Apartment REITs: A Renter's Market

• Apartment REITs were among the weakest-performing property sectors for a second-straight year in 2023 - lagging even the battered office sector - despite delivering another year of mid-single-digit earnings growth.

• Following two years of record-setting rent growth, residential rents decelerated in 2023 alongside a broader cooling of inflationary pressures, with multifamily rents seeing a particularly sharp cooldown amid supply headwinds.

• The wave of pandemic-era development - started at a time when rents were rising double-digits - resulted in a record year of new deliveries in 2023 with similarly elevated supply levels.

• The pundit-predicted rental market "crash" has remained elusive, however, as demand has stayed surprisingly robust, driven by the combination of resilient job growth, homeownership unaffordability, favorable demographics, and elevated inbound immigration.

• Pockets of rate-driven distress have remained isolated to the most highly-indebted corners of the private markets, but this distress spells opportunity for well-capitalized REITs. While organic growth will be flat in 2024, conditions are becoming ripe for external growth via acquisitions.