VRAI - Apartment REITs: Shelter From Soaring Inflation

• Renters across the nation should prepare for a rude surprise. Residential rents continue to soar at the fastest pace on record with double-digit percentage increases on both new leases and renewals.
• Riding this rental growth surge, Apartment REITs - which lagged early in the pandemic - have soared more than 50% this year with widespread strength across both Sunbelt-focused and Coastal-focused REITs.
• Recent earnings reports underscored the continued robust momentum as every apartment REIT raised its full-year outlook. Three Sunbelt-focused REITs - Mid-America, Camden, and NexPoint Residential - were upside standouts.
• Apartment REITs have exhibited restraint in rental rate increases on existing tenants - sometimes rent-control-related - as the gap between new leases and renewals has never been wider - implying substantial embedded NOI growth ahead.
• For the undersupplied housing industry, the favorable supply/demand imbalance will persist for the foreseeable future amid ongoing constraints on new home construction while demographic-driven and WFH-driven demand remain resilient.

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