REITs Gearing Up for Tough 2010

NEW YORK CITY-The bulk of REITs’ third quarter earnings reports are in, and it looks like many apartment firms are bracing themselves for a tough year ahead. While 2010 won’t be a complete bust for the multifamily market, conditions will likely continue to decline. The good news is that the pace of the decline is moderating and fundamentals have held up better than anticipated.

While these are encouraging signs, relates Michelle Ko, a research analyst with Bank of America, “Current pricing already reflects this trend and we still don’t believe we’ve hit the trough in the cycle yet.”

By all indications, apartment REITs are readying themselves to weather the next phase of the cycle–the bottom, which is still another quarter or two away. Having traded in effective rental rates to boost occupancy, many firms are now thinking of ways to hold rental rates steady and reduce concessions, she notes. But if property owners are looking to increase rents, they’re going to have to wait for jobs to return to the market.