Chicago real estateChicago might have a bad reputation when it comes to crime. Or taxes. Or commuter horror stories. Or artery-clogging street food. For decades, companies had been abandoning Chicago for more temperate climates (that is, literally anywhere else). But that polarity has changed. For every General Mills or Butterball or Mondelez International that left town, there’s a Walgreens or JPMorgan Chase or GE Healthcare that has increased its footprint along Lake Michigan.

Balancing act

At this moment in time — and it might be fleeting — supply and demand are in rough parity throughout Chicagoland.“ Apartment absorption picked up considerably during the first half of this year, particularly in urban areas,” Bisnow reported in October, “But there is still a race between supply and demand. Despite the increase in demand, there has been a lot of new supply, and that means vacancy hasn’t moved much recently.” That balance can’t last, not with the free-swinging market dynamics that are currently running their courses throughout the metropolitan area.

According to Institutional Property Advisors’ recent Chicago outlook report, vacancies are rising faster around Chicago than across the U.S. in general. In related news, Chicago rents are rising more slowly — as a whole. While Class A rents will likely struggle to find a 2% increase this year, Class Bs are projected to gain 3% and Class Cs 4%. This is an inversion of what happened in 2018.

Institutional Property Advisors further forecasts that, while 2019 completions will approximate those in 2018, absorptions will drop by about one-third. While that would point to declining leasing prices, it’s also true that Chicago mortgage payments far exceed effective rents and the gap between the two continue to grow. That would tend to signal that there’s ample room for rents to increase and still be competitive with home ownership, but who knows?

Staying in the Loop

Downtown is, apparently, where the action is. “Rents in the newest buildings remain at record levels, and occupancy has held fairly steady despite new supply,” Bisnow quoted Tom Weeks, an executive with Lendlease as saying, “all of which speaks to a healthy multifamily market as the population of Downtown continues to rise.”

Weeks’s company is developing multi-unit properties along the South Loop section of Downtown Chicago, but his perspective isn’t just a matter of anecdote. There are data to back up reports of the area’s resurgence. Just because Amazon took a pass on Chicagoland doesn’t mean that other tech companies aren’t finding compelling reasons to rent commercial space there — and Downtown in particular. And, as commercial real estate goes, so goes residential.

“Corporate expansions and relocations to Downtown Chicago and surrounding neighborhoods are boosting incomes and supporting household formation. Tech companies, including Google and Facebook, are growing their footprints and increasing hiring. Software firm Salesforce is also considering expanding its presence downtown, potentially bringing 5,000 jobs to the area,” according to Institutional Property Advisors. In response, “[m]any professionals are renting in the city’s dense urban areas as high costs in these neighborhoods make homeownership difficult. As a result, apartment vacancy in the city of Chicago began to improve in late 2018 at a faster rate than in the suburbs despite elevated construction.”

Still, despite Weeks’s optimism, other published reports suggest that Downtown, and especially the South Loop, are going to face price pressure as thousands of units come online. Crain’s Chicago Business reports that “[l]andlords in the South Loop will face more competition over the next two years, as developers complete more than 2,200 units in the neighborhood,” and that across the entire Downtown area 8,400 units will be built through 2019 and 2020.

Fortunately, there’s much more to Chicagoland than Downtown, and the adjacent Near North Side, Near South Side and Near West Side. While everyone is keeping their eye on the city core, some savvy investors have been placing bets on multifamily units well into the suburbs. Grayslake and Chicago  Heights North rents were up 11.3% and 7.3% year-over-year respectively, according to Yardi Matrix. Meanwhile big projects are being built out in Wheaton and Shaumburg.

Chicago at a glance

  • New construction: 9,500 apartments in 2019 (projected), compared with 9,200 in 2018
  • Vacancy: up 30 basis points in 2019 (projected) as completions outpace absorption, reversing last year’s 40 bp decline
  • Average effective rent: $1,510/mo (projected), up 3.2%
  • Median annual household income: $53,006 in 2016, up from $38,625 in 2000; still below Illinois’s statewide figure of $60,960

Sources: Marcus & Millichap,

Brooklyn, New York

Brooklyn has been through a lot of changes since the 1950s. It evolved from a rough-around-the-edges, working-class borough of New York City to a blighted but unbowed urban expanse that forged its own voice. Then it became the frontier for artsy technocrats with a taste for coffee shops, galleries, gastropubs and event spaces. In short, Brooklyn evolved from humble to hip over the past few decades.

But many real estate professionals are giving public voice to what was, two years ago, sheer heresy: Maybe this New York City borough — if it were still its own city it would be America’s third-largest — isn’t as hip as it used to be.

There’s Brooklyn, Then There’s Everywhere Else

It’s hard to compare Kings County, as Brooklyn is otherwise known, with anyplace else. Life is quantitatively and qualitatively different. A higher percentage of Brooklynites commute via subway than people living in any comparable municipality. Gentrification has completely transformed neighborhoods as, over the past 20 years, average per capita income practically doubled with knowledge workers and creative types who work in Manhattan filling up rehabbed brownstones and spurring new construction. Brooklyn is majority minority, with black and Hispanic residents accounting for 54% of its 2.5 million residents. The remainder of the community has another distinction: The Jewish population of Brooklyn, 561,000, is larger than that of Jerusalem.

[Caption: Mural inside Dumbo’s One Girl Cookies pastry shop by Aaron Meshon]

Brooklyn evolved into a patchwork of neighborhoods that, to a degree, you can’t ignore, are often defined by dominant ethnic groups. The Chassidic and Orthodox Jews are concentrated in Borough Park and Williamsburg, while a vibrant Chinatown has emerged in Sunset Park. The language on the street in Bushwick is Spanish, and that in Brighton Beach is Russian. Caribbean culture exploded onto the scene in East Flatbush and Bedford-Stuyvesant continues a long tradition as a cradle of African-American culture.

