Apartment REITs

Apartment REITs are real estate investment trusts that acquire, develop, and manage multifamily properties.

Apartment properties not only compete with each other and single-family homes for rent, but also with the attractiveness of owning a home. Therefore, in addition to vacancy rates, home prices and interest rates can also have an impact on the performance of apartment REITs. Falling housing prices would normally put competitive pressure on the properties owned by these REITs however tightening credit has made it more difficult to purchase a home, helping to ease some of this pressure.

The performance of these REITs is also influenced by the local economies, particularly job growth. Therefore, current rising unemployment could have an adverse effect on the holdings of these REITs. Investors should check growth rates and unemployment rates in the local areas where a REIT owns properties to see if their holdings are at risk for high vacancy rates.

The three largest Apartment REITS according to market cap are:

  • Equity Residential (EQR) based in Chicago, IL
  • Avalonbay Communities Inc. (AVB) based in Alexandria, VA
  • Essex Property Trust Inc. (ESS) based in Palo Alto, CA