PT - JOURNAL ARTICLE AU - Mark Fitzgerald AU - Chenchao Zang AU - Will McIntosh TI - Multifamily Development: <em>Can You Always Lease It Up?</em> AID - 10.3905/jpm.2019.1.097 DP - 2019 Aug 21 TA - The Journal of Portfolio Management PG - jpm.2019.1.097 4099 - https://pm-research.com/content/early/2019/08/16/jpm.2019.1.097.short 4100 - https://pm-research.com/content/early/2019/08/16/jpm.2019.1.097.full AB - Large institutional investors continue to view multifamily real estate favorably and raise their allocations to this sector. It is commonly perceived among institutional investors that multifamily—and multifamily development in particular—is a safer investment relative to other property sectors, a common refrain being “you can always lease it up.” In this article, the authors attempt to validate this statement by examining the distribution of lease-up terms from initial lease-up to stabilization for multifamily developments delivered in the United States between 2008 and 2018. In addition, they investigate the impact of the length of the lease-up period on effective rents. Unfortunately, they do not have underwritten projections for each development to compare with subsequent performance as a mechanism to determine an investment’s success. Despite this gap in the available data, the authors generally find support for the conventional wisdom; most developments are able to lease-up in a relatively expedient fashion, no matter the position in the economic/business cycle. However, effective rent change over the lease-up period varies significantly by point of cycle and lease-up term and is an important factor in the investment performance of multifamily developments.TOPIC: Real estateKey Findings• Multifamily development is considered lower-risk by many investors, relative to other property sectors, as you “can always lease it up”.• Our research confirms this – relatively expedient lease-up is achieved across markets, vintage, property size, etc.• Effective rent growth, on the other hand, is more sensitive to these factors, and varies significantly by lease-up term.