Of course, not all Brooklyn neighborhoods are defined by ethnicity. The creative and high-tech worlds are studiously diverse, so gentrification has blurred a lot of long-rutted lines. Hipsters have staked their homesteads in Red Hook and Park Slope and reclaimed a stretch along the once-sketchy East River waterfront that has come to be called Dumbo, an acronym for Down Under the Manhattan Bridge Overpass.

“How much? Fuhgeddaboudit!”

“Fugheddaboudit” doesn’t literally translate into “Forget about it.” It’s more like an expression of resignation, or a gentle phrases Brooklyn natives might utter when you tell them what the upstairs unit just sold for. But maybe the decades-long rising temperature of the local housing market is beginning to lose steam.“ The average price per square foot of multifamily buildings in 2018 in Brooklyn was $192, down from 2017’s average of $371,” according to TerraCRG. “The average price per unit was approximately $199,000, down 34% from approximately $303,000 in 2017.”

Others, particularly real estate firm Elliman and appraiser Miller Samuel, still see multifamily unit prices rising, but volumes declining. Brick Underground quotes a Miller Samuel statistic that Brooklyn inventories are up an astonishing 75% year-over-year. We’ll see how sustainable high prices are amid high occupancy, and we’ll also see what effect this dynamic has on the buy-versus-rent decision every home hunter considers. But when you see the gentrification going on in Queens, northern New Jersey, and upper Manhattan, you might think you’re in the 2001 version of Brooklyn. It’s possible that this venerable borough might be an overbuilt buying opportunity about to happen.

Brooklyn at a Glance

  • Average monthly rent: $3,125, up 3% year-over-year
  • Median condo sales price: $805,000, down 5.9% year-over-year
  • Market share of new development rentals: 20.3%, up 1.7% year-over-year
  • Condo absorption rate: 3.2 months and rising sharply

Sources: The Elliman Report

Houston is home to a complicated housing market. That’s not surprising, considering that it’s the fourth-largest city in the United States, the largest international cargo hub and has a city limit that’s one-third larger than New York City’s.

But the Houston housing market’s most notable feature is the exceptionally wide range in price between two otherwise comparable homes in different ZIP codes. Houston doesn’t top the list of’s list of markets with the highest housing value disparity — Atlanta holds that distinction — but Houston is by far the biggest town among the top 100 of 50,000+ residents and the only one with a population exceeding 2 million.

This kind of discontinuity in the market is often linked to social factors that perpetuate poverty, because which side of the divided highway your house sits on is often the only determinant of why it’s worth some percentage less than the same house a quarter mile away. And, since property values on your side of the interstate don’t appreciate as quickly as those on the other side, you can’t grow wealth as quickly as your near-neighbors.

But that unfortunate trend might be reversing in Houston for one very good reason: The city’s population is growing quickly, and its housing stock is virtually standing still.

[Caption (Free via Creative Commons providing credit is given): The Unisphere in Flushing Meadows-Corona Park, a vestige of the 1964 World’s Fair. Credit: Beyond My Ken]






Caption: Houston’s skyline viewed from Sabine Park. Credit: Jujutacular

A Tale of one City

What’s good for the energy sector is good for Houston, which has long been tied economically to oil and petrochemical industries. As long as the pipelines are pumping crude down toward the Houston Ship Channel, there will be a pipeline of people moving into town.

And, as of this writing, the oil is flowing. As disruptions strike Venezuela and significant parts of the Middle East, America — that is, Texas — has extended its lead as the world’s largest exporter.

Unlike other cities sitting atop the world’s oil patches, Houston has consistently strived to diversify its industrial base. Its nickname Space City comes from the NASA complex that has come to be known as the Johnson Space Center, which houses the mission control room that has overseen every manned spacecraft the agency ever launched. But Houston also has frothy career opportunities in broadcasting, telecommunications, electronics and of course construction.

The closer you get to the Gulf of Mexico, according to one recent report, the better the economy — and housing market — get. “East, southeast and south Houston apartment properties, especially those in areas near the Texas Gulf Coast, are capturing significant interest as a busy port and petrochemical boom drive apartment demand, according to a 2019 Marcus & Millichap study. “Cap rates in these submarkets have averaged 50 to 100 basis points higher than comparable properties in central Houston, as well as those located in areas to the north and west.”

Although 2018 saw a spike in deliveries of new rental units in Houston, they were in large part replacements for housing stock lost in 2017’s Hurricane Harvey, which is a major reason why supply isn’t currently keeping up with demand. “While a tragic event, the impacts of Hurricane Harvey on Houston’s housing market have resulted in a quick snap rebound for the multifamily sector,” the report continues. “With demand continuing to increase as Houston begins its economic recovery, the multifamily sector should see a return to growth and the construction pipeline.”

According to Texas A&M’s data, the Downtown submarket is experiencing the most growth in multifamily units. Sugar Land/Stafford/Sienna, Montrose/Museum/Midtown and I-10 East/Woodforest/Channelview have all seen several recent grand openings, as has Galleria/Uptown. Meanwhile, Braeswood/ Fondren SW, Baytown and Energy Corridor/CityCentre/ Briar Forest have seen a number of large apartment buildings change hands. Construction toward the end of last year was concentrated in Lake Houston/Kingwood, Heights/Washington Avenue, and Montrose/Museum/Midtown.

