January 2017 REIT Report

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Market Reporting that Matters

January 2017 REIT Report

Apartment REIT Performance Remains Level

Annual effective rent growth for the publicly traded apartment REITs may still be low, thanks to negative rent growth in many markets with high REIT concentrations. But it certainly is steady.

The REITs recorded 1.0% rent growth in January 2017 for the third straight month and the fourth month of the past five. The figure has remained within an 18-basis-point (bps) range since September 2016. January’s national rent-growth rate also was essentially the same as it was in December.

REIT vs. National Rent Growth 

January’s REIT rate did represent a 365-bps decrease from the 4.7% of January 2016. The good news for investors and property owners was that same-store average effective rent increased for the first time in five months, to $1,959 in January.

Performance improved in many REITs’ portfolios in the San Francisco Bay Area, Houston and New York, even though the rent-growth figures were mostly negative. However, several REITs saw declining rent growth in metros such as Atlanta.

The Metropolitan Statistical Areas and Metropolitan Divisions among Axiometrics’ Top 50 apartment markets with the highest annual effective rent growth in December were:

  • Sacramento, CA (9.5%)
  • Riverside, CA (7.7%)
  • Las Vegas, NV (5.4%)
  • Fort Worth, TX (5.3%)
  • Phoenix, AZ (5.1%)
  • Seattle, WA (4.9%)
  • Salt Lake City, UT (4.3%)
  • Charleston, SC (4.3%)
  • Atlanta (4.2%)
  • Raleigh, NC (4.2%)
  • Warren, MI (4.1%) 

MSAs underperforming the national average included:

  • Washington, DC (1.9%)
  • Boston, MA (1.7%)
  • Miami, FL (1.3%)
  • Chicago, IL (1.1%)
  • Philadelphia, PA (0.9%)
  • Austin, TX (0.9%)
  • New York, NY (-0.9%)
  • San Jose, CA (-1.0%)
  • San Francisco, CA (-1.6%)
  • Houston, TX (-3.5%) 

Occupancy Continues Gradual Decline

REIT occupancy declined slightly for the fourth straight month, dipping 6 bps to 95.7% in January. The occupancy rate was 9 bps lower than the January 2016 figure of 95.8%, and REIT occupancy continues to outperform the national rate, which was 94.4% in January.

January 2017 REIT Occupancy

If you can glean anything off of January year-to-date (YTD) rent-growth figures, it’s that 2017 is starting off in the middle of the pack among post-recession years. Though the 0.3% YTD rent growth of January 2017 is 10 bps below the post-recession average of 0.4%, that average was powered by exceptional January's in 2010, 2012 and 2014.

2017 vs. Average REIT YTD

January REIT YTD Rent Growth


Milestone No. 1 in Rent Growth

Milestone Apartments (MST.UN) is in the process of being purchased by Starwood Capital Group for a reported $1.3 billion. Should the deal close, Starwood would be acquiring the publicly traded apartment REIT with the highest rent growth in January 2017.

MST.UN recorded 2.6% year-over-year (YoY) effective rent growth in January, some 13 bps ahead of No. 2 Aimco (AIV)’s 2.5%. On an average trailing 12-month basis (ATTM), Milestone’s 5.4% rate was No. 1 by a wide margin over second-place Mid-America Apartments (MAA), which reported an ATTM rate of 4.1%.

The nine REITs surveyed were bunched close together on a YoY rent-growth basis, with 436 bps separating No. 1 from No. 9.

UDR Inc. continued to be the most occupied, at 96.5%, followed closely by Essex Property Trust (ESS) at 96.3% and Equity Residential at 96.2%.

Individual REIT January 17 Fundamentals


REIT-Reported vs. Axio Fourth-Quarter Results

The Axiometrics revenue number is the combined change in effective rent and occupancy growth for each company’s portfolio (same-store properties only). Because the REITs typically maintain a stable occupancy rate close to 95%, the revenue number is dictated mostly by changes in effective rent.

The reported revenue for most REITs in the third quarter of 2016 was close to Axiometrics’ fourth-quarter surveyed results using the annual trailing 12-month methodology.

While most REITs’ reported revenue strongly correlates with the Axio survey results, Axiometrics’ surveys cannot report on all forms of revenue. For example, the renewal pricing strategy at some companies can affect their turnover rates, causing a shorter or longer lag between Axiometrics’ data and a REITs’ reported revenue. It is important to note that Axio surveys calculate revenue solely based on effective rents quoted for new leases and occupancy.

Total revenues for each company include revenues from renewals and other income, which can cause a discrepancy in the results.








Accessing the Data Files

The data files can be accessed by logging into the AXIOPortal®. Go to the Publications tab, select ”Trend Report” under Category, then search for “REIT” in the “Search Publication Name” box. Select “REIT” in the Type dialogue box.

Student Housing REIT information can be accessed by clicking on the Publications tab, then, under Category, selecting “REIT Report” under the Student Housing section.

Please note that Aimco (AIV) does not allow its properties to disclose occupancy rates. Axiometrics readjusts AIV's occupancy data after each quarterly earnings release. Between releases, we apply the average REIT growth rate in each market to AIV's properties. We apply the submarket's average growth rate if there is no REIT presence in the market.

Remember that rent and occupancy levels in those files are not same-store throughout time, but the growth rates are same-store for each month. You may view how the unit counts change at the bottom of the Effective Rents tab. The file with "Rolling 13 Month" in the name represents annual changes by month. 


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