161 3 Waterton Associates $345,383,333 2 Q1 $1,380,844,456 $10,000,000,000 4 BlackRock Real Estate $194,800,000 2 Q2 $3,172,636,034 $9,000,000,000 5 Hasta Capital $191,000,000 3 Q3 $4,388,055,261 $8,000,000,000 2015 Q4 $8,630,378,849 TOP WASHINGTON DC SELLERS - 2017 $7,000,000,000 Q1 $1,292,149,669 $6,000,000,000 RANK BUYER TOTAL VOLUME NO. TRANSAC- Q2 $2,369,119,226 TIONS Q3 $3,754,809,215 $5,000,000,000 1 Bainbridge Companies, Starwood Capital $642,017,776 7 2016 Q4 $5,778,357,180 $4,000,000,000 2 Federal Capital $628,450,482 13 Q1 $1,002,505,539 $3,000,000,000 Q2 $1,823,105,453 3 CBRE Global Investors $345,383,333 2 $2,000,000,000 Q3 $4,349,673,973 4 Buvermo Investments, Northwestern $194,800,000 2 2017 Q4 $6,420,105,509 $1,000,000,000 Mutual, StonebridgeCarras, PN Hoffman Q1 $2,043,667,127 $0 5 AvalonBay $170,000,000 1 Q2 $3,417,332,537 Q1 Q2 Q3 Q4 Q3 $3,417,332,537 2018 2013 2014 2015 2016 2017 CAP RATES 2018 Q4 Market cap rates have averaged 5.16% through mid-year 2018, a slight Source: Real Capital Analytics decrease over year end 2017. A total of 61 properties have traded so far in 2018, a 75% increase from what traded during the first half of 2017. NOTABLE SALES $240,000 6.20% • The largest sale through midyear 2018 was the Starwood DC Metro $220,000 6.10% portfolio, which was purchased for $358,000,000 by joint venture between $200,000 6.00% 5.90% JP Morgan and L3C Capital Partners. $180,000 5.80% • In Northern Virginia Lincoln at Old Town sold for $148,000,000. The $160,000 5.70% 403 unit, 2000 built high-rise in Old Town, Alexandria was purchased by $140,000 5.60% 5.50% Lincoln Property Co. from Paradigm Companies. $120,000 $100,000 5.40% • The largest sale in the District closed in August: 319-unit Trellis House sold 5.30% $80,000 for $128,000,000. CIM Group purchased the property from Ambling Cos., 5.20% $60,000 Pinak Mehta, and Gateway Investment Partners. 5.10% $40,000 5.00% • In Suburban Maryland, the 864-unit Cider Mill sold for $142,650,000. HOC 2011 2012 2013 2014 2015 2016 2017 2018 of Montgomery County purchased the Gaithersburg complex from the Avg Price Per Unit Avg Cap Rate joint venture Donaldson Group and Angelo, Gordon & Co. Source:Source: Real Real CapitalCapital Analytics Analytics MARKET INSIGHT Mid-Year 2018 WASHINGTON DC 24

