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  • Alex Pettee, CFA

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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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

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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