U.S. apartment REITs are an attractive investment

A major demographic shift in the United States has contributed to a steady decline in homeownership since the global financial crisis, with Generation Y dubbed “generation rent” as millennials delay purchasing a home in the suburbs in favor of renting in the urban core, according to an AMP Capital whitepaper, Generation Rent.

“Millennials are opting for proximity to nightlife, restaurants and the workplace along with access to shared spaces and amenities, which is translating into greater demand for rented apartments in the urban core,” says Chris Deves, AMP Capital client portfolio manager for global listed real estate and report author. “As a demographic cohort, the strong willingness of millennials to relocate in the pursuit of new career opportunities necessitates flexibility and mobility, which is also more conducive to renting over owning.”

U.S. apartment REITs make up roughly 8 percent of the global listed real estate benchmark or more than $100 billion of equity market capitalization.

The shift is a positive for residential landlords and, in turn, a positive for investors in the listed institutional apartment operators, which have asset portfolios with meaningful exposure to key urban centers.

“Apartment REITs are generally high quality and consolidation in the sector has left a set of large, well-capitalized companies with seasoned management teams, making them attractive for real estate investors with a long-term investment horizon,” says Deves.

But Generation Y is still expected to be homeowners in their future.