Apartment REITs: Urban Exodus Until Vaccine
The pandemic-driven "urban exodus" hasn't yet shown signs of slowing. Apartment REITs in the coastal "shutdown cities" have been slammed as residents flee to lower-cost suburban markets and business-friendly Sunbelt metros.
While forthcoming vaccines may reverse recent dynamics, rental rates and occupancy levels have plunged in New York, L.A., Chicago, D.C., and San Francisco, and don't yet appear to have bottomed.
Third-quarter earnings results revealed a striking bifurcation between the coastal and sunbelt-focused REITs. Sunbelt-focused REITs continue to see positive rent and occupancy growth in Q3, which further accelerated into October.
No "rent strikes." Contrary to dire forecasts, rent collection rates have remained with several percentage-points of pre-pandemic levels throughout the pandemic and have generally improved since the "shutdown months."
Outside of the troubled urban metros, national apartment markets have been remarkably resilient. Trading near the cheapest multiples of the post-recession period, apartment REIT valuations appear compelling as the U.S. housing industry continues to lead the post-pandemic recovery.
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