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  • Alex Pettee, CFA

Apartment REITs: Shelter From Inflation

  • Rents are soaring at the fastest pace on record in essentially every major market across the country. After rising nearly-20% in 2021, renters should prepare for double-digit growth again in 2022.

  • Riding the rental boom, Apartment REITs continue to report stellar earnings results, ending 2021 with record-high occupancy rates with the momentum accelerating in 2022 with 15% earnings growth this year.

  • The animal spirits have come alive as well: Blackstone has picked-off a pair of apartment REITs over the past two months, acquiring Bluerock Growth and Preferred Apartments at substantial premiums.

  • While goods shortages and resulting inflation should gradually ease as the world emerges from the pandemic, the housing shortage will likely persist into the back half of the decade and shelter costs will resume their role as the primary driver of inflation.

  • Not only are residential REITs an effective inflation hedge, they should also benefit from rising mortgage rates if households get priced out of the ownership markets. We remain bullish on apartment REITs and continue to lean towards faster-growing Sunbelt-focused REITs.

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