We used a number of variables and Esri Business Analyst Online to conduct research that would allow us to find the “best” location for an apartment complex; “best” is defined as an area with low vacancy rates, high median rents, and other desirable aspects as determined through our research in order to provide a stable, long-term investment. Such variables might include college enrollments and population growth.

Research

Selecting a state

Our goal was to start from the highest level and work our way down towards finding an appropriate location. We first looked at the continental United States:

Figure 1 States meeting vacant housing units, student enrolled in college, rented dwelling, and growth rate criteria (Esri) – Continental USA

The map above (Figure 1) shows the potential states for an apartment complex across the continental United States. The best states to build an apartment complex in the United States are the states shaded in blue. According to the IBISWorld Industry Report for Apartment Rental in the US (NAICS 53111), one of the key economic drivers is rental vacancy rates. Each blue shaded state represents between 244,000 and 2,704,095 students enrolled in college (ACS Pop 3+ Enrolled in College) with vacancy rates between 8.2% and 11% in 2016 and vacancy rates between 8.08% and 11% in 2021. The rented dwellings average for these shaded states are between $4,000 and $10,419 with population growth rate (2016-2021) between 0.9% and 2.32%.

Oregon was selected as one of the potential states to locate the new apartment complex due to proximity. The best county to build an apartment complex in Oregon is Benton County. There are more than 17,000 students enrolled in college there (according to Esri/American Community Survey Pop 3+ Enrolled in College), due to the presence of Oregon State University (OSU). According to OSU’s enrollment reports, there are more than 30,000 students attending OSU in Corvallis. Also, there are relatively few vacant housing units. See the map below for a visualization of this information.

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Figure 2 Counties in Oregon with low vacant housing units and high college enrollment (Esri/ACS)

Selecting a county and city

Figure 3 2016 Scholars and Patriots Tapestry LifeMode Group L14 by County (Esri) – Oregon

The map above (Figure 3) is a BAO screenshot showing a color-coded map of the “L14 Scholars and Patriots” (College and military populations and Renters with roommates in nonfamily households) Tapestry LifeMode Group by county across the state of Oregon. The best county in Oregon to locate an apartment complex targeting college students is Benton County with almost 24% of the households fall into the L14 LifeMode category, so that could support locating the apartment complex there.

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Figure 4 2016 Vacant Housing Units >40 and ACS Population 3+ Enrolled in College >452 in Benton County, Oregon

The best city to locate the apartments complex in Benton County is Corvallis. The top five census tracts surrounding Corvallis each have more than 2,000 students enrolled in college. Also, there are fewer than 176 vacant housing units. This is illustrated above in Figure 4. Areas with high student enrollments and low vacancies tend to result in higher median rental rates per room (Carroll, et. Al, 2012).

Comparison of Corvallis to a similar market (Eugene)

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Figure 5 Comparison of Site A: University of Oregon, Eugene (left) and Site B: Oregon State University, Corvallis (right)

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Variables

Site A:University of

Oregon (30 minutes)

Site B: Oregon State

University (30 minutes)

2016-2021 Population: Annual

Growth Rate (Esri)

1.33%0.66%

2016 Vacant Housing Units (Esri)551463

2010-2014 ACS Population 3+

Enrolled in College

13,81811,610

2010-2014 ACS Median Contract

Rent (Households Paying Cash

Rent)

$712$737

Table 1 Comparison of Site A and Site B. Source: Esri Market Potential

As part of the analysis, we wished to compare the Corvallis market with a similar market. For this, we chose Eugene, which contains a similarly-sized university and is just 40 miles from Corvallis. The maps above (Figure 5) show four different data points that will help compare two sites (30 minutes’ walk time) around University of Oregon in Eugene, OR and Oregon State University in Corvallis, OR. One of the variables is the number of vacant housing units in 2016 which is lower in site B with 463 vacant housing units than site A which is 551 vacant housing units. The population growth rate is higher in Site A with 1.33% compared with site B which is 0.66%.

The map to the left (Figure 6) shows the number of competitors of apartment complex Industry (NAICS 53111) for the area between Corvallis, OR and Eugene, OR. In Corvallis there are 49 competitors which is better than 136 competitors in Eugene, which supports locating the apartment complex in Corvallis.

Figure 6 2016 Esri Business Data (NAICS 53111) - Corvallis - Eugene, Oregon

Factors impacting site selection

Figure 7 2016 Labor Force by Industry (Real Estate) by County (Esri) – Oregon

The map above (Figure 7) is a BAO screenshot showing a color-coded map of the labor force by industry (real estate) by county across the state of Oregon. The highest number of labor force in Oregon is Multnomah County with 10,314. However, the labor force in Benton County, the county that we planning to build the apartment complex in it for the final project, is 637. Finding help to manage the apartment complex should be relatively easy compared to other areas.

