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LOIS LANE DUPLEXES1401 Lois Ln • Norfolk, VA 23513
OFFERING MEMORANDUM
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N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E
Confidentiality and DisclaimerThe information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and
should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified
information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due
diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the
future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or
asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any
tenant's plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable;
however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters
and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of
the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap. All rights reserved.
Non-Endorsement NoticeMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name
is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or
commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.
ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY.
PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.
LOIS LANE DUPLEXES
Norfolk, VA
ACT ID Z0600036
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TABLE OF CONTENTS
SECTION
INVESTMENT OVERVIEW 01Offering Summary
Regional Map
Local Map
Aerial Photo
Floor Plans
FINANCIAL ANALYSIS 02Rent Roll Summary
Rent Roll Detail
Operating Statement
Notes
Pricing Detail
Acquisition Financing
Growth Rate Projections
Cash Flow
MARKET COMPARABLES 03
Sales Comparables
Rent Comparables
MARKET OVERVIEW 04Market Analysis
Demographic Analysis
LOIS LANE DUPLEXES
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LOIS LANE DUPLEXES
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INVESTMENT
OVERVIEW
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LOCATION SUMMARY
LO I S L A N E DUPLEXES
N A V A L S T A T I O N NORFOLK J O I N T B A S E
LITTLE CREEK – FORT STORY
E A S T O C E A N V I E WFISHING PIER
M A C A R T H U R C E N T E RSHOPPING MALL
D O W N T O W NNORFOLK
E A S T O C E A N V I E WFISHING PIER
N O R F O L KPREMIUM OUTLETS
D O W N T O W NNORFOLK
V I R G I N I AZOOLOGICAL PARK
LOIS LANE APARTMENTS
LOIS LANE DUPLEXES
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EXECUTIVE SUMMARY
OFFERING SUMMARY
MAJOR EMPLOYERS
EMPLOYER # OF EMPLOYEES
Norfolk Public Schools 6,730
Old Dominion University 4,851
City of Norfolk 3,734
Bank of America 3,070
Childrens Hosp of Kngs Dghters 1,905
Alabama Great Southern RR Co 1,805
Eastern Virginia Medical Schl 1,730
Academic Physicians & Surgeons 1,500
Lockheed Martin 1,276
Norfolk Southern 1,206
Amsec Corporation 1,200
United States Dept of Navy 1,192
DEMOGRAPHICS
1-Miles 3-Miles 5-Miles
2017 Estimate Pop 17,820 106,242 288,938
2017 Census Pop 17,277 103,369 278,616
2017 Estimate HH 6,796 42,511 103,995
2017 Census HH 6,604 41,503 100,125
Median HH Income $47,847 $49,310 $50,115
Per Capita Income $22,586 $25,495 $26,755
Average HH Income $59,211 $63,526 $69,419
UNIT MIX
NUMBEROF UNITS
UNIT TYPEAPPROX.SQUARE FEET
10 Two-Bedroom, One-Bath 850
10 Total 8,500
VITAL DATA
Price $750,000 CURRENT YEAR 1
Down Payment 25% / $187,500 CAP Rate 8.99% 9.73%
Loan Amount $562,500 GRM 7.15 6.69
Loan Type Proposed NewNet Operating Income
$67,441 $72,980
Interest Rate / Amortization 4.75% / 30 YearsNet Cash Flow After Debt Service
17.19% / $32,229 20.14% / $37,769
Price/Unit $75,000 Total Return 21.82% / $40,909 25.00% / $46,870
Price/SF $88.24
Number of Units 10
Rentable Square Feet 8,500
Year Built 1986
Lot Size 0.57 acre(s)
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LOIS LANE DUPLEXES
OFFERING SUMMARY
▪ Five Turn-Key Properties
▪ Cash-on-Cash Return of 15.37%
▪ Stabilized Cap Rate of 9.73%
▪ 2.5 Miles from Norfolk Premium Outlets
▪ 3 Miles from Hampton Roads First Ikea
▪ 6 Miles from Naval Station Norfolk
INVESTMENT HIGHLIGHTS
This is a unique opportunity to acquire five duplexes on the same street, a quiet cul-de-sac located off the Norview Avenue East exit of I-64. The location is ideal as it is
within walking distance to shopping, public transportation, a short distance to neighboring military bases as well as in close proximity to the Norfolk International Airport.
Investors will see value in the acquisition of this portfolio due to the stability of the overall market fueled by a strong military presence. Hampton Roads boasts one of the
lowest vacancy rates in the country. This property offers solid brick construction, a convenient location, dependable income stream, ease of management, as well as the
opportunity to acquire a well maintained portfolio. This portfolio has a history of high occupancy, and would make an excellent addition to any investor's portfolio.
The Hampton Roads economy is heavily anchored to the US Department of Defense, a major employer for the area, houses eight military installations and the second
largest concentration of military personnel in the U.S.. Naval Station Norfolk, the worlds largest naval base, employs upwards of 67,000 people and yields 6,200 acres of the
Hampton Roads commercial acquisition. With the inauguration of republican leadership, military funding and employee benefits are expected to grow in salary increases,
branch wide budget expansion, and more.
Investors are moving out of major metro areas into secondary and tertiary markets, such as the Hampton Roads/ Tidewater area, in search of higher rates of return.
Although a few distressed assets are still available at cap rates above eight percent, more investors are targeting stabilized properties with higher cash flows. Apartments
near large employers, military bases and institutions of higher learning, such as Old Dominion University, provide a steady renter base with cap rates for Class A/B assets
typically in the seven percent area.
