HEIGHTENED NYC APARTMENT SUPPLY PUTS THE SQUEEZE ON MULTIFAMILY REITS
May 2, 2017 | by Orest Mandzy | Trepp
I don’t want to sound like Captain Obvious, but a lot of people want to live in New York City. NYC neighborhoods are getting redeveloped left and right as potential residents continue to flock to apartments in all corners of the five boroughs. However, REITs that specialize in the multifamily sector, particularly those with an exposure to high-end apartments in New York City, continue to struggle in the face of new construction.
Equity Residential, which owns 40 properties with 10,007 units in the city, is one of the REITs that is feeling the heat. The firm noted that rents at their NYC units remained under pressure as 15,000 new units are expected to be delivered city-wide this year, and another 17,000 are on the books for next year. The city’s high-end apartment stock is also getting whacked by the lack of newly created high-paying jobs.
Equity Residential’s stock price has felt the pain resulting from heightened construction. While the firm’s stock is up 2% in 2017 YTD – a figure inline with a broader REIT index – it’s down 7% over the last year. In contrast, the broader REIT index is up 2% during that period.
