Economics, Housing, & Commercial Real Estate Analysis

Keepin' It Real 

Apartment REITs
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Data Center REITs
Mall REITs
Net Lease REITs
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  • Alex Pettee, CFA

Apartment REITs: Roaring Rents

  • To read the full article, click here to read Seeking Alpha!

  • If you thought the rent was “too damn high” already, wait until your next renewal letter. Apartment rent growth reaccelerated last quarter to the highest rate since 2016.

  • It’s a good time to be a landlord yet again. All seven major apartment REITs raised 2019 same-store net operating income and FFO guidance in the second quarter.

  • Before 2019, renters actually enjoyed a brief reprieve from rising rents over the prior two years as landlords competed to fill a record number of newly completed high-end apartment units.

  • The 2010s will be remembered as a decade of historic underbuilding. Despite a US population nearly double the size of the 1960s, we produced 30% fewer housing units this decade.

  • Overregulation is at the root of the housing shortage, and there’s a risk that politically popular but economically irrational “solutions” like rent control will hurt landlords and renters alike.

Before this year, renters enjoyed a brief reprieve from rising rents over the prior two years as landlords competed to fill a record number of newly completed apartment units, particularly in the high-end luxury category. The relative "boom" in multifamily construction that began in 2014 continued into 2019, but deliveries appeared to have peaked for this cycle during the summer of 2018 at a TTM rate of roughly 365k units. Deliveries will likely hover around a range of 330k-350k through the end of 2020, which amounts to roughly 1.5% per year annual supply growth. Starts and permitting activity has pulled back since mid-2018, and as of April, multifamily starts have risen just 1.3% on a trailing twelve-month basis.

If you thought the rent was “too damn high” already, wait until your next renewal offer. Apartment rent growth reaccelerated last quarter to the highest rate since March 2016. A “perfect storm” of factors - rising wages, solid job growth, elevated mortgage rates last year, and lack of total housing supply - has rejuvenated the residential rental markets, even as multifamily supply growth remains relatively elevated. The Zillow ZRI Rent Index shows that rent growth in both the single-family and multifamily category jumped to the highest rate since 2016 despite moderating home price appreciation.

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Homebuilders, Apartments, Student Housing, Single Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Apartments, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.


Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.


Hotel REITs
Single Family Rental REITs
Mobile Home REITs
Healthcare REITs
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