INVESTMENT OVERVIEW
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LOIS LANE DUPLEXES
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OFFERING SUMMARY
PROPERTY OVERVIEW
Marcus & Millichap is pleased to present the Offering Memorandum for the Lois Lane duplex portfolio located at
1401,1402,1405,1409 and 1411 Lois Lane, in Norfolk, Virginia. Lois Lane neighbors North Military Highway (0.5
mi), a primary traffic artery through the South Hampton Roads region, and a dominant route through The City of
Norfolk.
The portfolio consists of five (5) two-bedroom and 1-bathroom duplexes. The properties are serviced by I-64 (0.5
mi), known as Hampton Roads Beltway and accessible in less than a mile of the property, provides tenants access
to Norfolk's major commercial corridors and top employment drivers including the US Department of Defense,
Sentara Healthcare Centers, Old Dominion University, BAE systems, Norfolk State University and more. Tenants
with school-age children have access to public schools less than a mile away. The Norfolk International Airport,
which serves the entire Hampton Roads, is located only 1.5 miles from the property.
Downtown Norfolk recently renovated; the Waterside District ($50 Million), Hilton Main Hotel ($150 Million), The
ICON Luxury Apartments ($100 Million), and ADP ($32.5 Million). Automatic Data Processing (ADP) is expected to
bring an estimated 2,000 jobs to the area and is anticipated to produce annual regional earnings of about $158
million as the overall economic impact climbs to almost $465 million, alone. The Norfolk Premium Outlets, a
332,000 sq ft outlet mall located 2.5 miles from the property, opened July 2017 and has 50 retail and restaurant
locations for residents and tourists to experience high-end shopping. Ikea is opening its Norfolk location, the first in
Hampton Roads, in Spring of 2019 and is expected to employ over 250 local residents. The 331,000 sq ft store
located 3 miles from the property will feature nearly 10,000 items, 50 rooms, a kids play area, a food market and a
450-seat restaurant.
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▪ Ample Off-Street Parking
Common Area Amenities
▪ Close Proximity (0.5 mi) to Interstate 64
▪ Close to Public Transportation (HRT Bus)
▪ Ten (10) Two-Bedroom, One-Bathroom Units
Unit Amenities
▪ Central HVAC in All Units
▪ Washer and Dryer Connections
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LOIS LANE DUPLEXES
PROPERTY SUMMARY
OFFERING SUMMARY
PROPOSED FINANCING
First Trust Deed
Loan Amount $562,500
Loan Type Proposed New
Interest Rate 4.75%
Amortization 30 Years
Loan Term 10 Years
Loan to Value 75%
Debt Coverage Ratio 1.92
THE OFFERING
Property Lois Lane Duplexes
Price $750,000
Property Address 1401 Lois Ln, Norfolk, VA
SITE DESCRIPTION
Number of Units 10
Year Built/Renovated 1986
Rentable Square Feet 8,500
Lot Size 0.57 acre(s)
Type of Ownership Fee Simple
Parking Off-Street
Parking Ratio 1:1
Landscaping Flat
UTILITIES
Water Tenant Paid
Electric Tenant Paid
Gas Tenant Paid
CONSTRUCTION
Foundation Concrete Slab
Exterior Brick
Parking Surface Asphalt
Roof Gable
MECHANICAL
HVAC Central
Fire Protection City Code
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REGIONAL MAP
LOIS LANE DUPLEXES
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LOCAL MAP
LOIS LANE DUPLEXES
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AERIAL PHOTO
LOIS LANE DUPLEXES
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Marcus & Millichap closes
more transactions than any other
brokerage firm.
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LOIS LANE DUPLEXES
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PROPERTY PHOTO
FLOOR PLANS
LOIS LANE DUPLEXES
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FLOOR PLANS
LOIS LANE DUPLEXES
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LOIS LANE DUPLEXES
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FINANCIAL
ANALYSIS
FINANCIAL ANALYSIS
LOIS LANE DUPLEXES
RENT ROLL SUMMARY
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FINANCIAL ANALYSIS
LOIS LANE DUPLEXES
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RENT ROLL DETAIL
FINANCIAL ANALYSIS
LOIS LANE DUPLEXES
OPERATING STATEMENT
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FINANCIAL ANALYSIS
LOIS LANE DUPLEXES
NOTES
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FINANCIAL ANALYSIS
LOIS LANE DUPLEXES
PRICING DETAIL
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MARCUS & MILLICHAP CAPITAL CORPORATION
CAPABILITIES
MMCC—our fully integrated, dedicated financing arm—is committed to
providing superior capital market expertise, precisely managed execution, and
unparalleled access to capital sources providing the most competitive rates and
terms.
We leverage our prominent capital market relationships with commercial banks,
life insurance companies, CMBS, private and public debt/equity funds, Fannie
Mae, Freddie Mac and HUD to provide our clients with the greatest range of
financing options.
Our dedicated, knowledgeable experts understand the challenges of financing
and work tirelessly to resolve all potential issues to the benefit of our clients.
National platform
operating
within the firm’s
brokerage offices
$5.63 billion
total national
volume in 2017
Access to more
capital sources
than any other
firm in the
industry
Optimum financing solutions to
enhance value
Our ability to enhance buyer
pool by expanding finance
options
Our ability to enhance
seller control
• Through buyer
qualification support
• Our ability to manage buyers
finance expectations
• Ability to monitor and
manage buyer/lender progress,
insuring timely,
predictable closings
• By relying on a world class
set of debt/equity sources
and presenting a tightly
underwritten credit file
WHY MMCC?