SUBMARKET OVERVIEW by Davis Development. The project which will deliver in 2020 is part of the second phase of the Loudoun Station Pentagon City continues to hold the highest effective rent for the Washington metro region, mixed-use development. averaging $2,681. Bethesda/Chevy Chase holds the second highest rate and the highest rate • Additional projects are underway in Fredericksburg, in Suburban Maryland with $2,445. The Woodley Park submarket has the highest rents for the with construction kicking off for four projects totaling District of Columbia, currently averaging $2,332. Average vacancy for the Washington metro is 1,045 units. Breeden Company will deliver the largest 4.4%. The only submarkets where vacancy falls below 3.0% are all within the suburbs of Maryland development, The Allure at Jefferson, a 338-unit and Northern Virginia, including Hyattsville (1.6%), Takoma Park (1.7%), NE Alexandria (2.4%), complex next year. and Fredericksburg (2.4%). Suburban Maryland • In Bethesda, JBG Companies has started construction RENTS & VACANCY BY SUBMARKET Rents & Vacancy by Submarket on its 17-story project at 7900 Wisconsin Avenue, which $2,681 will have 475 multifamily units, 21,600 square feet of 15.0% $2,500 $2,445 retail and a 11,000 sf two-level park. Currently there are $2,332 13.0% 1,494 units under construction in Bethesda/Chevy Chase $2,137 $2,122 $2,127 $2,095 $2,056 $2,016 $1,980 $1,981 $1,955$1,996 with 316 units due to deliver by the end of 2018. $2,000 $1,886 11.0% $1,764 $1,793 • In College Park, a 275-unit luxury apartment building $1,708 $1,702 $1,677$1,648 $1,601 9.0% $1,526 dubbed Alloy by Alta has kicked-off construction. $1,422 $1,451$1,429 $1,442 $1,465 $1,500 $1,386$1,372 Developer Wood Partners will deliver units beginning in $1,287 $1,245 $1,197 7.0% $1,111 early 2019.

$1,000 5.0% The District 3.0% • Navy Yard/Capitol South continues to see a strong $500 1.0% pipeline of multifamily units with 5,184 units currently under construction. Construction broke ground on 1,816 $0 -1.0% of those units this year. The largest of these projects is Tishman Speyer’s Square 696- Phase I development with 400 units due to deliver in 2020. Capitol Hill currently has the highest vacancy rate of any submarket in the Washington metro region at 11.3%. • In NoMA, Foulger-Pratt broke ground on the 355-unit Source:Source: REIS REIS Submarket Average Rents Submarket Average Vacancy Press House at Union District due to deliver in 2020. This brings the total number of units under construction in Union Market/NoMA to 3,292. SELECT SUBMARKET NEWS • Tasea Investment Company delivered Legacy West End, Northern Virginia a 197-unit complex, in DC’s West End neighborhood • In the Rosslyn-Ballston Corridor, construction has broken ground on 1,130 units. West Rosslyn during the first quarter of 2018. The project is currently Development Company will deliver 560-units at 1555 Wilson Boulevard in 2020. In Ballston, in lease-up. Jefferson Apartment Group is building a 326-unit 22-story luxry high-rise with the first units • In Southeast DC, construction is now underway for the delivering at the end of 2019. Also in Ballston, Shooshan Company is constructing a mixed-use mixed-use development, Skyland Town Center, which development, Liberty Center, which will deliver 244 multifamily units in 2019. will deliver 263 units beginning in late 2019. After • Nothing in the pipeline for Tysons Corner has broken ground this year as the submarket awaits facing several delays, the project is moving forward to the highly anticipated delivery of The Boro in 2019. Kettler’s mixed-use development at The redevelop the former Skyland Shopping Center. In total Boro will deliver 677 units, with the first units in the second quarter of 2019. the project is approved for 320,000 square feet of retail • In Loudoun County, construction has started for BLVD Loudoun Station II, a 319-unit project and 500 multifamily units. MARKET INSIGHT Mid-Year 2018 BALTIMORE 25