Judgment Calls

There’s a lot to recommend Houston, but there’s no wishing away the city’s stark economic divide. It has more than its share of ZIP codes with the highest net capital gains, but it also has more ZIP codes than any other American city with the lowest.

There are other livability issues. It’s one of the most humid cities in the U.S. and endures some of the nation’s hottest summers. Ever since Harvey, floodplain maps are being redrawn and flood insurance is becoming a serious expense for homeowners and housing stock investors. Further, if you venture away from the touristy areas, you might find yourself in one of the most robbery-prone neighborhoods north of the Rio Grande — although crime has been declining incrementally since 2006.

Still, Houston ranks up there with other top-tier American cities when it comes to job growth, rising rents and other signs of a healthy metropolis. But in Houston — even more so than almost any other American city — the key to success in real estate is location, location, location.

Houston at a Glance

  • New construction: 4,100 units (2019 projection), continuing a three-year decline
  • Average effective rent: $1,136/mo, up 3% from 2018
  • Median annual household income: $47,793, up dramatically from $42,439 in 2000
  • Occupancy: 89.7% and rising

Sources: Marcus & Millichap, Texas A&M University,

real estate crowdfundingReal estate crowdfunding tends to be at the forefront of new ways to raise money. While “creative” might not be a compliment in accounting, it is very much so in finance. Joint-stock companies were developed to establish British overseas colonies. The oddly named Cigar Excise Tax Extension of 1960 established the legal framework for real estate investment trusts. And today crowdfunding has attracted more attention in real estate than in any other U.S. economic sector.

So today, real estate investors have an interesting dilemma. There are two different ways that a newly formed LLC or LLP can offer securities without bearing the full regulatory brunt of filing with the Securities and Exchange Commission. Then, once prospective issuers select which way to go, they face a secondary dilemma of which of two flavors to pick within their selected exemption. These exemptions come courtesy of Title 17 of the Code of Federal Regulations, chapter 2, part 230 and are known as Regulation A and Regulation D.

The ‘A+’ team

Reg A was enshrined as part of the Securities Act of 1933, but hardly anyone used it. To make it more appealing, it was expanded as part of the Obama-era Jumpstart Our Business Startups Act and the new version is often called Reg A+. It’s designed to allow small companies to raise funds publicly without the time and expense of a full initial public offering.

Real estate “is the first segment in Reg A+ that is engaging wealthy investors in a meaningful way,” Rod Turner of Manhattan Street Capital wrote in Forbes, due to the kind of money this sector attracts. “Institutional and angel investors are generally cautious about getting into new investment types until thoroughly proven. So in most cases, we do not see much activity from them in Reg A+. At this stage, Reg A+ offerings must appeal deeply to consumers to be viable, because consumers are early adopters and will invest if they love what your company does.” Turner notes that the combination of the tangibility of real estate assets and the dependability of interest or preferred dividend payments are what make these projects most attractive to Reg A+ investors.

Tenacious ‘D’

Regs D is also intended to enable funding of small, growing firms, but it takes a far different tack. While Reg A is all about opening up the sale of securities to the public, Reg D is a path to a private placement.

When discussing Reg D, people generally refer to Rule 506, which has two key paragraphs: (b) and (c). Rule 506(b) allows up to 35 investors who are not accredited but are sophisticated. Accredited investors make at least $200,000 per year or have a net worth of over $1 million, while “sophisticated investor” is a more nebulous term that suggests this person understands finance. This rule forbids the kind of “general solicitation” — that is, advertising — the JOBS Act enables for hedge funds. Meanwhile, Rule 506(c) requires all investors to be accredited but allows general solicitation.

Unlike Reg A, there is no limit on how much a firm can raise and still be in compliance. This goes for either rule, although the commercial real estate market seems to favor 506(c). According to WealthForge, that’s because of the permissibility of advertising, lower document disclosure requirements and a lack of the 30-day lockup required under 506(b).

While We’re on the Subject …

Regs A and D aren’t the only ways to gain exemption from SEC requirements. While you’ll find opportunities for Reg A and D investment here, Sharestates also provides investors with a channel to direct money into specific projects via straightforward crowdfunding. This is permitted under Regulation CF.

Regs A and D at a Glance

Reg A, Tier 1 Reg A, Tier 2 Reg D, 506(b) Reg D, 506(c)
Who can raise money? U.S. or Canadian companies U.S. or Canadian companies Any newly formed company Any newly formed company
Who can buy in? Anyone, although Exchange Act requirements are triggered at the 500-shareholder threshold Anyone, although Exchange Act requirements are triggered at the 500-shareholder threshold Accredited investors and up to 35 non-accredited but sophisticated investors Accredited investors
How much can you raise? Up to $20 million total, up to $5 million per year Up to $50 million total, up to $5 million per year Unlimited Unlimited
Can securities be resold on public markets? Yes Yes No No
Can I market online? Yes Yes No Yes
What must you file? Offering circular, one time, including unaudited financials Offering circular and continual reports, including unaudited financials Form D Form D
Do you still have to comply with state securities laws and federal anti-fraud laws, as well as civil liability? Yes Yes Yes, although state registration is unnecessary Yes, although state registration is unnecessary


Sources: SEC, WealthForge, Upcounsel, Investopedia

The second half of the 20th century was unkind to many American cities, and urban blight struck few places harder than Baltimore, Md. In 1950, with a population of 950,000, it was the sixth-largest city in the United States. Over the course of one human lifetime, it has lost roughly one-third of its residents and now ranks 30th.

And yet Charm City never gave in to the forces that drove it into distress. The population drain slowed to a trickle after 2009, and Baltimore’s real estate community has turned the stark reality of decline into the marketing appeal of affordability.

