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The first step in buying real estate is evaluating the market. When evaluating a market for multifamily investments, one particularly important factor to analyze is employment trends. A strong market must have a track record for stable and diverse employment, as well as lower unemployment rates. The reason is simple – a market with strong and steady employment trends attracts more people to live in the area, a higher demand for apartments and other types of multifamily housing, a stronger tenant base, and therefore a more reliable investment. While there are, of course, several other factors that help define a strong market, make no mistake that employment trends is not one to overlook.
As COVID continues to impact our economy, there are certain industries which are less likely to be impacted. According to Newmark Knight Frank’s US Multifamily Capital Markets Report Q1 2020 industries such as education, healthcare, government, and financial are less likely to be grossly impacted, as opposed to hospitality, retail, or entertainment.
Understanding the composition of a market’s employment base is a critical factor to consider before investing in the area. Diversity is key. If there are only one or two major employers in a metroplex, and one employer closes business, the market is heavily impacted and your investment right along with it. If a local economy relies heavily on tourism, a pandemic exactly like COVID or even a natural disaster, can greatly jeopardize the stability of the employment markets. Again, diversity is key.
As of the close of Q1 2020, these are the ten most resilient employment markets in the US:
10. Salt Lake City, UT
· Top 3 Employment Industries:
o Education & Healthcare: 11.9%
o Government: 15.2%
o Financial: 7.2%
· Average 1 BR Rent: $1,235
· Renter Occupied Housing: 48%
9. Minneapolis, MN
· Top 3 Employment Industries:
o Education & Healthcare: 17%
o Government: 11.0%
o Financial: 7.4%
· Average 1 BR Rent: $1,588
· Renter Occupied Housing: 55%
8. Los Angeles, CA
· Top 3 Employment Industries:
o Education & Healthcare: 18.1%
o Government: 12.4%
o Financial: 5.0%
· Average 1 BR Rent: $2,524
· Renter Occupied Housing: 40%
7. Boston, MA
· Top 3 Employment Industries:
o Education & Healthcare: 21.2%
o Government: 10.2%
o Financial: 6.5%
· Average 1 BR Rent: $3,432
· Renter Occupied Housing: 51%
6. San Antonio, TX
· Top 3 Employment Industries:
o Education & Healthcare: 15.5%
o Government: 14.6%
o Financial: 8.2%
· Average 1 BR Rent: $1,049
· Renter Occupied Housing: 35%
5. Baltimore, MD
· Top 3 Employment Industries:
o Education & Healthcare: 19.2%
o Government: 14.8%
o Financial: 5.5%
· Average 1 BR Rent: $1,283
· Renter Occupied Housing: 47%
4. Philadelphia, PA
· Top 3 Employment Industries:
o Education & Healthcare: 22.8%
o Government: 10.1%
o Financial: 6.6%
· Average 1 BR Rent: $1,652
· Renter Occupied Housing: 45%
3. Sacramento, CA
· Top 3 Employment Industries:
o Education & Healthcare: 15.5%
o Government: 20.4%
o Financial: 5.4%
· Average 1 BR Rent: $1,579
· Renter Occupied Housing: 32%
2. New York, NY
· Top 3 Employment Industries:
o Education & Healthcare: 21.2%
o Government: 11.5%
o Financial: 10.6%
· Average 1 BR Rent: $4,208
· Renter Occupied Housing: 57%
1. Washington, D.C.
· Top 3 Employment Industries:
o Education & Healthcare: 15.1%
o Government: 28.0%
o Financial: 3.5%
· Average 1 BR Rent: $2,234
· Renter Occupied Housing: 56%
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About the Author
Ellie is the founder of Blue Lake Capital, a real estate company specialized in multifamily investing throughout the United States. At Blue Lake Capital, Ellie helps investors grow their wealth and achieve double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
Ellie is the host of REady2Scale , a podcast that highlights honest, insightful, and thought-provoking discussions on the multiple approaches for successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital at www.bluelake-capital.com and learn more about Ellie at www.ellieperlman.com.
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