BALTIMORE, MD ECONOMIC EXPANSION The following are select announcements from 2017: Paul Fredrick – In July, the menswear firm announced it will relocate EMPLOYMENT & UNEMPLOYMENT TRENDS a its corporate headquarters to Baltimore County, adding 70 new jobs over the next five years. The Baltimore MSA is currently in an expansion cycle with employment trending upwards over the last several quarters. The unemployment rate has risen to 4.6% Towson Square – The project on the former Towson Circle begun in July 2018, which is a 10-bps increase over the previous 12-months. Employment a construction which has brought an estimated 1,530 jobs to the growth registered an increase of 16,000 nonfarm jobs over the year ending July area. 2018, which is a 1.1% increase. The Professional/Business sector saw the most Stanley Black and Decker – The company leased an additional growth, adding 13,900 jobs over the year. The Baltimore area has one of the 48,000 SF in addition to expanding its corporate headquarters in most stable economies for similar sized metro areas with a high concentration of a Towson which is expected to accommodate another 300 to 400 hospitals and universities. As a result, the Education/Health sector was a major new jobs over the next 2-5 years. job generator with 3,100 new jobs created. Other high growth sectors in included – Currently located in Sparks, MD, Bureau of Labor Statistics McCormick and Company Leisure/Hospitality (5,300 jobs) and Trade/Transportation/Utility (1,600 jobs). the company consolidated its workforce in the region to a new a 340,000 SF headquarters building in Hunt Valley. This bring 900 office employees to the area. BALTIMORE JOB GROWTH TRENDS Baltimore Employment Growth Trends Johnson, Mirmiran and Thompson – The national architectural and 1,600,000 5.0% a engineering firm moved into its new headquarters building to Hunt Valley bringing with it 500 employees. 1,550,000 BTS Bioenergy – The Italian Bioenergy firm will invest $40 million 4.0% a to establish its North American headquarters in Howard County, 1,500,000 establishing 20 new jobs.

1,450,000 Sylvan Learning – Moved its corporate headquarters from 3.0% a downtown Baltimore to Hunt Valley in 2017 bringing 125 employees 1,400,000 to Baltimore County.

2.0% Seagirt Marine Terminals – In May 2017, the firm announced a $55 1,350,000 a million expansion which will bring its total footprint to 356 acres. The expansion is expected to create an additional 2,000 jobs. 1,300,000 1.0% Amazon – In January 2017, Amazon announced plans to open a 1.2 1,250,000 a million square foot fulfillment center in North East, Maryland which will create 700 new jobs immediately. 1,200,000 0.0% Feb Mar Apr May Jun Jul MULTIFAMILY TRENDS

2017 2018 YOY % Job Change Apartment market fundamentals have been suppressed by elevated levels of supply in Q1 and Q2 of 2018. Vacancy for all investment grade apartments SourceSource:: BLSBLS increased 60 bps over the year and currently averages 4.2%. Class B NOTE:Note: 20162017 data data is ispreliminary preliminary as it as is subjectit is subject to subsequent to subsequent BLS adjustments BLS adjustments and corrections and corrections apartments outpace Class A apartments with vacancy of only 2.8%. Rent growth was robust over the trailing 12-months and totaled 3.3%. Growth was more pronounced in the class A space, which increased rents 3.4%. High JOB GROWTH & UNEMPLOYMENT RATE levels of supply may restrict absorption, but overall growth in the market will keep fundamentals stable for the next several quarters in Baltimore. +1.1 +10 % YOY BPS YOY +3.3 +60 July 2018 employment growth Unemployment increased to % YOY BPS YOY totaled 16,000 jobs over the year 4.6% as of July 2018 Average asking rent Vacancy increased increased to $1,248 to 4.2%

Source: Bureau of Labor Statistics Generated on: June 10, 2015 (12:40:07 PM) MARKET INSIGHT Mid-Year 2018 BALTIMORE 26

HISTORICAL & FORECASTED METRO RENT GROWTH RATES DEMOGRAPHIC FUNDAMENTALS Rent growth is projected to increase in 2019 and average 2.4% for all Increasing demographics have been a primary reason for the success of apartments. Vacancy is projected to decrease to 4.3%. Rent growth is the region’s apartment market. Population growth and job growth have expected to average annual increases of 2.1% from 2020 through 2022 occurred in tandem with household income growth. Population and with vacancy averaging 4.5% annually over the same time. household income growth are projected to increase at current levels which should continue to support a strong apartment market.