Cheap sleeps

According to one online real estate brokerage, three of “Redfin’s 2019 Hottest Affordable Neighborhoods” are in Baltimore, a distinction shared by Philadelphia, which Sharestates recently reported on. Specifically, Baltimore’s Parkville, Hamilton and Linthicum sections made the list.

“A lot of people are moving away from the city center into places that feel more like suburbs,” said Redfin agent Rebecca Hall. “They’re moving to areas that don’t feel as dense; they have more of a neighborhood feel and that’s really appealing to homebuyers. Some of these pockets are also known for desirable charter schools.”

Of the three neighborhoods cited by Redfin, only one is in Baltimore City. Parkville is in Baltimore County, which is nothing like the city. The city is a tight cluster of homes and businesses hugging a harbor off the Chesapeake Bay. The county spreads out east, west and especially north from there, all the way to the Pennsylvania border — what used to be called the Mason-Dixon Line. The city has a population density of 7,607 people per square mile, compared with the county’s 1,392. Average household income, $47,350 per year inside the city limits, rises to $50,667 on the other side. Linthicum is in Anne Arundel County, which is as suburban as Baltimore County. The region’s other suburban redoubt, Howard County, is currently experiencing a building boom, especially in its two largest communities, Ellicott City and Columbia.

But Hamilton is an inner-city community of 21,000 people tucked into Baltimore’s northeast corner. According to The Baltimore Sun, the median sale price for a home in Hamilton — which will almost certainly be a row house — is $159,500. That compares to a national average of $222,800 for homes in general, according to Zillow.

Hamilton is just one of roughly 300 neighborhoods in Baltimore which are, divided into nine geographic regions — named after the eight compass points, plus Central. Most locals, though, simply split the city into East Baltimore and West Baltimore, with I-83 as the dividing line.

Baltimore Housing Market is one-of-a-kind

The real estate business in Baltimore is distinct in many ways from the way it is in your city. To start with, you have to be very careful about landmarks. The duplex you’re trying to flip might have been the childhood home of Edgar Allan Poe or Babe Ruth. Baltimore has 65,000 buildings on the National Register of Historic Places. That’s more than any other city. Not just more per capita than any other city, more in absolute terms. Baltimore has more landmarks than Boston, Philadelphia, New York or Washington.

According to Marcus & Millichap, Baltimore is currently being inundated with real estate investment money that is flowing from the U.S. primary markets to take advantage of the city’s affordability, which is a rare find this late in the economic cycle. “Buyers from Los Angeles, New York City, San Francisco and Washington, D.C., are drawn to the area for its comparatively lower entry costs and higher initial yields,” according to a report published in the third quarter of 2018. “A similar property can change hands at a sale price $100,000 to $200,000 less per unit relative to one of those other metros, with going-in cap rates that are 200 basis points higher.” The paper goes on to state that average sales prices in Baltimore appreciated 81% over 10 years, “one of the highest rates in the country.”

As much as poverty and violent crime — and the occasional riot — have generated unfavorable views of Baltimore, City Hall has been successful to some degree in creating jobs and expanding the tax base. Baltimore’s worst days followed the April 4, 1968, assassination of Martin Luther King. Chaos reigned on the streets of many American cities, and nowhere more than Baltimore. It took years to recover, but the creation of the Inner Harbor tourist destination, Oriole Park at Camden Yards and the Ravens’ new home at M&T Bank Stadium have all had a positive impact. So too has the expansion of the Johns Hopkins Hospital, thanks to deep-pocketed donors from around the world. The city’s latest project, the redevelopment of the Port Covington facility, which was shuttered as a railroad terminal in 1988 and as a Walmart in 2016, is expected to cost $5.5 billion — that’s more than Amazon plans to spend on either of its new headquarters in New York or Virginia. The Port Covington project is controversial because it is unclear how a fairly remote retail center is going to benefit the typical Baltimorean, but it demonstrates the city’s willingness to support tax-increment financing on a grand scale.

Ultimately, Baltimore is a city of sharp contrasts. There are gleaming new towers, but there are also blocks with only one house standing. There are great museums and theaters and restaurant rows, and there are tracts of high-crime corridors. A year-over-year doubling of new jobs from 2017 to 2018 and a contemporaneous fourfold increase in household formations are cheery news, but these statistics are only possible in a town that is bouncing off the socioeconomic bottom. The best advice to buying real estate in Baltimore is to be selective. If you can’t view the property yourself, you should leverage an investment sales broker or fractional investment platform with a track record of success and reputation you can trust.

Baltimore at a glance

  • New construction (2018, preliminary): 3,800 units, flat compared with 2017, centered in downtown Baltimore, Baltimore City East and Riverside/Tidal Point.
  • Vacancy rate (2018, preliminary): 5.5%, a 0.2% decrease from 2017, continuing a tightening trend
  • Average effective rent: $1,290/mo, a 2.3% year-over-year increase
  • Median household income: $47,350 in 2016, compared with U.S. median $61,179
  • Proportion of households renting: 52.5% in 2016, rising steeply

Source: Marcus & Millichap, Baltimore SunI am text block.

Sharestates has helped real estate investors and developers seeking funding to find each other in leading cities in Texas and California as well as throughout the densely populated East Coast. But the Sharestates platform also extends into sections of the United States that are just as eager to develop their real estate stock even if they aren’t as crowded. Utah, Minnesota, Alabama, South Carolina and other states that don’t garner as much attention in Real Estate press also attract Sharestates investors’ attention.