Closed 1,707
debt and equity
financings
in 2017
ACQUISITION FINANCING
LOIS LANE DUPLEXES
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FINANCIAL ANALYSIS
LOIS LANE DUPLEXES
GROWTH RATE PROJECTIONS
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FINANCIAL ANALYSIS
LOIS LANE DUPLEXES
CASH FLOW
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LOIS LANE DUPLEXES
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MARKET
COMPARABLES
LOIS LANE DUPLEXES
SALES COMPARABLES MAP
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LOIS LANE DUPLEXES
(SUBJECT)
912 Druid Cir
1532 Wyoming Ave
1412 Andes Ct
203 Ethel Ave
SALES COMPARABLES
1
2
3
4
PROPERTY NAMELOIS LANE DUPLEXES
SALES COMPARABLES
27
SALES COMPARABLES
Avg. $86,063
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
Lois LaneDuplexes
912 DruidCir
1532Wyoming Ave
1412Andes Ct
203 EthelAve
Average Price Per Unit
SALES COMPARABLES SALES COMPS AVG
PROPERTY NAMELOIS LANE DUPLEXES
SALES COMPARABLES
28
SALES COMPARABLES
Avg. $101.37
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
Lois LaneDuplexes
912 DruidCir
1532Wyoming Ave
1412Andes Ct
203 EthelAve
Average Price Per Square Foot
SALES COMPARABLES SALES COMPS AVG
PROPERTY NAME
MARKETING TEAM
LOIS LANE DUPLEXES
SALES COMPARABLES
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
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SALES COMPARABLES
Units Unit Type
Offering Price: $750,000 10 Two-Bdr, One-Bath
Price/Unit: $75,000
Price/SF: $88.24
CAP Rate: 8.99%
GRM: 7.15
Total No. of Units: 10
Year Built: 1986
Underwriting Criteria
Income $97,556 Expenses $30,115
NOI $67,441 Vacancy ($7,324)
LOIS LANE DUPLEXES1401 Lois Ln, Norfolk, VA, 23513
1
Units Unit Type
Close Of Escrow: 7/11/2017 2 2 Bdr 1 Bath
Sales Price: $188,000
Price/Unit: $94,000
Price/SF: $97.92
Total No. of Units: 2
Year Built: 1969
NOTES
On July 11th, 2017 the duplex at 912 Druid Cir, Norfolk, VA sold for
$188,000. ($94,000/unit)
912 DRUID CIR912 Druid Cir, Norfolk, VA, 23504
Units Unit Type
Close Of Escrow: 4/10/2017 2 2 Bdr 1 Bath
Sales Price: $155,500
Price/Unit: $77,750
Price/SF: $90.94
Total No. of Units: 2
Year Built: 1972
2
NOTES
On April 10th, 2017 the duplex at 1532 Wyoming Ave, Norfolk, VA sold for
$155,500. ($77,750/unit)
1532 WYOMING AVE1532 Wyoming Ave, Norfolk, VA, 23502
PROPERTY NAME
MARKETING TEAM
LOIS LANE DUPLEXES
SALES COMPARABLES
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
30
SALES COMPARABLES
Units Unit Type
Close Of Escrow: 3/30/2018 2 2 Bdr 1 Bath
Sales Price: $155,000
Price/Unit: $77,500
Price/SF: $104.17
Total No. of Units: 2
Year Built: 1981
3
NOTES
On March 30th, 2018 the duplex at 1412 Andes Ct, Norfolk, VA sold for
$155,000. ($77,500/unit)
1412 ANDES CT1412 Andes Ct, Norfolk, VA, 23502
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Units Unit Type
Close Of Escrow: 5/9/2017 2 2 Bdr 1 Bath
Sales Price: $190,000
Price/Unit: $95,000
Price/SF: $112.43
Total No. of Units: 2
Year Built: 1964
NOTES
On May 9th, 2017 the duplex at 203 Ethel Ave, Norfolk, VA sold for
$190,000. ($95,000/unit)
203 ETHEL AVE203 Ethel Ave, Norfolk, VA, 23504
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LOIS LANE DUPLEXES
RENT COMPARABLES MAP
LOIS LANE DUPLEXES
(SUBJECT)
3232 Somme Ave
1222 W 27th St
524 Connecticut Ave
772 50th St4
7
8
9
11
20
12
14
15
16
17
13
18
10
4
1
2
3
31
PROPERTY NAMELOIS LANE DUPLEXES
RENT COMPARABLES
32
AVERAGE RENT - MULTIFAMILY
Avg. $855
$0
$90
$180
$270
$360
$450
$540
$630
$720
$810
$900
Lois LaneDuplexes
3232Somme Ave
1222W 27th St
524Connecticut
Ave
772 50th St
2 Bedroom
PROPERTY NAME
MARKETING TEAM
LOIS LANE DUPLEXES
RENT COMPARABLES
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
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YEAR BUILT: 1986
rentpropertyname1rentpropertyaddress1
Unit Type Units SF Rent Rent/SF
Two-Bdr, One-Bath
10 850 $874 $1.03
Total/Avg. 10 850 $874 $1.03
LOIS LANE DUPLEXES1401 Lois Ln, Norfolk, VA, 23513
YEAR BUILT: 1966
1
Unit Type Units SF Rent Rent/SF
2 Bdr 1 Bath 2 735 $800 $1.09
Total/Avg. 2 735 $800 $1.09
3232 SOMME AVE3232 Somme Ave, Norfolk, VA, 23509
2
YEAR BUILT: 1920
Unit Type Units SF Rent Rent/SF
2 Bdr 1 Bath 2 924 $875 $0.95
Total/Avg. 2 924 $875 $0.95
1222 W 27TH ST1222 W 27th St, Norfolk, VA, 23508
PROPERTY NAME
MARKETING TEAM
LOIS LANE DUPLEXES
RENT COMPARABLES
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
rentpropertyname1
rentpropertyaddress1
34
YEAR BUILT: 1920
3
Unit Type Units SF Rent Rent/SF
2 Bdr 1 Bath 2 900 $850 $0.94
Total/Avg. 2 900 $850 $0.94
524 CONNECTICUT AVE524 Connecticut Ave, Norfolk, VA, 23508
YEAR BUILT: 1935
4
Unit Type Units SF Rent Rent/SF
2 Bdr 1 Bath 2 1,125 $895 $0.80
Total/Avg. 2 1,125 $895 $0.80
772 50TH ST772 50th St, Norfolk, VA, 23508
LOIS LANE DUPLEXES
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MARKET
OVERVIEW
MARKET OVERVIEW
HAMPTON ROADSOVERVIEW
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Hampton Roads, also known as the Virginia Beach-Norfolk-Newport
News metropolitan area, is recognized for its miles of waterfronts and
beaches, military presence, harbors, shipyards and coal piers. The
metro is composed of James, Gloucester, Mathews, York and Isle of
Wight counties in Virginia, and Gates and Currituck counties in North
Carolina, as well as the cities of Virginia Beach, Williamsburg,
Chesapeake, Norfolk, Newport News, Hampton, Poquoson, Portsmouth
and Suffolk. Approximately 1.8 million people reside in the market,
roughly 460,000 of whom are in Virginia Beach, the market’s most
populous city.