Year Average Rent Vacancy Rent % Increase YOY $1,260 5.00% YOY % HOUSEHOLD YOY % POPULATION 2012 $1,070 4.30% 4.50% $1,240 4.50% INCREASE INCOME INCREASE 2013 $1,100 4.40% 2.80% $1,220 4.00% 2014 2,790,250 0.40% $140,546 3.50% 2014 $1,135 4.50% 3.10% $1,200 3.50% 2015 $1,166 4.20% 2.70% 2015 1,798,390 0.30% $144,303 2.70% $1,180 3.00% 2016 $1,190 3.90% 2.20% 2016 2,803,960 0.20% $148,206 2.70% $1,160 2.50% 2017 $1,226 3.70% 3.00% 2017 2,811,740 0.30% $152,984 3.20% Q2 2018 $1,248 4.20% 3.30% $1,140 2.00% $1,120 1.50% 2018 2,818,140 0.20% $159,637 4.30% $1,100 1.00% 2019 2,823,550 0.20% $165,786 3.90% $1,080 0.50% 2020 2,828,460 0.20% $169,055 2.00% $1,060 0.00% 2021 2,833,690 0.20% $173,613 2.70% 2014 2015 2016 2017 Q2 2018 2022 2,839,250 0.20% $178,740 3.00% Average Rent Vacancy Rent % Increase YOY

Source: REIS MULTIFAMILY FORECAST DEVELOPMENT / INVENTORY The following are Cushman & Wakefield’s projections over the near term:

Like many Mid-Atlantic cities, the strength of the local economy led to an outsized development pipeline with an average of 2,474 units completed each year since 2013. Deliveries totaled 2,805 units in the first half of 2018 and a number of projects are currently under construction with PIPELINE % deliveries projected to increase to 4,936 units by year’s end. Following RENTS VACANCY this latest wave the pipeline is expected to decrease significantly to and GROWTH average 1,079 units annually from 2019 to 2022. The vast majority of the current pipeline continues to be concentrated in downtown Baltimore, NOTABLE SALES and outlying suburbs have produced fundamentals in excess of the The trailing 12-month sales velocity in Baltimore decreased 14% over Q2 2017 overall market. Class B apartments have continued to be a benefactor, and registered a total volume of $1,696,350,344. The largest sale was Lone particularly in suburban submarkets with limited or no new construction. Star’s Howard Crossing, a 1,350-unit community that sold for $236,200,000, making it Baltimore’s largest property sale to date. In total, 53 properties transacted for an average project total of ~$32 million. MARKET INSIGHT Mid-Year 2018 RICHMOND 27

RICHMOND, VA ECONOMIC EXPANSION The following are Richmond MSA expansions or relocations as of July 2018 EMPLOYMENT & UNEMPLOYMENT TRENDS Cascades – In July, the green packaging and tissue products firm announced plans to invest $275 million to establish a lightweight The Richmond area economy continued its expansion cycle through Q2 a recycled containerboard operation in Hanover County. The project 2018, reaching historical highs for both total labor force and employment will create 140 new jobs. in 2018. Jobs continue to grow above the region’s long-term average with 10,700 new jobs added as of July 2018 which equates to a 1.6% increase. TemperPack – In May, the sustainable thermal insulation manufacturer Unemployment decreased 100 bps over the year and currently averages announced plans to invest $10.4 million to establish a manufacturing 3.1%. Job growth at year end continued to come from a diverse group a operation in Henrico County. The facility will be the firm’s second in of sectors with Professional/Business (2,600 jobs), Trade/Transportation/ Virginia and will create 141 new jobs. Utilities (2,600 jobs), Education/Health (1,300Bureau jobs), of and Labor Mining/Logging/ Statistics Service Center Metals – In January, the manufacturer announced it Construction (1,100 jobs) the largest contributors. was investing $45.2 million to expand its manufacturing capabilities a at its headquarters in Prince George County. The investment will RICHMOND JOB GROWTHRichmond TRENDS Employment Growth Trends create 58 new jobs. Dominion Outsourcing – In June, the healthcare outsourcing firm 1,000,000 5.0% a announced it will invest $370,000 to expand its facility in Henrico 900,000 County. The firm will create 190 new jobs. 800,000 4.0% Delta Pure Filtration – In May, the water cartridge and systems