Figure 8 Corvallis area 2010-2014 ACS median contract rent (Households paying cash rent) by block groups (Esri)

The map above (Figure 8) shows median contract rent for block groups in Corvallis. Using the median rather than the mean helps to shield the data from outliers and give us a better idea of what the average household is paying for rent. The highest median rents are found near Oregon State University (where there are many students) as well as the northern part of the city, where many professionals and faculty members live. Important to note is that each block group has an associated reliability and margin of error. By comparing median rents to residence types (house, apartment, number of bedrooms, etc.) and property values, we can potentially come up with an idea of how profitable a new development or purchase might be.

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Figure 9 Corvallis block groups with low vacant housing units and high college enrollment (Esri/ACS)

The best place to locate an apartment complex in Corvallis is the area near Oregon State University. Each blue shaded area represents between 575 and 1,800 students enrolled in college (ACS Pop 3+ Enrolled in College) with fewer than 22 vacant housing units. We will need to investigate the availability of vacant land in this area (or the feasibility of demolishing existing structures for new building) as well as other potential factors such as zoning rules.

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Figure 10 Corvallis block groups with low vacant housing units and high college enrollment (Esri/ACS)

The map above (Figure 10) shows the potential areas for an apartment complex in Corvallis, OR. The best place to build an apartment complex in Corvallis is the area near Oregon State University. Each blue shaded area represents between 550 and 1,800 students enrolled in college (ACS Pop 3+ Enrolled in College) with fewer than 41 vacant housing units.

Figure 11 2010 Vacant Housing Units for Rent <32.27% (2010 Esri Vacant Hosuing Units, US Census) and 2016 Owner Occupied Housing Units < 59.28% (2016 Esri Key Demographic Indicators)

The map above (Figure 11) shows areas (in blue) around Oregon State University with a high percentage of vacant housing units and a low percentage of owner-occupied housing units. These two variables are key economic drivers of apartment rentals in the United States (IBISWorld) and we can see that apartments in these areas are most likely in relatively high demand compared to the surrounding areas.

Figure 12 Percentage of adult population in 2016 Dorms to Diplomas (14C) Tapestry Segment (2016 Esri Tapestry Market Segmentation [Adults])

The map above (Figure 12) shows the percentage of adults falling into the Dorms to Diplomas (14C) tapestry segment. The red shaded areas represent block groups around Oregon State University where this tapestry segment makes up 100% of the adult population.

The Dorms to Diplomas (14C) tapestry segment has a low median household income of $17,000 and an average household size of 2.2, as well as 92.1% of households renting rather than owning a home (primarily in multiunit rentals). The average rent for this segment is $990 (Esri).

Table 2 Corvallis area renter priorities (Edwards, et. al, 2012)

Table 2 (above) shows the number of times each priority was mentioned by respondents to a survey of renters in the Corvallis area. Location was the number one priority, followed by price/affordability, and quality/condition/maintenance. A new apartment complex should be in a good location with access to Oregon State University as well as shops, and be well-maintained while keeping a per-bedroom contract rent in line with market rates.

Figure 13 Housing units for sale in vicinity of Oregon State University, May 30, 2017 (realtor.com)

The map above (Figure 15) shows housing units for sale in Corvallis that are located nearby Oregon State University. The unit highlighted in red is an apartment complex that could be purchased in an area that meets our criteria.

Opportunities for creating more cash flow in this property could include improved marketing, better quality units, and mixed-use development. The apartment complex is in a location with a lot of shops and restaurants frequented by students of OSU.

Recommendations

We looked at a number of variables such as vacancy rates and college enrollments to find a location that can support a stable, long-term investment.

Since building sites are few and far between in the desired parts of Corvallis, we looked at housing units for sale. The selected apartment complex is priced around $77,000 per unit, which is very competitive compared to other properties in the area. There are likely deferred maintenance costs that will need to be factored in as well as opportunities for increasing the per-unit rent, such as room configuration (how many bedrooms/bathrooms) and perceived quality of the unit.

Overall, Corvallis is a less competitive market than similar college towns such as Eugene, and can provide value to investors willing to do their research in this small but stable community.

References

Carroll, M., Clark, J., Dennis, L., Dugan, D., Edwards, M., Foley, K., Hauser, D., Lanfear, C., Lewis, M., Moran, K., Olson, J., Osborne, M., Ruiz, L., Waddell, T., Wall, C. (2012), “Corvallis Area Rental Market Analysis”. Oregon State University School of Public Policy, SOC 519 Project Team.