Multifamily REIT Q1 Rent Preview

Yardi Matrix data and analysis on eight publicly traded apartment companies.
Multifamily REITs
Photo by Victoria Boradinova/Pixabay.

Matrix rent survey data from January and February suggests multifamily REITs’ same-store rent growth will continue to be bifurcated in the Q1 2021 reporting period and beyond. For January and February 2021, portfolios centered on expensive, high-wage coastal gateways and technology hubs returned flat to negative monthly sequential rent growth and sharply negative year-over-year rent growth. 

For these portfolios, an inflection point was reached during the summer: Rents continue to decline, albeit at a slower rate. The very worst may be behind them, but a full recovery in rate will take time. 

Conversely, lower-priced portfolios primarily located in the Sun Belt and Midwest continued to record monthly sequential and year-over-year rent growth in January and February, suggesting first-quarter reported results for these portfolios will continue to outpace their more expensive coastal peers.   

Methodology

Yardi’s market coverage is broad enough to construct a portfolio rent for the following eight REITs: AIR Communities (AIR), Avalon Bay Communities (AVB), Camden Property Trust (CPT), Equity Residential (EQR), Essex Property Trust (ESS), Independence Realty Trust (IRT), Mid-America Communities (MAA), and UDR Inc. (UDR). For each of these REITs, Yardi’s data covers a minimum of 95 percent of the properties listed in each of the REIT’s publicly reported financial disclosures. 

The rents presented here are “same store.” A property is considered same store if it has been continuously owned by the REIT for the previous 12 months and has reached 90 percent occupancy during the ownership tenure before the comparison period.   

Further, the rental rates analyzed here are “street rates.” In other words, they are based on survey data of publicly disclosed rental rates. Changes in same store rental rates discussed here most closely track REIT reported new lease rates, not renewal or blended lease growth rates nor in place portfolio rent. 

High Average Rent and Low Rent Growth

Ranking the REITs by February average rent from highest to lowest also roughly predicts year-over-year and sequential month rent growth. Higher rents generally correlate with lower year-over-year rent growth. The most expensive portfolios: AVB, EQR, ESS, and AIR recorded the largest year-over-year rental growth declines and, except for AIR, are still suffering from weak sequential monthly rent growth. Conversely, more affordable portfolios such as CPT, IRT and MAA are exhibiting same store sequential month rent growth. IRT and MAA’s year-over-year rent growth has largely remained positive throughout the pandemic. 

February Average Rent, Year over Year Change, and Sequential Month Change
REIT Average Rent Year over Year Jan to Feb
AVB $2,448 -8.25% -0.20%
EQR $2,428 -11.45% -0.12%
ESS $2,243 -8.04% -0.27%
AIR $2,220 -3.52% 0.18%
UDR $2,021 -4.96% 0.15%
CPT $1,675 -1.76% 0.48%
MAA $1,371 2.47% 0.44%
IRT $1,169 6.27% 0.52%
Source: Yardi Matrix

 

AIR

Newly created AIR saw same store sequential rent growth first turn positive in November and, after a flat December, the positive trend continued into January and February. Poor rent growth in earlier months conspired to leave year-over-year rent growth at -3.52 percent in February. Most of AIR’s Southern California portfolio turned in positive sequential rent growth in January and February, suggesting the worst might be over for hard-hit Metro Los Angeles. Sequential rent growth was negative for AIR in Northern Virginia, the San Francisco Peninsula, and Urban Chicago.  

Source: Yardi Matrix
Source: Yardi Matrix

AVB

Save for August 2020, AVB has recorded negative sequential rent growth throughout the pandemic. Like AIR, their Southern California portfolio turned sequential growth in January and February. Hard-hit Manhattan and Brooklyn also turned positive. With February year-over-year rent at -27.12 percent in Manhattan and -23.96 percent in Brooklyn, however, a full recovery is still several quarters away. Rent growth is being dragged down by poor performance by the greater San Francisco Bay Area (East Bay, South Bay, and Peninsula), Washington, D.C., and Northern Virginia marketplaces. Combined, these markets represent roughly one third of AVB’s same-store portfolio.

Source: Yardi Matrix
Source: Yardi Matrix

CPT

Approximately 20 percent of CPT’s portfolio is in Southern California and the greater Washington, D.C., metroplex. The balance is contained entirely in the Sun Belt. For the portfolio, sequential monthly rent growth increased in January and February. Year-over-year rent growth was still negative in February, but decreased to -1.76 percent in February—the best number recorded during the pandemic. Results continue to be dragged down by poor performance in the Washington, D.C., area as well as continued weak rental growth in the West Houston marketplace. 

Source: Yardi Matrix
Source: Yardi Matrix

EQR

EQR’s location focus on high-wage, high-rent markets has not fared well during the pandemic. Monthly sequential rent growth declines have slowed, thanks to improving performance in its Southern California and Metro NYC portfolio, but new rent growth remains negative for its same store portfolio in Boston, San Francisco, Washington, D.C., and Seattle. Accordingly, year-over-year rent growth continues to trend downward. 

Source: Yardi Matrix
Source: Yardi Matrix

ESS

Despite a more suburban footprint, ESS’ Pacific Coast focus continues to fare poorly compared to its more geographically diverse peers. Monthly sequential rental growth remained negative in January and February. Portfolio results were primarily driven by further declines in Seattle rental rates. Approximately 25 percent of ESS’ portfolio is located here. Elsewhere, its Southern California portfolio, excluding Metro Los Angeles, looks to be on the mend, while its Bay Area properties’ rent growth remains negative on a monthly sequential basis. 

Source: Yardi Matrix
Source: Yardi Matrix

IRT

During the pandemic, IRT’s Sun Belt and Midwestern value-add portfolio has indeed added value. Portfolio sequential monthly rent growth shows a strong seasonal trend, with growth turning negative in January but rebounding smartly in February. Positive rent growth through summer 2020 added up to solid year-over-year rent growth in January and February. At 6.27 percent, IRT’s February year-over-year rent growth was clearly top. January and February results were solid across the IRT portfolio, apart from weakness in Charlotte and North Dallas.

Source: Yardi Matrix
Source: Yardi Matrix

MAA

Apart from Washington, D.C., and Northern Virginia, MAA’s entire portfolio is located in the Sun Belt. Like IRT, pandemic rental rate performance has been excellent. February marked the 10th consecutive month of sequential month rent growth. Likewise, February year-over-year rent growth checked in at a solid 2.47 percent. Rent growth was strong across the portfolio, save for the greater Metro D.C. marketplace, as well as select markets in Texas. North Dallas, Austin, and West Houston sequential month rent growth continued to be negative in January and February.

Source: Yardi Matrix
Source: Yardi Matrix

UDR

A broadly diversified portfolio has not insulated UDR from weakness in Coastal markets. Unlike other apartment REITs, UDR’s Southern California portfolio recorded negative sequential month growth in San Diego and Orange County. Rates continue to deteriorate in Seattle in January and February. While rent growth turned positive for MAA’s portfolio in the hard-hit San Francisco Peninsula, Manhattan and Brooklyn markets. 

Source: Yardi Matrix
Source: Yardi Matrix

Ben Bruckner is a Senior Research Analyst for Yardi Matrix.