MARKET OVERVIEW
METRO HIGHLIGHTS
MILITARY CONCENTRATION
It has the second-largest concentration of military
personnel in the U.S. with eight military installations
in the market providing a large portion of jobs.
HOSPITALITY AND TOURISM
Visitors are drawn to Williamsburg and the multiple
beaches and resorts in the area that have activities for
everyone.
SKILLED LABOR POOL
Technical knowledge learned in the military helps to
provide a highly educated and skilled labor force.
LOIS LANE DUPLEXES
MARKET OVERVIEW
ECONOMY▪ The local economy is best known for tourism and defense, but advanced manufacturing,
maritime and logistics, cybersecurity and biomedical technology are growing sectors.
▪ Fortune 500 headquarters include Norfolk Southern, Dollar Tree and Huntington Ingalls
Industries. Other companies headquartered locally include Gold Key PHR, Amerigroup, Anthem
and Stihl.
▪ The large military presence includes Naval Station Norfolk, Joint Expeditionary Base Little
Creek-Fort Story, Naval Air Station Oceana Dam Neck Annex, Joint Base Langley-Eustis Naval
Shipyard and Coast Guard Base-Portsmouth.
SHARE OF 2017 TOTAL EMPLOYMENT
MAJOR AREA EMPLOYERS
Huntington Ingalls Industries Inc.
Sentara Healthcare
Naval Medical Center Portsmouth
Norfolk Naval Shipyard
Riverside Health System
The Colonial Williamsburg Foundation
Joint Expeditionary Base Little Creek-Ft. Story
GEICO General Insurance Co.
Naval Air Station Oceana-Dam Neck
Nasa Langley Research University* Forecast
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MANUFACTURING
7%GOVERNMENT
HEALTH SERVICES
EDUCATION AND
+OTHER SERVICES
5%
LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES
17%
AND UTILITIES
TRADE, TRANSPORTATION CONSTRUCTION
PROFESSIONAL AND
BUSINESS SERVICES
1%INFORMATION
14%
5%
21% 11% 5%
15%
LOIS LANE DUPLEXES
MARKET OVERVIEW
DEMOGRAPHICS
SPORTS
EDUCATION
ARTS & ENTERTAINMENT
▪ The metro is projected to expand by 58,200 people through 2022, resulting in the
formation of 28,200 households during this period.
▪ Median home prices that are above the U.S. level contribute to a homeownership rate
of 61 percent, which is slightly below the national rate of 64 percent.
▪ Approximately 29 percent of residents age 25 and older hold a bachelor’s degree; of
those residents, 11 percent also have earned a graduate or professional degree.
Known for its beaches and water recreation, the region has much to offer by way of outdoor
activities and entertainment. Busch Gardens Williamsburg, Colonial Williamsburg, the USS
Wisconsin and the Virginia Aquarium are prominent attractions that draw tourist and locals
alike. Cultural activities are available at the Virginia Museum of Contemporary Art, Virginia
Aquarium & Marine Science Center and Virginia Beach Amphitheater. Sports teams play at
the Virginia Beach Sportsplex, Harbor Park and Scope Arena, while the Kingsmill
Championship is held here as a part of the LPGA Tour. Universities include the College of
William & Mary, Old Dominion University, Virginia Wesleyan College, Hampton University
and Norfolk State University.
QUALITY OF LIFE
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2017 Population by Age
0-4 YEARS
6%5-19 YEARS
19%20-24 YEARS
9%25-44 YEARS
28%45-64 YEARS
25%65+ YEARS
13%
* Forecast
Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody’s
Analytics; U.S. Census Bureau
LOIS LANE DUPLEXES
35.5
2017MEDIAN AGE:
U.S. Median:
37.8
$60,500
2017 MEDIAN HOUSEHOLD INCOME:
U.S. Median:
$56,300
1.8M
2017POPULATION:
Growth2017-2022*:
3.3%
658K
2017HOUSEHOLDS:
4.3%
Growth2017-2022*:
MARKET OVERVIEW
LOIS LANE DUPLEXES
39
* 2007-2017 Average annualized appreciations in price per unit
Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics
2018 PRICING & VALUATION TRENDS
Yield Range Offers Compelling Options for Investors; Most Metros Demonstrate Strong Appreciation Rates
MARKET OVERVIEW
LOIS LANE DUPLEXES
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** Price per unit for apartment properties $1 million and greater
Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics
AVERAGE PRICE PER UNIT RANGE**
(Alphabetical order within each segment)
MARKET OVERVIEW
LOIS LANE DUPLEXES
41
2018 NATIONAL MULTIFAMILY INDEX
U.S. Multifamily Index
Coastal Markets Top National Multifamily Index;
Several Unique Markets Climb Ranks
Trading places. Seattle-Tacoma leads this year’s Index after moving up one notch, driven by robust
employment in the tech sector and soaring home prices that keep rental demand ahead of elevated deliveries.