And there are plenty of reasons why. Sometimes the best tactic is to go where others aren’t following and where you’re not following anyone else. So let’s turn our attention to how real estate operates in secondary markets as opposed to how it does in big cities.

Defining our terms

Just to be clear: We’re discussing secondary real estate markets, not secondary mortgage markets. In the United States, the primary metropolitan areas for real estate deals include New York City, Washington, D.C. and Boston on the East Coast; Los Angeles and San Francisco on the West Coast; and Chicago in between. Depending on whom you ask, you might add Philadelphia, Miami, Houston and Dallas-Fort Worth to the mix. The definition of primary market is a little loose because it takes into account both total population and population density, with density being a bit more critical. That’s why San Diego and San Antonio aren’t generally considered primary markets despite the reach of their local mass media. By the same token, there are plenty of densely packed pockets of greater Pittsburgh or Louisville, but there just aren’t enough people there to credibly promote them to primary.

One other nuance to the primary designation is the turnover of multi-family units in an area. “Instead of focusing on a single indicator” to make these distinctions, Drew Dolan of Titan Fund Management wrote in,  “we create a matrix of information, including population, job growth, traditional and alternative economic drivers, and cap rate analysis.” Dolan, by the way, eschews the term “secondary” and considers “gateway” more apt. But we’ll stick with convention for now.

Reasons why

The question then is, why? Why pour money into a less populous, less cosmopolitan town when you could be investing the same money in a city that’s always going to draw young, educated strivers and, by extension, the firms that want to hire them?

The first reason is obvious: There’s nothing wrong with the city life in San Diego, San Antonio or Pittsburgh. They’ve got contending professional sports franchises, homegrown industries, international airports and otherwise great standards of living. “Secondary markets are generally mid-sized cities that have begun to experience an uptick in growth—and as a result, they begin to capture people’s attention,” according to Robin Young, a blogger for property management software vendor Buildium. “In the rental market, occupancy rates begin to rise; but because the supply of apartments is relatively unconstrained, rent prices stay affordable for most residents.”

That uptick is the lower boundary that makes a mid-sized city a secondary rather than a tertiary market. Is there anything lower than tertiary? Maybe, but let’s turn the question around: Would you ever invest in it? “The housing market steadily gains strength but remains less competitive than primary markets,” Young notes, “resulting in lower prices for homebuyers and higher returns for investors.”

Another reason, though, for investing in secondary markets as opposed to primary markets is that the metro areas that comprise these categories are subject to change. Detroit was a primary market once. Now you can buy a detached home there with a credit card. Alternately, Dolan points out that what he terms gateway markets “are less volatile in downturns, which makes them particularly attractive late in the investment cycle. Deals in these markets are not overvalued and offer higher returns. They also offer stronger growth potential due to a lower cost of living and less supply.” Data analytics from Trepp back him up. According to their findings published in National Real Estate Investor, secondary markets’ aggregate cap rate stands at 6.8% as opposed to 3.68% in top-tier markets.

Secondary markets worth a second glance (U.S.)

  • Austin: fastest-growing population overall and fastest-growing population under age 35
  • Charlotte: top 5 in population growth overall and for population under age 35
  • Minneapolis: fastest job growth
  • Orlando: fastest growth in number of households
  • Raleigh: top 5 in population growth overall and for population under age 35
  • San Diego: top 5 in median home sale price and home sale price growth
  • San Jose: highest median home sale price

Source: Buildium

If you ask most visitors to the Big Apple about their impression of the Borough of Queens, they probably won’t have one. They landed at Kennedy or LaGuardia, grabbed their luggage, went to the curb and took a cab or Uber into Manhattan. The car windows stayed rolled up. All the visitors might remember of Queens would be the parkway traffic. But now, for a confluence of reasons, Queens isn’t just a place to watch professional-grade tennis. And yet more and more people are buying homes in this much-maligned borough.

If there’s one thing emblematic of Queens — the 1964 World’s Fair relics aside — it’s the borough’s diversity. Wikipedia calls it “the most ethnically diverse urban area in the world.” Hispanic, Asian and white households each comprise 25% or more of the borough, with black and mixed-race households rounding out the census.

[Caption (Free via Creative Commons providing credit is given): The Unisphere in Flushing Meadows-Corona Park, a vestige of the 1964 World’s Fair. Credit: Beyond My Ken]

Queens also features a diversity of occupations. Only 5% of the working population of this bedroom community within North America’s largest city is comprised of government employees. It’s 7.6% in Topeka. Almost a quarter of Queens residents work in healthcare and another 10% in education. Then there’s quite a spread of retail, professional services, construction trades, and financial industry employees. Tellingly, 28% of all locals are self-employed. (Topeka: 8%.) This coincides with great economic diversity as well; along with the newly hip northwestern sections of Astoria or Long Island City, the quiet money enclaves of Forest Hills or Bayside and the middle-class ethnic neighborhoods of Flushing, Queens also has some less advantaged sections, particularly those south and west of the Jamaica transit hub.

As a result, Queens has a vastly diversified portfolio of housing stock. There is roughly the same number of detached homes, duplexes and apartment buildings with 50 or more units. A lot of those multifamily buildings are Class B and C residences, and the market for such accommodations are not going away. But it’s also not why Amazon decided to move half its HQ2 project to Queens. Long Island City is where the world’s richest individual, Jeff Bezos, just committed to spending $2.5 billion on construction. So that’s where we need to focus our attention.

East of the East Side

When I lived in Bellerose, I used to pass through Long Island City on my daily commute to midtown Manhattan. I would muse as the bus passed by One Court Square a.k.a. the Citigroup Building, what’s that skyscraper doing all the way over on this side of the East River? It looks lonely. It doesn’t anymore. The past two decades have turned Long Island City into a bouquet of glass-and-steel towers that is practically a mirror image of Midtown East.

