Outlook for Apartment (and Storage) REITs Not So Bad
By: Multifamily Real Estate Industry Team
According to a recent article in The New York Times, some real estate investment trusts are not faring so badly in this otherwise dreadful investment climate. Third quarter earnings were strong in both apartment and storage REITs, apartments posting a 12.5 percent gain and storage surging by 19.3 percent.
REIT investors appear to have more confidence in these two sectors for several reasons. The current difficulties associated with home prices and mortgage availability are keeping households in the rental market. Tenant turnover has slowed, and operators have been able to trim operating expenses as a result (e.g., spending less on replacing carpet, repainting). Fannie and Freddie continue to be active apartment lenders, with adequate capital available for this sector. Particularly in areas where the economies seem to be relatively stable, the apartment sector is anticipated to continue to be strong.
Storage REITs appear to be doing well in areas at the opposite end of the economic spectrum. They did best in the regions that had the worst housing markets and where foreclosures have been on the rise. Evidently, people need a space to store possessions when they move into smaller houses or apartments.
The article discusses several apartment REITs and storage REITs that are favored by analysts just now, click http://www.nytimes.com/2008/10/12/realestate/commercial/12sqft.html?_r=1&ref=business&oref=slogin to read about them.
(This entry posted by Karen Estelle Carey, member of the multi-family practice at Womble Carlyle.)
REIT investors appear to have more confidence in these two sectors for several reasons. The current difficulties associated with home prices and mortgage availability are keeping households in the rental market. Tenant turnover has slowed, and operators have been able to trim operating expenses as a result (e.g., spending less on replacing carpet, repainting). Fannie and Freddie continue to be active apartment lenders, with adequate capital available for this sector. Particularly in areas where the economies seem to be relatively stable, the apartment sector is anticipated to continue to be strong.
Storage REITs appear to be doing well in areas at the opposite end of the economic spectrum. They did best in the regions that had the worst housing markets and where foreclosures have been on the rise. Evidently, people need a space to store possessions when they move into smaller houses or apartments.
The article discusses several apartment REITs and storage REITs that are favored by analysts just now, click http://www.nytimes.com/2008/10/12/realestate/commercial/12sqft.html?_r=1&ref=business&oref=slogin to read about them.
(This entry posted by Karen Estelle Carey, member of the multi-family practice at Womble Carlyle.)
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