The metro outperforms last year’s leader, Los Angeles (#2), which slid one spot. Midwest metro Minneapolis-
St. Paul (#3) rose one notch as its diverse economy generates steady job growth and robust rental demand,
maintaining one of the lowest vacancy rates among larger U.S. markets. San Diego (#4) jumped five spots as
deliveries slump while household formation proliferates, resulting in sizable rent growth. Portland (#5) inches up
a slot to round out the top five markets. East Coast markets fill the next two positions: Boston (#6) moves down
three slots as rent growth slows while vacancy ticks up, and New York City (#7) rises three places as stout
renter demand holds vacancy tight.
Index reshuffles with big moves. Sacramento (#8) posted the largest increase in the Index, vaulting 12
positions to lead a string of California markets that fill the next five slots. Robust rent growth and low vacancy
pushed the market up in the ranking. Other double-digit movers were Orlando (#17) and Detroit (#28), which
each leaped 10 places. Employment gains and in-migration are generating the need for apartments in Orlando,
maintaining ample rent advancement. In Detroit, steady employment and a slow construction pipeline keep
demand above supply, allowing rents to flourish. The most significant declines were registered in Austin,
Nashville and Baltimore. Austin (#31) tumbled nine spaces as elevated deliveries overwhelm demand slowing
rent growth. Nashville (#35) and Baltimore (#45) each moved down six steps as demand has yet to absorb
multiple years of elevated inventory gains. Although Kansas City (#46) retains the bottom slot, there is greater
change in the lower half of the NMI as more Midwest markets rise.
MARKET OVERVIEW
LOIS LANE DUPLEXES
42
Growth Cycle Invigorated by Confidence;
Tax Laws Could Transform Housing
U.S. ECONOMY
Tight labor market restrains hiring as confidence surges. The steady economic tailwind benefiting
apartment performance is poised to carry through 2018 as a range of positive factors align to support growth.
Consumer confidence recently reached its highest point since 2000 while small-business sentiment attained a
31-year record level, both reinforcing indications that consumption and hiring will be strong. The total number of
job openings has hovered in the low-6 million range through much of 2017, illustrating that companies have
considerable staffing needs, but with unemployment entrenched near 4 percent, companies will continue to face
challenges in filling available positions. These tight labor conditions should place additional upward pressure on
wages, potentially boosting inflationary pressure in the coming year. The strong employment market, rising
wages and elevated confidence levels could unlock accelerated household formation, particularly by young
adults. Last year, the number of young adults living with their parents ticked lower for the first time since the
recession, signaling that these late bloomers may finally be considering a more independent lifestyle.
Housing preferences may change under new tax laws. The new tax laws could play a significant role in
shaping both the economy and housing demand in 2018. Reduced taxes will be a windfall for corporations,
potentially sparking invigorated investment into infrastructure. The rise in CEO confidence over the last year
already boosted companies’ investment by more than 6 percent, accelerating economic growth. However, the
tax incentive-based stimulus will likely offer only a modest bump to GDP in 2018 because corporate investment
comprises just 12 percent of economic output. One factor that could weigh on economic expansion under the
new tax laws is the housing sector, which added just 3 percent to the economy last year, about two-thirds of
normal levels. The increased standard deduction and restrictions on housing-related deductions will reduce
some of the economic incentive to purchase a home, further sapping the strength of the housing sector.
Nonetheless, the increased standard deduction could benefit apartment investors, encouraging renters to stay
in apartments longer and reducing the loss of tenants to homeownership.
* Forecast
** Through 3Q
MARKET OVERVIEW
LOIS LANE DUPLEXES
43
2018 National Economic Outlook
U.S. ECONOMY
▪ Labor force shortage weighs on job creation. The economy has added jobs every month for more than
seven years, the longest continuous period of job creation on record. The trend will continue in 2018, but the
pace of job additions will moderate, falling below 2 million for the year as the low unemployment rate
restricts the pool of prospective employees.
▪ Wage growth poised to accelerate. Average wage growth has been creeping higher in the post-recession
era, with compensation gains in construction, professional services and the hospitality sectors outpacing the
broader trend. The tight labor market will continue to pressure wage growth, potentially sparking inflation in
the process.
▪ Tax laws could invigorate apartment demand. Since 2011 household formations have outpaced total
housing construction, a key ingredient in the tightening of apartment vacancies. The new tax laws could
cause homebuilders to reduce construction while shifting a portion of the housing demand from
homeownership to rentals, and a rental housing shortage could ensue. If this behavior change occurs in
conjunction with additional young adults moving out of their own, apartment demand could dramatically
outpace completions.