And it’s nowhere near built out yet. Addresses such as 29-37 41st Avenue, 5-40 44th Drive and 29-32 Northern Boulevard will soon be home to hundreds of new residents — many of them with Amazon ID badges, no doubt. Construction is also underway on sites with such florid names as Star Tower, Corte, 5 Pointz and Galerie will also be move-in ready when the Seattle transplants show up.

[Caption: Welcome home, Amazon! Credit: City of New York]

Before you cut that ribbon …

Hyphenated street numbers aren’t the only oddball idiom for Queens real estate. For example, height restrictions are taken very seriously. They exist almost everywhere, of course, but in Queens, there’s an actual reason. You’re not going to get a variance just by showing up at a zoning board meeting because, as stated at the top of this post, Queens has airports — really busy, international airports. Just as most of southern Queens is in the JFK flight path, most of northern Queens — including Long Island City, is in LaGuardia’s. The FAA recently forced the developers of the planned Court Square City View to rein in their ambitions for a 984-foot tower to a more modest 780 feet. Upon completion, it would still be the tallest building in Queens and, considering LaGuardia’s holding pattern is as low as 3,000 feet, that’s a good thing.

Another regulatory dimension to multifamily real estate in Queens is the set-aside for “affordable housing.” These are units the developer must reserve for local residents who can’t afford the full rent. For example, 150 of the 481 apartments planned for the Jackson East & West will be rented out for below-market prices. The goal is to ensure that poorer people who work in rich neighborhoods don’t have to spend all the rest of their waking hours commuting and that households displaced by new construction can stay within their communities. It’s how New York City and many other urban areas have addressed the issues of affordable housing, and renters usually account for the majority of these cities’ residents.

Northwest Queens (including Long Island City) at a glance

  • New construction: 39.3% of market share
  • Inventory trend: down 15.5% from September 2017 to September 2018
  • Average effective rent: $3,095/mo, a steep 3.8% increase from 2017 ($1,359 in Queens as a whole)
  • Median annual household income: $62,207, up dramatically from $42,439 in 2000 (Queens as a whole)
  • The proportion of households renting: 57%

Sources: The Elliman Report,

To view Sharestates open investments in the borough of Queens, click here.

philadelphia rent ratesPhiladelphia has been known over the years as the nation’s first capital, the setting for countless films and most recently home to recent Superbowl champions the Eagles. It’s where the Fresh Prince of Bel Air was born and raised and where Rocky met Adrian. But these days it’s known mostly as the place where the train slows down between New York and Washington. Which is unfortunate because, from a real estate perspective, there’s a lot going on there.

The urban areas two hours to the northeast and two hours to the southwest just got shots in the arm from Amazon’s announced investment in two new headquarters, but the Delaware Valley’s storied and historic metropolis also has a dynamic multifamily market. And it’s about to get even more dynamic because builders have taken their attention off the City of Brotherly Love, meaning that apartments are becoming scarcer and rents are going up. According to Zumper, Philadelphians pay the 16th-highest rents in America.

Centered on Center City

Center City Philadelphia is a comeback tale worthy of a Sylvester Stallone movie. This is certainly the most dynamic part of town, with Independence Hall, Rittenhouse Square, Penn’s Landing, Chinatown, the new Avenue of the Arts and so much more. So there’s little question why it has recently attracted multifamily construction — roughly 40% of all new projects.

Even so, the pace is slowing down measurably as investors widen their gazes to the less densely packed sections of town, as well as the suburbs and nearby cities. In Center City, vacancy rates are actually projected to rise by half a percent year-over-year.

“In Center City Philadelphia, the vacancy rate increased to 10.2% in the second quarter of 2018, a 250-bps increase year-over-year,” according to a Cushman & Wakefield report. “The increase in vacancy is due to the 1,192 new units delivered during the first half of 2018, already eclipsing Center City’s 2017 new construction total of 768 new units.”

Multifamily housing is only part of the story of Center City, of course. It is the commercial district of a major American city, and most of those buildings there contain offices rather than homes. This reflects Philadelphia’s employment profile — one out of five residents work in administrative or management jobs.

Don’t Forget the Neighborhoods

Even as Center City’s multifamily market pauses to catch a breath, Class A construction continues to move forward in Philly’s other neighborhoods. And if there’s one thing the city has no shortage of, it’s defined, identifiable communities — both in the four suburban counties and within the city limits. If you want to see that kind of local pride on display, look no further than the annual Mummers Parade on January 1st.

[Caption: The Pennsport String Band marching in the 2015 Mummers Parade. Credit: Mr. Mummer]

The city is comprised of 11 sections that follow the Delaware River from the northeast to the southwest, with well-to-do Germantown, Manayunk and neighboring communities spiking out to the northwest. Within those confines, Wikipedia identifies 166 separate neighborhoods. That number is probably a bit too generous with the definition, but there’s no doubt that terms such as “South Philly,” “West Philly” or “the Northeast” are insufficient to convey the reality on the ground. Passyunk, Bella Vista and Grays Ferry are all unique markets unto themselves, although they all fall under the moniker of South Philly. The same could be said for Overbrook and Squirrel Hill in West Philly or Bustleton and Millbrook in the Far Northeast.

According to a Marcus & Millichap report, vacancy rates are declining in Northeast Philadelphia. “Availability is tightest in Northeast Philadelphia, the metro’s second-largest apartment submarket,” the report states. “A lack of substantial new completions over the past five years directs demand to existing stock and keeps vacancy low, prompting above-market rent gains in that time.” The report goes on to say that the Northeast — specifically the Fishtown and Brewerytown neighborhoods — are attracting a great deal of interest from investors seeking to retrofit Class B units.