700,000 company announced it will invest $2 million to expand its a manufacturing operation in Hanover County. The expansion will 600,000 3.0% create 18 new jobs. 500,000 UDig – In April, the consulting firm that develops technology 400,000 2.0% solutions announced it was investing $1.6 million to expand its IT a headquarters operation in Henrico County. The project will create 300,000 51 new jobs. 200,000 1.0%

100,000

0 0.0% Feb Mar Apr May Jun Jul MULTIFAMILY TRENDS Apartment market fundamentals remained strong throughout 2018 with 2017 2018 YOY % Job Change high levels of demand contributing to vacancy of 4.0% for all investment Source: BLS grade apartments. Rent growth for all apartments totaled 4.5% over the year Source: BLS NOTE: 2017 data is preliminary as it is subject to subsequent BLS adjustments and corrections Note: 2016 data is preliminary as it is subject to subsequent BLS adjustments and corrections which includes 4.0% in class A apartments and 4.5% in class B apartments. With population and employment dynamics projected to remain strong, JOB GROWTH & UNEMPLOYMENT RATE multifamily fundamentals in the Richmond MSA are projected to remain strong. 10,700 -100 +4.5 +20 JOBS BPS YOY % YOY BPS YOY Added over the year ending Unemployment decreased to Average asking rents Vacancy increased July 2018 3.1% as of July 2018 increased to $987 to 4.0%

Source: Bureau of Labor Statistics Generated on: June 10, 2015 (12:40:07 PM) MARKET INSIGHT Mid-Year 2018 RICHMOND 28

HISTORICAL & FORECASTED METRO RENT GROWTH RATES DEMOGRAPHIC FUNDAMENTALS Richmond’s rent growth over the next five years is projected to average Richmond is one of the market leaders in economic fundamentals 2.62% annually with the current supply pipeline decreasing below 1.0% among similarly sized MSA’s thanks to its friendly business climate, high of inventory starting in 2019. Vacancy is expected to remain stable and concentration of Meds & Eds and large concentration of Fortune 1000 average 4.2% in 2019 and 3.9% annually through 2022. companies. The population has registered steady increases which has been exceeded by average household income growth. A strong jobs climate will Year Average Rent Vacancy Rent % Increase YOY RichmondRICHMOND Rent RENT Growth GROWTH & Vacancy& VACANCY Rates RATES continue to attract new residents to Richmond. 2012 $821 5.20% 2.20% YOY % HOUSEHOLD YOY % $1,000 5.00% 2013 $847 4.30% 3.10% POPULATION INCREASE INCOME INCREASE 2014 $861 4.00% 1.70% 2015 $894 4.40% 3.80% $950 4.00% 2014 1,264,400 1.00% $125,592 4.10% 2016 $921 3.50% 3.50% 2015 1,276,000 0.90% $130,977 4.30% $900 3.00% 2017 $953 3.80% 3.40% 2016 1,288,360 1.00% $132,234 1.00% Q2 2018 $987 4.00% 4.50% $850 2.00% 2017 1,299,610 0.90% $136,651 3.30% 2018 1,309,510 0.80% $139,807 2.30% $800 1.00% 2019 1,318,910 0.70% $143,038 2.30% $750 0.00% 2020 1,328,250 0.70% $144,778 1.20% 2014 2015 2016 2017 Q2 2018 2021 1,337,680 0.70% $148,705 2.70% Average Rent Vacancy Rent % Increase YOY 2022 1,347,190 0.70% $153,097 3.00% Source: REIS MULTIFAMILY FORECAST DEVELOPMENT / INVENTORY The following are Cushman & Wakefield’s projections over the near term: According to REIS, 1,288 units delivered in the past 12-months, which equates to 1.7% of inventory. By year-end 2018, deliveries are projected to total 1,817 units, which is 2.4% of inventory. In 2019 this is projected to increase to 1,406 (1.8% of inventory). Demand is projected to remain high in 2019 with net absorption of 1,469. Starting in 2020 the pipeline PIPELINE % decreases to 184 units with 901 units projected to deliver from 2021 RENTS VACANCY GROWTH through 2022. NOTABLE SALES Strong sales velocity has contributed to a record 12-months for the Richmond market in terms of aggregate sales volume. Aggregate sales totaled $752,188,099 which is the highest trailing-12 total every achieved in the market. Nearly 45% of the total volume occurred in the 4th quarter of 2017. Cushman & Wakefield contributed heavily to total volume brokering $125,925,000 of sales including Falling Creek ($25,000,000), Crystal Lake ($37,500,000) and Terraces at Manchester ($30,125,000) which set a price per unit record for a market rate property in Richmond ($203,547). MARKET INSIGHT Mid-Year 2018 HAMPTON ROADS 29

