In January, MPF Research put out a report showing that the difference between urban and suburban performance is much narrower than expected. One key finding from the report showed that from December 2011 to December 2014, central business districts (CBDs) generally tracked 200 basis points below high-rent suburbs in terms of renewal conversion.
“There’s a key flaw in the anti-suburban argument, and it’s a simple one: Not all suburbs are the same,” said Jay Parsons, Director of Analytics and Forecasts for MPF Research in a recent press release. “Evaluating all suburbs as one group is like evaluating all football teams mashed together. If you separate winning teams from losing teams, key differences emerge.”
But pinpointing that winning suburb isn’t easy. Here are six things to look for.
1. Follow the jobs:
“This is typically an urban mantra, but most large metros have big suburban employment corridors full of white-collar office jobs,” Parsons says. “In some Sun Belt markets, there can be more jobs in the suburbs than there are downtown.”
2. Follow the infrastructure:
“Look for good transit—either roads or public,” says Ryan Severino, senior economist and director of research of New York-based Reis. “People in apartments often have to commute a bit.”
3. Follow the pack:
“Is the neighborhood adequately served in terms of retail, restaurant, and entertainment options that help make for a desirable place to live?,” asks Greg Willett, MPF Research’s vice president. “Given the urbanization of closer-in suburbs in many metros, these lifestyle offerings can be walkable just as they are in the urban core.”
4. Follow the higher home prices:
“Suburban renters are often more likely to eye single-family when their life stages change,” Parsons says. “Prime apartments are often located in areas where home prices are much higher than the often-cited metro median. Since most folks want to remain in or near their current neighborhoods, the right location could prolong a renter’s stay until they can afford the down payment.”
5. Stay in the right markets:
“Among the 50 largest markets, half recorded net job growth of at least 3.0% over the last six years,” Parsons says. “Suburbs of those markets recorded significantly better apartment fundamentals than suburbs of economically weak markets.”
6. Look for a price point differential between the suburban market and urban core:
“That’s a 50% price difference, so there are lots more renters who make incomes that will allow them to afford the new product in suburban Dallas than in the urban core,” he says.