Yet it is long-neglected North Philly that has shown the most improvement in velocity over the past year, particularly in Fairmount and Northern Liberties. According to Marcus & Millichap, “Properties recently sold there tended to be older and smaller than the market average, but they offer a compelling location near the market’s urban core.”

Meantime, rents are advancing most strongly in Southwest Philly where, over the past year, monthly rents jumped 12.6% to $1,550 per unit. Drilling down to the neighborhood level, though, none of the three fastest-rising submarkets are in Southwest Philly, according to Zumper. Point Breeze borders on Southwest, but is actually in South Philly. Mill Creek is in West Philly and Kensington occupies the space between Center City and the near Northeast.

Beyond the City Limits

A unique aspect of Philadelphia is that its metro area doesn’t end at some farmer’s fence somewhere. It bleeds into New York’s and, to a lesser extent, Baltimore’s and Wilmington, Delaware’s. Wilmington, itself a city of almost 75,000 people, is subsumed by the Delaware Valley metropolitan statistical area, which includes a total 6.1 million people through four states. Wilmington, by the way, is one of the largest pockets of new multifamily construction in the entire area.

Even so, Philadelphia has its own designated suburbs — four counties of them on Pennsylvania side of the river. One of them, Montgomery County is attracting as much Class A construction as Wilmington, particularly in its county seat, Norristown, and nearby Upper Merion and Lower Merion townships. In fact, this is where the highest effective rents in the entire market are, topping out at $1,362 per month.

What is missing from this discussion is Camden, N.J. This hardscrabble town directly across the Ben Franklin Bridge from Center City has not been able to catch an economic break in generations. Here’s hoping that, once the low-hanging fruit has been picked from elsewhere in the Philadelphia metro area, some savvy developers take advantage of the bargains to be had in Camden.

Philadelphia Metro Area at a Glance

  • New construction in 2018: 4,600 units (projected), a significant drop from 2017’s 5,200
  • Vacancy rate: 4%, down 40 basis points year-over-year
  • Average effective rent: $1,313/mo, a 2.7% increase from 2017
  • Median annual household income: $72,846 in the metro area, $41,449 in the city, compared with U.S. median $61,179
  • Proportion of households renting: 48%

Sources: Marcus & Millichap,

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If ever a town were invented for the rental property market, it’s Washington, D.C.

Every two years, as we’ve just seen, dozens of high-profile jobs can turn over, along with the considerable support staff that accompanies newly elected officials. And although a sizable community of civil service professionals has amassed around them, these permanent fixtures of the federal government have set down owner-occupied roots along the Beltway, the convergence of interstate highways a half-hour radius from the corridors of power.

Along with other aspects of a sovereign government’s seat comes a pronounced military presence. Service members tend to move roughly every three years and, despite there being a dozen or so military bases in the Washington metro area, very few actually live on base. These are generally people with families, thus, there are more college dorm beds in greater Washington than there are barracks bunks.

This leads us to another reality about Washington: It’s not a company town anymore. It was conceived and developed as a bastion of service to the Republic. According to, public administration accounts for only 16% of employment for those who live in the District, that is, the capital city itself, not including the bedroom communities of NoVa (northern Virginia), MoCo (Montgomery County, Maryland) and PG (Prince George’s County, Maryland). Far more numerous are those employed in technology. Retail and construction jobs, cornerstones of many local economies, account for only 5% each of the District’s workforce. As a result of this tilt toward knowledge work as opposed to service industry work, typical residents of area code 202 make six-digit annual salaries, as opposed to the roughly $75,000 of their suburban counterparts or $61,000 for the nation as a whole.

This combination of high incomes and high turnaround are the blueprint for a frothy market in multifamily residences.

From all corners

A lot has changed in our nation’s capital over the years, including the new neighborhood hotspots.

According to a Marcus & Millichap report, the highest net absorption rate in the District — a proxy for the highest demand — is in the adjacent districts of the Navy Yard and Capitol South. Back in the 1990s, the Navy Yard was beginning a long climb back to respectability as a shopping district and Capitol South was essentially a no-go zone for middle-class university students. Reston, Va., was at the time a cookie-cutter community famous for nothing but being directly under the flight paths for jets landing at Dulles International Airport. Now it’s the home of Verisign, Learning Tree and scads of other tech companies, not to mention Rolls-Royce North America and Google Federal Services. As a result, it is now Washington’s fastest-growing residential suburb.

Meanwhile, Charles County, Maryland has come out of nowhere over the past few months to become a magnet for renters looking for Class B and C accommodations.

Not everything has changed, though. Georgetown is still the most desirable section of the District. Alexandria, Va., remains the bastion of conspicuous wealth inside the Beltway. Rockville, Md., is still managing to grow despite the inevitability that someday it has to be completely built out.

Bracing for Bezos

Anyone who is remotely shocked that the Washington metro area was selected as a site for Amazon’s second headquarters might be interested in a bridge we have to sell. The first tip should’ve come in 2013 when Amazon founder Jeff Bezos bought the Washington Post. But just this past month, after a long search, the National Landing district of Arlington, Va. was identified along with the Long Island City section of Queens, N.Y. as the trillion-dollar Seattle company’s East Coast command posts. Amazon says it will bring to NoVa 25,000 six-digit salaries and a $2.5 billion construction budget. It’ll need every penny to build out the infrastructure necessary to support the move.

