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Trouble With Apartment REITs

Aaron Levitt Dec 27, 2017

When it comes to commercial real estate, not all sub-sectors have been performing equally. Some have truly knocked it out of the park when it comes to returns.

One of those in that category happens to be apartment owners. Since the recession, multi-family real estate has been on fire due to the issues surrounding the housing industry. Apartment owners – especially those structured as real estate investment trusts (REITs) – have continued to realize strong cash flows, rent growth and profits since the end of the recession.

And their shares have seen plenty of gains, too.

The problem is that all of this might finally be coming to an end. With housing starting to grind forward and supplies of new apartments hitting the market like crazy, rent growth is getting hard to come by. For investors, that could mean a slowdown in the torrid share price appreciation seen since the end of the recession.

Read about REIT valuations and how to decipher them here.

Plenty of Gains

According to real estate industry group NAREIT, apartment owners have single handedly been the best performing real estate sub-sector since the recession. And it’s easy to see why. Multi-family property owners have benefited from a variety of factors stemming from the housing industry.

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