Suppose that you work for Camden Property Trust, a multi-family REIT in the southern US, and that your company wants to add another apartment building to its investment portfolio. After conducting a thorough market analysis, you have narrowed your search to three properties located in different areas in Houston, Texas. All of the properties have a similar number of units, and the units are also similar with regard to mix and sizes. The primary differences is the supply and demand in the different market areas, and the consideration of newer versus older properties

Option 1: The first property is currently built and operating in a middle income area that has a shortage of housing. At this time, the building has no vacancy, but there are some new apartments being built nearby that will soon be competing with this property. This is the oldest property, and will likely be impacted by the new construction in the area that may take away tenants.

Option 2: The second property is currently under construction, and is being sold because the developer has run out of money, and is unable to finish the project. However, it is likely that your firm could complete the building at a favorable per-unit cost. The market area is close to equilibrium, but with some excess supply, and the completion of this property would add even more. However, it would be a new building - something that is often attractive to potential tenants.

Option 3: The third property currently has a relatively high vacancy rate. However, the market area has become an increasingly desirable area to live and demand is expected to grow. There is also little threat of new competition here because there are no sites available to build additional apartment complexes.

Given these vacancy considerations, which property would you choose? Are there other investment factors that may be impacted by these considerations?