Local news station WTOP-FM reports that there won’t be a rush to grab living space as soon as the ribbon is cut. Reporter Mike Murillo says that jobs would take more than a decade to trickle in. Still, real estate investors are likely targeting neighborhoods in Arlington, Alexandria, and McLean starting now.

Washington, D.C., metro area at a glance

  • New construction (projected): 10,200 units, with strongest concentrations in Reston, Va., and central D.C.
  • Vacancy rate (projected): 4.4%, a 0.6% decrease from 2017 when vacancies rose slightly
  • Average effective rent: $1,727/mo, a steep 3.0% increase from 2017; $1,748 in Washington itself, excluding suburbs
  • Median annual household income: $75,506, $101,237 in Washington itself, excluding suburbs, compared with U.S. median $61,179
  • The proportion of households renting: 59% in Washington itself, excluding suburbs

If there’s a center for multifamily real estate developers right now, it’s northern New Jersey.

According to, 10 of the top 21 cities with the highest percentage of renters are in a narrow band of five counties along the west bank of the Hudson River. The range goes from two-thirds of Hoboken citizens to 80% of those who call neighboring Union City home.

Government agencies have a broad definition of “northern New Jersey” which encompasses 13 counties that reach almost all the way south to Atlantic City, including the Philadelphia suburbs from the southwest corner of the expansive region. For our purposes, though, it’s best to focus on that tangle of light rails and all-night bus routes that stretch from New Brunswick in the southeast to Passaic in the north because that’s where the action is: in commuting distance from Manhattan.

Across all classes

The headlines are always about the Class A units coming online. They make for the prettiest pictures, certainly. “Current developments are providing many of the same conveniences that can be found in Manhattan at a monthly savings of $1,000 or more on rent,” according to a recent Marcus & Millichap report. “The impact of this trend is most apparent among luxury products,” driving the vacancy rate for Class A rentals down to 7.5%.

With that said, the same report clarifies that there’s also plenty of action downmarket. “Investors have shown increased interest in Newark over the past four years,” the report continues. This is somewhat surprising because Newark has been the poster child for urban blight in northern New Jersey for generations. According to, you can buy an attached home for under $180,000, and the 2016 median gross rent was barely $1,000/mo. Unemployment is almost four times the national average. From 2009 to 2013, there were a total of nine building permits issued for a city of 280,000 residents. That makes 2014’s 32 permits — the latest figure available — seem positively frothy. One would have to go to Detroit to find a lower ratio of building permits per capita.

So why the sudden investor interest in Newark real estate? Doesn’t the paucity of building permits suggest otherwise? “I don’t think [building permits and investor interest] should correlate, especially in a town like Newark,” Marcus & Millichap’s New Jersey manager Brian Hosey tells Sharestates. The Class B and C investment is in “rehabbing existing stock and converting it. This doesn’t involve new development.”

Swimming upstream

Newark might be the biggest city in northern New Jersey, but it’s hardly the whole story in this economically diverse region. The Garden State’s quiet money is concentrated in Hunterdon County which, although it could technically be considered northern New Jersey, lies out Interstate 80 along the Pennsylvania border. It boasts annual family income in excess of $120,000 on average, and neighboring Morris and Somerset counties aren’t far behind.

But in that concentrated area roughly east of the Garden State Parkway, it’s Bergen County — with such leafy hamlets of Saddle River and Alpine — that has the sole distinction of a six-digit average annual family income. That said, there are any number of prosperous communities nested in less heralded counties. Blue-collar Essex County benefits from having Summit in its tax base. Hudson County boasts transit hub and gentrification success story Hoboken, where you can’t walk a block down Washington Avenue without some reminder you’re in Frank Sinatra’s hometown.

The most improved climate for real estate, according to Hosey, is Newark’s neighbor to the west. “In Irvington, crime is down something like 86 percent,” he says. drills down into the numbers a little more, apparently backing his assertion. The declines in murders and robberies are particularly impressive.

And just as you can’t judge a state by a county or a county by a city, northern New Jersey’s cityscapes merit a closer look. Jersey City — which accounts for roughly one-third of northern New Jersey’s new construction units — is comprised of districts that each have their own flavor. There is, for instance, a world of difference between nouveau rich Historic Downtown and the more commercial Downtown. At the north end of the city — northern New Jersey’s second largest edged out by Newark — is The Heights. And although it is considered perhaps the lowest-income part of town, it really needs to be assessed block by block. West of Summit Avenue has socio-economic issues that the other parts of The Heights might not face. The part of The Heights up the palisade from Hoboken — the area real estate agents and neighborhood associations have taken to calling Riverview — is a place with a lot of new, well-heeled residents.

northern New Jersey
New construction along Palisade Avenue in The Heights of Jersey City

But perhaps the greatest turnaround is just below Essex County, home to the urban renewal of the Port of Elizabeth. “Transaction activity picked up the most year-over-year in the eastern portion of Union County,” the Marcus & Millichap report says. “There, several 20th century-built Class C properties south of Newark Airport changed hands at initial yields around 6 percent.”

Ultimately, northern New Jersey is hard to capture in a small snapshot such as a blog post. “It kind of reminds me of Brooklyn 20 years ago,” Hosey says. “There are lots of pockets of nice houses but, if you go five blocks in the wrong direction, it gets a little sketchy.”

Northern New Jersey at a glance

  • New construction (projected): 9,700 units, more than half in Hudson County
  • Vacancy rate (projected): 4.6%, a 0.3% increase from 2017 due to record-setting new construction
  • Average effective rent: $1,855/mo, a 1.8% increase from 2017
  • Median household income: $77,527, compared with U.S. median $61,179
  • Proportion of households renting: 50%