While a lot of attention has focused on the investment returns of multifamily housing in central business districts, or CBDs, recent analyses show that similar investments in “good suburbs” can prove equally profitable.
Using a database from the National Council of Real Estate Investment Fiduciaries, MPF Research closely examined the 88 percent of apartments owned by institutional investors not located in CBDs. Analysts found that multifamily housing investments in “good suburbs” showed the same returns as units in CBDs over multiple cycles. “Good suburbs” were defined as submarkets in the nation’s top 50 metros that were built in economically healthy areas and could charge monthly rent above the metro's average. They mirrored CBDs in occupancy rates and rent growth.
Like CBDs, “good suburbs” are areas that offer abundant job opportunities, convenience to thoroughfares and rail stations, high-priced housing, higher incomes, and more amenities. In low-rent suburbs in economically weak metro areas, investment returns were the weakest.
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