• Alex Pettee, CFA

Apartment REITs: Rents Are Soaring

Summary

  • After lagging early in the pandemic, Apartment REITs have surged nearly 40% this year as rental operators across the country have been "passed the torch" of the flaming-hot housing market.

  • Apartment rents are rising at the fastest rate on record as the pandemic-driven boom in household formations - including 1.6 million new renters - has clashed with the record-low housing supply.

  • Demographics suggested the 2020s were already poised to see historic housing demand, but the Work From Home era has begun to unleash millions of extra "deferred" formations among adult children.

  • Apartment REITs reported that new lease rates soared 15% in July - the highest on record - as rents are now rising by double-digit rates across half of the major markets.

  • While there are few "bargains" left across any asset class, residential REITs appear to be at the genesis of a multi-year growth phase and have historically been quintessential inflation hedges.

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