S U B M A R K E T R E P O R T

SUBMARKET MAP

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794

794

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SUBMARKET FACTS

SUBMARKET VACANCY RANKING SUBMARKET HIGHLIGHTS

Submarket Metro

* 2006-2011 Forecast

Submarket3Q 07

Vacancy3Q 07

Asking Rents

Population 46,486 1,519,871

Avg. Annual Five-Year Chg.* 0.3% 0.3%

Total Households 26,234 611,551

Avg. Annual Five-Year HH Chg.* 0.9% 0.7%

Median Household Income $41,906 $56,066

Median Age 31.8 37.5

Employment 77,205 941,832

Vacancy Rate (3Q 07) 3.2% 4.0%

Avg. Asking Rent (3Q 07) $1,085 $825

West Waukesha County 2.3% $828

City East 3.2% $1,085

Cudahy/South Milwaukee 3.5% $765

Brookfield 3.6% $950

Greenfield 4.1% $750

Wauwatosa/West Allis 4.3% $765

Northshore/Northwest 5.2% $832

City West 5.8% $685

Robust rental demand, coupled with limited addi-tions to inventory, have provided owners in the CityEast submarket with region-high rents over the lastseveral years. Local owners continue to benefit from theUniversity of Wisconsin-Milwaukee’s student popula-tion, which provides a steady source of rental demand.As such, the submarket remains one of the tightest sub-markets in the metro, with a vacancy rate 80 basispoints below that of the metro average.

The collapse of the subprime market will benefitimpact apartment owners through the remainder of2007, as tighter lending practices will keep many would-be homeowners in the rental market, further expandingthe pool of potential renters. Despite the stabilization ofthe median home price over the last year, homeowner-ship remains out of reach for many of the area’s resi-dents. The submarket’s median income creates a short-fall of nearly $14,000 in order to qualify for home loanequal to the metro median home price of $220,000.

Going forward, investors may want to exercisecaution, as developers are projected to increase deliver-ies of for-sale units, many of which may enter the mar-ket as rentals, thus increasing competition for tenants.The submarket offers turnkey opportunities to buyerswilling to pay premiums on such assets, however,which should provide some long-term appreciation.

© Marcus & Millichap 2007www.MarcusMillichap.com

Fourth Quarter 2007City East Submarket, Milwaukee MSA

Michael L. BrownResearch Associate

Michael L. BrownResearch Associate

© Marcus & Millichap 2007www.MarcusMillichap.com

Apartment Submarket Report ◆ Fourth Quarter 2007

Sources: Marcus & Millichap Research Services, BOC, CoStar Group Inc., RCA, Reis, SRC, TWR

The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.

Uni

ts C

ompl

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Construction Trends

* ForecastSources: Marcus & Millichap Research Services, Reis, TWR

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50

100

150

200

04 05 06 07*03

Average Asking RentVacancy

Asking Rent and Vacancy Trends

Sources: Marcus & Millichap Research Services, Reis* 3Q 2007

Ave

rage

Ask

ing

Rent

per

Mon

th

04 05 06 07*03

Vacancy Rate

$900

$950

$1,000

$1,050

$1,100

2%

4%

6%

8%

10%

Num

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of P

erm

its

(tho

usan

ds)

Permit Trends

0

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8

04 05 06 07*03* ForecastSources: Marcus & Millichap Research Services, CoStar Group, Inc.

Single FamilyMulti Family

City East Submarket, Milwaukee MSA

◆ Restrained by a lack of developable land, multi-family construc-tion is projected to remain absent for the second consecutive year.

◆ The 91-unit City Green Apartments at 1100 N. Cass Street is the onlyproject currently under way. The development, which is scheduledfor completion in the first quarter of 2008, will increase the submar-ket’s inventory by less than 1 percent when delivered.

◆ Developers are concentrating their efforts on for-sale condo units,as nearly 400 units are under construction, and an additional 758units are in the various stages of the planning pipeline.

RENT AND VACANCY TRENDS◆ Submarket vacancy has improved 160 basis points to 3.2 percent

over the last year, compared with a 40 basis point drop in the pre-ceding 12-month period. By year-end 2008, vacancy is anticipatedto increase 110 basis points to 4.3 percent, partially due to agreater number of single-family and for-sale units entering themarket as rentals.

◆ Despite tight market fundamentals, owners have refrained fromboosting rents, opting instead for solid occupancy levels. Over thepast year, asking rents remained relatively flat at $1,085 permonth, and effective rents have increased by less than 1 percent to$1,036 per month.

◆ Asking rents are projected to make modest year-over-year gains,appreciating 1.7 percent to $1,087 per month. Tight fundamentalswill result in a slight reduction in concession offerings. As such,effective rents are expected to climb 2.3 percent year over year to$1,038 per month.

PERMIT TRENDS◆ By year end, single-family permit issuance is forecast to decline

25.6 percent to 1,929 annualized units from 2006, while multi-fam-ily permits are projected to drop 38.4 percent to 1,026 units.

◆ The continued decrease in single- and multi-family permitissuance indicates a long-term strengthening in market funda-mentals for apartment owners; however, the spike in condo con-struction could soften MSA metrics in the near term, as many newcondominium units are projected to enter the rental market.

CONSTRUCTION TRENDS