* Forecast
** Through 3Q
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Demand Outlook Sturdy as Pace
Of Construction Begins to Retreat
U.S. APARTMENT OVERVIEW
* Forecast
Investors wary of apartment construction. The wave of apartment completions entering the market in recent
years has permeated the investor psyche, raising concerns of overdevelopment and escalating vacancy rates,
but numerous demand drivers have held this risk in check. Steady job creation, positive demographics, above-
trend household formation and elevated single-family home prices have converged to counterbalance the
addition of 1.37 million apartments over the last five years, at least on a macro level. Though a small number of
markets have faced oversupply risk, the affected areas tend to be concentrated pockets, with upper-echelon
units facing the greatest competition. For traditional workforce housing, Class B and C apartments, the risks
stemming from overdevelopment have been nominal, and in most metros, even the Class A tranche has
demonstrated sturdy performance. In the coming year, rising development costs, tighter construction financing
and mounting caution levels will curb the pace of additions from the 380,000 units delivered in 2017 to
approximately 335,000 apartments. However, the list of markets facing risk from new completions will stretch
beyond the dozen metros that builders have concentrated on thus far. This will heighten competition, requiring
investors to maintain an increasingly tactical perspective integrating vigilant market scrutiny and strong property
management.
Competitive nuances increasingly granular. Although the pace of apartment completions will moderate in
2018, additions will still likely outpace absorption. This imbalance will most substantively affect areas where
development has been focused, such as the urban core where vacancy rates have risen above suburban rates
for the first time on record. Nationally, Class A vacancy rates have advanced to 6.3 percent in 2017 and will
continue their climb to the 6.8 percent range over the next year. Vacancy rates for Class B and C assets will
rise less significantly in 2018, pushing to 5.0 percent and 4.7 percent, respectively. Although vacancy levels are
rising, three-fourths of the major metros have rates below their 15-year average. Still, the magnitude of new
completions coming to market and the high asking rents these new units command will spark increased
competition for tenants, generating a more liberal use of concessions in 2018 as landlords attempt to entice
move-up tenants.
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2018 National Apartment Outlook
U.S. APARTMENT OVERVIEW
** Estimate
▪ Rent growth tapers as concession use edges higher. Average rent growth will taper to 3.1 percent in
2018 as concessions become more prevalent, particularly in Class A properties. Rent gains in the Class C
space, which were particularly strong last year, will face greater challenges as affordability restrains
demand. Although job growth has been steady for seven years, wage growth has been relatively weak,
particularly for low-skilled labor.
▪ Congress may nudge apartment demand. The new tax laws could reinforce apartment living as the larger
standard deduction reduces the economic incentive of homeownership. Previous tax rules encouraged
homeownership with itemized deductions for property taxes and mortgage interest that often surpassed the
standard deduction. These advantages have largely been eliminated, particularly for first-time buyers.
▪ Are millennials finally moving out on their own? The 80 million-strong millennial age cohort, now
pushing into their late 20s, may finally be showing independence. Since the recession, the percentage of
young adults living with their parents increased dramatically, but last year that trend reversed. Should the
share of young adults living with family recede toward the long-term average, an additional 3 million young
adults would need housing.
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Fed Normalization Portends Rising Interest Rates;
Capital Availability for Apartments Elevated
U.S. CAPITAL MARKETS
* Through December 12
** Through December 6
Fed cautiously pursues tighter policies. Investors have largely adapted to the modestly higher interest rate
environment, and most anticipate additional increases in 2018 as the Federal Reserve normalizes both its
policies and its balance sheet. The Fed is widely expected to continue raising its overnight rate through 2018 as
it tries to restrain potential inflation risk and create some dry powder to combat future recessions. The Fed will,
however, be cautious about pushing short-term rates into the long-term rates, which would create an inverted
yield curve. The spread between the two-year Treasury rate and the 10-year Treasury rate has tightened
significantly, and if the Fed is too aggressive in its policies, the short-term interest rates could climb above long-
term rates. This inversion is a commonly watched leading indicator of an impending recession. The new
chairman of the Fed, Jerome Powell, will likely make few changes to the trajectory of Fed policies, and he is
widely expected to continue the reduction of the Fed balance sheet. Powell may consider accelerating the
balance sheet reduction to ensure long-term rates move higher. That said, Powell is widely perceived to be a
dovish leader who will advance rates cautiously.
Readily available debt backed by sound underwriting. Debt availability for apartment assets remains
abundant, with a wide range of lenders catering to the sector. Apartment construction financing has
experienced some tightening, a generally favorable trend for most investors. Fannie Mae and Freddie Mac will
continue to serve a significant portion of the multifamily financing, with local and regional banks targeting
smaller transactions and insurance companies handling larger deals with low-leverage needs. In general,
lenders have been loosening credit standards on commercial real estate lending, but underwriting standards
remain conservative with loan-to-value ratios for apartments in the relatively conservative 66 percent range. An
important consideration going forward, however, will be investors’ appetite for acquisitions as the yield spread
between interest rates and cap rates tightens.
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47
2018 Capital Markets Outlook
U.S. CAPITAL MARKETS
▪ Yield spread tightens amid rising interest rates. Average apartment cap rates have remained relatively
stable in the low-5 percent range for the last 18 months, with a yield spread above the 10-year Treasury of
about 280 basis points. Many investors believe cap rates will rise in tandem with interest rates, but this has
not been the case historically. Given the strong performance of the apartment sector, it’s more likely the
yield spread will compress, reducing the positive leverage investors have enjoyed in the post-recession era.
▪ Inflation restrained but could emerge. Inflation has been nominal throughout the current growth cycle, but
pressure could mount as the tight labor market spurs rising wages. Elevated wages and accelerating
household wealth could boost consumption, creating additional economic growth and inflation. The Fed has
become increasingly proactive in its efforts to head off inflationary pressure, but the stimulative effects of tax
cuts could overpower the Fed’s efforts.
