Market-Advisory Services

To dissect the drivers beneath the latest trends - the Why - and then to determine What's Next, an expert team including data management expertise, PhD consultants, and Witten's real-world experience has built and maintains over 200 proprietary models. Building on lessons learned from the challenging markets of 2001-2002, this team introduced its initial forecasts for the nation's major markets in late 2002.

These 40 market-specific forecasts are a) updated each quarter to reflect the ever-changing realities of each local market, b) the result of models that capture the real drivers of demand, and of supply, unique to each market, that c) provide consistent analysis across all the nation's major apartment markets, yet also include d) an ongoing review, update and adjustment process quarter after quarter and e) present conclusions for investment strategy rather than just more data.

Among the lessons that have come from almost two years of R&D effort are these:

1. Among the demand drivers for apartments, job growth is important, but explains less than 40% of apartment demand, on average, across the nation's major markets. In 2002, several markets generated positive apartment absorption, despite losing jobs.
2. Home-buying competition has indeed drained some apartment demand in 2001-2002, but on average only accounts for less than 20% of the change in apartment demand over the past cycle.
3. A variety of other, uniquely local factors drive apartment demand - immigration, rent affordability, the availability of a large inventory of apartments from which to select, et al.
4. Apartment starts behave in a unique fashion in each market. Development yield (return on cost) is the largest determinant but, not surprisingly, is distorted by numerous lags - some lag due to entitlement difficulties, some to delays in capital markets' response.
5. Owners' behavior in raising rents is uniquely local as well. A 5% vacancy rate triggers rent increases in some markets and rent reductions in others.