HAMPTON ROADS, VA

EMPLOYMENT & UNEMPLOYMENT TRENDS ECONOMIC EXPANSION Large hospital systems, a high concentration of universities/colleges, one The following are Hampton Roads MSA expansions or relocations as of of the largest ports on the east coast and 5 naval bases characterize the economy of Hampton Roads. Over the past 24-months job growth has Newport News Shipbuilding – In June 2018, the firm announced that been inconsistent, with short term gains offset by small losses, but has a it will seek to hire nearly 7,000 new employees over the next five generally trended upwards. However, in June the Federal government years. passed a budget for 2019 which increases defense spending by $82 Billion Sumitomo Machinery Corporation – In January 2018, the American over the next year which will have a meaningful impact on the regional arm of the global manufacturing firm announced it will invest $10 economy. DOD spending contributes nearly 40% of Hampton Roads GDP a million to expand its headquarters in the city of Chesapeake, retaining so additional growth is expected over the next 24-months as a result. The 20 existing jobs and adding 26 new jobs. unemployment rate continues to decrease andBureau currently of Labor Statistics stands at 3.3%, Instant Systems – In December 2017 the medical-grade bag which is a 110-bps decline over the trailing 12-months. a manufacturer announced it will invest $900,000 to expand its Norfolk facility and will create 72 new jobs. HAMPTON ROADSHampton JOB GROWTH Roads Employment TRENDS Growth Trends Global Technical Systems – In December 2017, Glad Technical Systems 850,000 5.0% a announced it was investing $54.7 million to build a new 500,000 square foot facility in Virginia Beach which will create 1,110 new jobs. 4.0% 800,000 Standard Calibrations – In November 2017, Standard Calibrations a announced they were expanding their engineering operation in City 3.0% of Chesapeake by 150 jobs. 750,000 STIHL, Inc. – In October 2017 STIHL announced they were investing 2.0% a over $20 million in Virginia Beach to expand their US headquarters.

700,000 Ferguson – In June 2017, the largest US plumbing wholesaler 1.0% a announced it was investing $82.8 million to expand its headquarters in Newport News creating 434 new jobs. 650,000 0.0% MULTIFAMILY TRENDS

600,000 -1.0% Fundamentals of the region’s apartment market have remained steady Feb Mar Apr May Jun Jul with low vacancy and rent growth in line with market averages over the last 5-years. Rent growth for all investment grade apartments was 2.6% 2017 2018 year-over-year which is approximately 10 bps over the annual average Source: BLS since 2012. Class B apartments felt the majority of this growth, averaging Source:NOTE: BLS2017 data is preliminary as it is subject to subsequent BLS adjustments and corrections a 3.4% increase while Class A properties averaged 1.6%. Vacancy remained Note: 2016 data is preliminary as it is subject to subsequent BLS adjustments and corrections consistent, averaging 4.65% over the year and currently standing at 4.6% JOB GROWTH & UNEMPLOYMENT RATE across all asset classes. Recent budget increases to defense spending and a transient population will continue to support expanding multifamily $82 -110 fundamentals for both Class A and B apartments. BILLION BPS YOY Defense spending increase over Unemployment decreased +2.6 4.6 the next year to 3.3% as of July 2018 % YOY % VACANCY Average asking rents Remained stable increased to $1,053 over the year