▪ Policies likely to strengthen dollar and could pose new risks. One wild card that could create an
economic disruption is the strengthening dollar. The economic stimulus created by tax cuts together with
tightening Fed monetary policy place upward pressure on the value of the dollar relative to foreign
currencies. This could restrain foreign investment in U.S. commercial real estate, but it could also weaken
exports and make it more difficult for other countries to pay their dollar-denominated debt, which in turn
weakens global economic growth.
* Through December 12
Estimate
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Apartment Investors Recalibrate Strategies;
Broaden Criteria to Capture Upside Opportunities
U.S. INVESTMENT OUTLOOK
* Through 3Q
** Trailing 12 months through 3Q
Appreciation flattens as buyers recalibrate expectations. The maturing apartment investment climate has
continued its migration from aggressive growth to a more stable but still positive trend. Investors have reaped
strong returns in the post-recession era through significant gains in fundamentals and pricing, but the growth
trajectory has flattened as the market has normalized. The pace of apartment rental income growth has moved
back toward its mid-3 percent long-term average and investor caution has flattened cap rates, moderating
appreciation. With much of the gains created by the post-recession recovery absorbed and most of the value-
add opportunity already extracted, it has been increasingly difficult for investors to find opportunities with
substantive upside potential. At the same time, apartment construction has finally brought macro-level housing
supply and demand back toward equilibrium, restraining upside potential in markets with sizable deliveries.
These challenges have been compounded by a widened bid/ask gap, with many would-be apartment sellers
retaining a highly optimistic perception of their asset’s value. It will take time for investor expectations to realign,
but buyers and sellers are discovering a flattening appreciation trajectory. Still, a range of opportunities remain.
Investors broaden criteria as they search for yield upside. Investors are recalibrating strategies, broadening
their search and sharpening their efforts to find investment options with upside potential. They have expanded
criteria to include a variety of Class B and Class C assets, outer-ring suburban locations, and properties in
secondary or tertiary markets. The yield premium offered by these types of assets has drawn an increasing
amount of multifamily capital. In the last year, nearly half of the dollar volume invested in apartment properties
over $1 million went to secondary and tertiary markets, up from 42 percent of the capital in 2010. This influx of
activity has caused cap rates in tertiary markets to fall from the high-8 percent range in 2010 to their current
average near 6 percent. During the same period, national cap rates of Class B/C apartment properties have
fallen by 200 basis points to the mid-5 percent range. Considering the low cost of capital, these yields have
remained attractive to investors with longer-term hold plans.
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2018 Investment Outlook
U.S. INVESTMENT OUTLOOK
▪ New tax laws could shift investor behavior. Additional clarity on taxes should alleviate some of the
uncertainty that held back investor activity over the last year while helping to mitigate the expectation gap
between buyers and sellers. Reduced tax rates on pass-through entities could spark some repositioning
efforts, bringing additional assets to market and supporting market liquidity.
▪ Tighter monetary policy could narrow yield spreads. Prospects of a rising interest rate environment
could weigh on buyer activity as the yield spread tightens. Cap rates have held relatively stable over the last
two years, and the sturdy outlook for apartment fundamentals is unlikely to change substantively in the
coming year. As a result, investors’ pursuit of yield will likely push activity toward assets and markets that
have traditionally offered higher cap rates.
▪ Transaction activity retreats from peak levels. Apartment sales continued to migrate toward more normal
levels last year as investors’ search for upside and value-add opportunities delivered fewer candidates.
Markets with a limited construction pipeline but with respectable employment and household formation
growth will see accelerated activity, while markets facing an influx of development could see moderating
investor interest.
* Through 3Q
** Trailing 12 months through 3Q
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* Forecast
REVENUE TRENDS
Five-Year Apartment Income Growth by Metro
Percent Change 2013-2018*
FIVE-YEAR TREND:
Outperforming Through
Development Cycle
2013-2018*
▪ U.S. creates 11.8 million jobs over five years
▪ Developers add 1.5 million new apartments
▪ Absorption totals 1.4 million apartments
▪ U.S. vacancy rate to match 2013 at 5.0 percent
▪ U.S. average rent rises 23.2 percent
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Sources: Marcus & Millichap Research Services; MPF Research
2018 NATIONAL INVENTORY TREND
Five-Year Development Wave Transforms Rental Landscape
Inventory Growth 2013-2018
Inventory Change by Market
2013 to 2018
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Sources: Marcus & Millichap Research Services; MPF Research
2018 NATIONAL INVENTORY TREND
Largest Growth Five-Year Inventory Change Five-Year Rent Growth
Austin 23.6% 22%
Charlotte 22.9% 30%
Nashville 21.7% 31%
Salt Lake City 20.9% 31%
Raleigh 19.5% 27%
San Antonio 18.7% 20%
Denver 17.9% 41%
Seattle-Tacoma 15.9% 41%
Orlando 15.3% 35%
Dallas/Fort Worth 15.3% 30%
U.S. 9.8% 23%
Top 10 Markets by Inventory Change
