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  • Alex Pettee, CFA

Apartment REITs: Shelter From Soaring Inflation

  • Renters across the nation should prepare for a rude surprise. Residential rents continue to soar at the fastest pace on record with double-digit percentage increases on both new leases and renewals.

  • Riding this rental growth surge, Apartment REITs - which lagged early in the pandemic - have soared more than 50% this year with widespread strength across both Sunbelt-focused and Coastal-focused REITs.

  • Recent earnings reports underscored the continued robust momentum as every apartment REIT raised its full-year outlook. Three Sunbelt-focused REITs - Mid-America, Camden, and NexPoint Residential - were upside standouts.

  • Apartment REITs have exhibited restraint in rental rate increases on existing tenants - sometimes rent-control-related - as the gap between new leases and renewals has never been wider - implying substantial embedded NOI growth ahead.

  • For the undersupplied housing industry, the favorable supply/demand imbalance will persist for the foreseeable future amid ongoing constraints on new home construction while demographic-driven and WFH-driven demand remain resilient.

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Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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