Apartment REITs' Revenue Growth Surpasses Pre-Covid Levels

The average revenue growth of the eight apartment REITs was 4% during the third quarter. 

Apartment revenue growth has made a V-shaped recovery and is now above the pre-COVID level of growth, according to a Q3 report by Markerr on large apartment REITs. 

The average revenue growth of the eight apartment REITs was 4% during Q321, marking a full recovery relative to the pre-Covid growth rate. On a non-weighted market average, YoY revenue growth for Q321 was 6.2%.

The outlook for 2022 is buoyed by strong new lease growth rates, an easy comparison period, bad debt and concessions being net positive, and a large loss to lease gap in the low-teens.

Markets Overexposed to Tech Suffer

Revenue growth was positive ~6% YoY on a non-weighted market average. The best YoY revenue growth is in tertiary markets, followed by Sun Belt markets and Coastal markets.

Coastal markets, particularly in the Bay Area, continue to lag and bear the risk of being overexposed to the tech sector, which is disproportionately impacted by remote work.

Coastal markets have better YoY growth in median income. This is likely driven by a lack of affordability and changing employment trends as less affluent employees are leaving the most expensive MSAs.

California Suburbs Outperforming Urban Centers

There is an extreme difference in the operating trends of California markets. The Bay Area (San Francisco, San Jose, and Oakland), is the worst performing geography across the US. In stark contrast, Southern California markets (Los Angeles, Orange County, and San Diego) are performing quite well.

Comparing the more suburban and relatively more affordable areas of San Diego and Orange County to Los Angeles, and Oakland to San Jose and San Francisco shows that the operating trends of the more suburban areas are significantly better.