By Jessica Fiur, News Editor
Washington, D.C.—According to a recent report from the National Association of Real Estate Investment Trusts (NAREIT), the U.S. REIT market as a whole underperformed in the third quarter of 2012, but outpaced the broader market in the first nine months of the year.
“The fundamentals behind the multifamily story are very much in place. We went from a market where in the housing market crisis, the rental market received all the new demand that was coming in,” Calvin Schnure, vice president of research and industry information, NAREIT, tells MHN. “What we’re seeing now is there’s still a huge pent-up demand, there are many people who remain living with roommates or doubled up in one way or another.”
Multifamily construction is tied to the economy, which Schnure says will lead to a strong demand.
“The sector has a lot of people who are on the sidelines waiting for the job market to improve, for them to go out and sign the lease,” he says. “We had very sluggish job market gains—this isn’t a surprise to anyone. The U.S. economic recovery is part of the global recovery that has been struggling. For the investor who’s got a medium timeframe, there’s pent-up demand. It’s not a question of ‘if,’ but ‘when.’”
Schnure also feels that although the single-family market is once again gaining some momentum, it won’t take away from the multifamily industry starts.
“We have a recovering single-family market,” Schnure says. “But this is not a zero-sum game. The single-family market is facing the same underlying fundamentals of pent-up demand.
“We’ve seen a big increase in the construction of multifamily. Multifamily starts are up 40 percent from a year ago. Given that we’ve got a huge pent-up demand, and supply is still not back in line with what the population is doing, that tells me that this market is facing more demand growth than supply growth for the foreseeable future.”
Currently timber REITs are leading the market. And according to NAREIT’s findings, almost all sectors of the REIT market produced double-digit returns in the first nine months of this year. The multifamily REIT market is behind other markets, but according to Schnure, this is no cause for alarm.
“Apartment REITs are up a bit over 5 percent, year to date, which is respectable, but it’s lagging a lot of the other REITs,” he says. “A lot of the U.S. households have a damaged financial position. They may not have as much of a down payment for buying a house. Some people may have hits to their credit ratings, and they might not be able to qualify for a mortgage. So for a lot of households, renting is still going to be their preferred option for several years.”