VRE - Apartment Fundamental Outlook Improved As Supply Wanes
2024-07-11 22:31:12 ET
Summary
- Apartment REITs have beaten 1Q24 earnings despite a massive new supply wave hitting the sector in 2024 and early 2025.
- Demand drivers such as strong employment, low savings rate, high cost of houses, and high cost of construction have kept occupancy high despite the supply.
- Supply growth is dropping in mid-to-late 2025, making investments in the apartment sector appealing for long-term growth potential.
One apartment REIT after another beat on 1Q24 earnings which was surprising as the sector is undergoing a massive new supply wave with development deliveries as much as 5% of existing inventory hitting the sector in 2024 and the first half of 2025.
So how has the sector been able to absorb the new supply so well?
In examining the data, it seems there is a perfect storm of demand drivers:
- Strong employment
- Low savings rate
- High cost of houses
- High cost of construction
- Mortgage rates