Source: Bureau of Labor Statistics Generated on: June 10, 2015 (12:40:07 PM) MARKET INSIGHT Mid-Year 2018 HAMPTON ROADS 30

HISTORICAL & FORECASTED METRO RENT GROWTH RATES YOY % HOUSEHOLD YOY % Rent growth is projected to average 3.3% by year-end 2018 and will average POPULATION INCREASE INCOME INCREASE 1.85% annually from 2019 through 2022. Vacancy is projected to decrease 2014 1,718,220 0.50% $118,634 4.30% to another 20 bps throughout the year to 4.4% and average 4.3% annually from 2019 through 2022. 2015 1,721,740 0.50% $122,705 3.40% 1,723,810 0.10% $123,121 0.30% Year Average Rent Vacancy Rent % Increase YOY $1,060 7.00% 2016 2012 $915 4.50% 2.60% 2017 1,727,670 0.20% $127,334 3.40% $1,040 6.00% 2013 $936 4.80% 2.10% $1,020 2018 1,734,540 0.40% $130,110 2.20% 2014 $963 5.90% 2.80% 5.00% 2019 1,743,510 0.50% $133,013 2.20% 2015 $980 5.60% 1.80% $1,000 2016 $1,007 4.60% 2.80% 4.00% 2020 1,753,960 0.60% $134,614 1.20% $980 2017 $1,035 4.70% 2.80% 3.00% 2021 1,764,750 0.60% $138,137 2.60% Q2 2018 $1,053 4.60% 2.60% $960 2.00% 2022 1,775,640 0.60% $142,065 2.80% $940

$920 1.00%

$900 0.00% MULTIFAMILY FORECAST 2014 2015 2016 2017 Q2 2018 The following are Cushman & Wakefield’s projections over the near term: Average Rent Vacancy Rent % Increase YOY Source: REIS

DEVELOPMENT / INVENTORY According to REIS, 1,380 units are projected to deliver in 2018, which PIPELINE % represents a 26% increase over 2017. The pipeline decreases by 80% in RENTS VACANCY GROWTH 2019 with only 276 units expected to deliver. From 2020 through 2022 only 648 units are projected to deliver annually. NOTABLE SALES DEMOGRAPHIC FUNDAMENTALS Transaction velocity over the past 12-months declined slightly compared to Q2 2017 but still remained above the long-term average. Aggregate volume The Hampton Roads MSA is the largest in Virginia and continues to totaled $602,573,519 in 20 transactions, the largest coming from the sale of diversify away from its reliance on the Department of Defense. The Mariner’s Cove for $52,200,000. region’s economy is underpinned by a number of large hospital systems and universities which provide steady, well-paying jobs. Both employment and population growth have continued to improve the region’s stable apartment market. With steady levels of population growth and household income growth projected to continue, fundamentals should continue to remain at or above long-term averages. MID-ATLANTIC & NEW YORK METRO MULTIFAMILY ADVISORY TEAM

NEW YORK METRO TEAM

PHILADELPHIA METRO TEAM

KAREN IMAN ROBERT NATION SENIOR DIRECTOR ASSISTANT DIRECTOR D 215 963 4136 D 215 963 4141 [email protected] [email protected]

WASHINGTON DC METRO TEAM

JORGE ROSA ANTHONY (TJ) LIBERTO SENIOR DIRECTOR DIRECTOR D 703 286 3002 A D 703 286 3007 [email protected] [email protected]

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