Publications

- February 1, 2022: Vol. 34, Number 2

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Margins matter: Apartment operational margins and NOI growth

by Christopher Muoio and Adrian Kay

The apartment sector has become increasingly institutionalized during the past decade, rising from only 23.5 percent of U.S. commercial real estate volume in 2008 to 34.0 percent in 2020, making it the largest sector by deal volume, according to data from Real Capital Analytics. A similar trend has been observed in Europe, with apartment volume seeing its proportion of deal volume rise from 14.2 percent in 2015 to 25.6 percent in 2020.

Madison International Realty believes investors’ attraction to the apartment sector can be explained in part by the outsized rent growth the sector has experienced. Apartment effective rents have expanded 40.1 percent since 2010, and 78.3 percent since 1999, averaging growth of 3.6 percent per year during the past two decades (source: REIS, October 2021). Meanwhile, office rents have only experienced growth of 27.2 percent since 1999, averaging only 1.2 percent growth per year, and retail rents have seen similarly tepid growth of 1.4 percent

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