In echo of ’07, REITs back away from multifamily
This is the first in a three-part series on the state of multifamily development and lending across the U.S. as credit quality concerns mount.
Amid concerns of a peaking multifamily market, publicly traded U.S. real estate investment trusts in 2016 were net sellers of multifamily properties for the first time since 2009.
In total, REITs sold $13.0 billion more multifamily properties than they bought. In the past 10 years, the only previous time REITS off-loaded more multifamily assets than they bought by such a large amount was in 2007, when sales dwarfed purchases by $21.11 billion.
REITs’ caution around making new property investments follows a long and steady escalation in apartment values, which have more than doubled since 2010, according to a national index from Moody’s/Real Capital Analytics. In recent months, a flood of new construction has depressed rents in coastal markets. New York and San Francisco, both key markets for the largest multifamily REITs, Equity Residentialand AvalonBay Communities Inc., saw rent growth flatline in 2016.
Blue Vault is just what advisors need to size up the different offerings in the nontraded REIT market. Just as importantly, it’s what the industry needs to encourage best practices among REITs.