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Year-End Demand Dip Not Good for REITs

The down market is increasingly applying more pressure on multifamily rents and concessions as traffic and leasing levels dip.

By Sule Aygoren Carranza | Updated on December 30, 2008

Things aren’t looking so great for property fundamentals at some of the largest US apartment REITs. In most markets, rising layoffs and the stagnant economy led to a reduced demand for multifamily units in most markets across the country, found Bank of America in its most recent property manager survey.

The locally based firm polled more than 2,800 property and leasing managers at communities in 13 of the largest multifamily markets in the country to find trends in market conditions. The survey indices are measured on a scale in which a score below 50 means conditions are poor or have gotten worse, while a score above 50 indicates positive or improving trends.

In November, demand indicators such as traffic and leasing levels were some of the worst so far this year. Of those polled, 59% said traffic and leasing activity was below expectations for what was normal at this time of year, up 5% from last year. Conversely, 8.6% said they exceeded expectations. BofA’s traffic index declined 2.5 points from October to 27.8, marking the lowest score year to date. Meanwhile, the monthly traffic and leasing index fell from 31 in October to 28.6 in November. In fact, San Francisco was the only market in which survey participants saw increased traffic, though this city is still showing signs of growing weakness.

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