Smallest Growth Five-Year Inventory Change Five-Year Rent Growth
Cincinnati 6.6% 24%
Chicago 6.2% 21%
Oakland 5.8% 40%
Riverside-San Bernardino 5.6% 36%
St. Louis 5.5% 14%
Los Angeles 5.4% 31%
New York City 4.6% 15%
Cleveland 4.6% 15%
Sacramento 3.8% 48%
Detroit 2.9% 25%
PROPERTY NAME
MARKETING TEAM
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DEMOGRAPHICS
Source: © 2017 Experian
Created on May 2018
POPULATION 1 Miles 3 Miles 5 Miles
▪ 2022 Projection
Total Population 18,260 105,570 289,188
▪ 2017 Estimate
Total Population 17,820 106,242 288,938
▪ 2010 Census
Total Population 17,277 103,369 278,616
▪ 2000 Census
Total Population 18,006 106,184 258,954
▪ Daytime Population
2017 Estimate 14,497 108,120 363,495
HOUSEHOLDS 1 Miles 3 Miles 5 Miles
▪ 2022 Projection
Total Households 7,064 42,660 105,277
▪ 2017 Estimate
Total Households 6,796 42,511 103,995
Average (Mean) Household Size 2.62 2.49 2.44
▪ 2010 Census
Total Households 6,604 41,503 100,125
▪ 2000 Census
Total Households 6,835 41,921 98,162
Growth 2015-2020 3.94% 0.35% 1.23%
HOUSING UNITS 1 Miles 3 Miles 5 Miles
▪ Occupied Units
2022 Projection 7,064 42,660 105,277
2017 Estimate 7,341 46,391 113,330
Owner Occupied 3,544 21,669 48,568
Renter Occupied 3,252 20,843 55,427
Vacant 546 3,880 9,335
▪ Persons In Units
2017 Estimate Total Occupied Units 6,796 42,511 103,995
1 Person Units 25.77% 28.34% 29.76%
2 Person Units 30.97% 32.27% 32.16%
3 Person Units 18.97% 17.81% 17.21%
4 Person Units 12.99% 12.05% 11.90%
5 Person Units 6.46% 5.69% 5.49%
6+ Person Units 4.86% 3.84% 3.47%
HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles
▪ 2017 Estimate
$200,000 or More 1.53% 2.24% 3.42%
$150,000 - $199,000 2.56% 2.71% 3.47%
$100,000 - $149,000 8.99% 9.84% 10.62%
$75,000 - $99,999 11.46% 12.12% 12.07%
$50,000 - $74,999 22.89% 22.31% 20.55%
$35,000 - $49,999 17.71% 16.56% 15.12%
$25,000 - $34,999 10.56% 11.07% 10.54%
$15,000 - $24,999 11.05% 10.61% 10.54%
Under $15,000 13.26% 12.55% 13.69%
Average Household Income $59,211 $63,526 $69,419
Median Household Income $47,847 $49,310 $50,115
Per Capita Income $22,586 $25,495 $26,755
POPULATION PROFILE 1 Miles 3 Miles 5 Miles
▪ Population By Age
2017 Estimate Total Population 17,820 106,242 288,938
Under 20 25.43% 24.26% 23.79%
20 to 34 Years 25.38% 25.80% 33.33%
35 to 39 Years 6.10% 6.46% 6.31%
40 to 49 Years 11.50% 11.51% 9.92%
50 to 64 Years 19.26% 19.54% 15.99%
Age 65+ 12.33% 12.44% 10.66%
Median Age 34.44 34.96 30.65
▪ Population 25+ by Education Level
2017 Estimate Population Age 25+ 11,871 72,188 179,975
Elementary (0-8) 2.62% 2.52% 2.25%
Some High School (9-11) 11.08% 10.70% 9.09%
High School Graduate (12) 31.37% 30.63% 27.22%
Some College (13-15) 29.02% 26.59% 25.93%
Associate Degree Only 7.98% 8.19% 7.70%
Bachelors Degree Only 11.13% 12.96% 16.19%
Graduate Degree 5.36% 7.00% 10.53%
▪ Population by Gender
2017 Estimate Total Population 17,820 106,242 288,938
Male Population 47.96% 48.84% 51.77%
Female Population 52.04% 51.16% 48.23%
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Income
In 2017, the median household income for your selected geography is
$47,847, compare this to the US average which is currently $56,286.
The median household income for your area has changed by 41.63%
since 2000. It is estimated that the median household income in your
area will be $58,162 five years from now, which represents a change
of 21.56% from the current year.
The current year per capita income in your area is $22,586, compare
this to the US average, which is $30,982. The current year average
household income in your area is $59,211, compare this to the US
average which is $81,217.
Population
In 2017, the population in your selected geography is 17,820. The
population has changed by -1.03% since 2000. It is estimated that the
population in your area will be 18,260.00 five years from now, which
represents a change of 2.47% from the current year. The current
population is 47.96% male and 52.04% female. The median age of the
population in your area is 34.44, compare this to the US average
which is 37.83. The population density in your area is 5,667.85 people
per square mile.
Households
There are currently 6,796 households in your selected geography. The
number of households has changed by -0.57% since 2000. It is
estimated that the number of households in your area will be 7,064
five years from now, which represents a change of 3.94% from the
current year. The average household size in your area is 2.62
persons.
Employment
In 2017, there are 4,083 employees in your selected area, this is also
known as the daytime population. The 2000 Census revealed that
53.47% of employees are employed in white-collar occupations in this
geography, and 46.59% are employed in blue-collar occupations. In
2017, unemployment in this area is 5.35%. In 2000, the average time
traveled to work was 25.00 minutes.
Race and Ethnicity
The current year racial makeup of your selected area is as follows:
34.49% White, 50.99% Black, 0.39% Native American and 6.77%
Asian/Pacific Islander. Compare these to US averages which are:
70.42% White, 12.85% Black, 0.19% Native American and 5.53%
Asian/Pacific Islander. People of Hispanic origin are counted
independently of race.
People of Hispanic origin make up 7.24% of the current year
population in your selected area. Compare this to the US average of
17.88%.
PROPERTY NAME
MARKETING TEAM
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Housing
The median housing value in your area was $178,006 in 2017,
compare this to the US average of $193,953. In 2000, there were
3,698 owner occupied housing units in your area and there were 3,136
renter occupied housing units in your area. The median rent at the
time was $473.
Source: © 2017 Experian
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