Publications

- September 1, 2016: Vol. 28, Number 8

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Why core apartments now? The case for investing in core apartments rests on the potential for higher risk-adjusted returns

by Gleb Nechayev

1 The year began with increased market volatility and uncertainty in the national and global economic outlooks. As a result, more institutional investors are adjusting allocations toward sectors and strategies that help reduce risk exposure in their portfolios. Within real estate, this could trigger a renewed interest in apartments, which have one of the most favorable risk-adjusted return profiles. While cap rate compression has driven most of the appreciation returns in recent years, the role of net operating income growth was far greater in apartments than in other property sectors. With NOI growth becoming an increasingly important driver of return, the ability to actively manage revenue and expenses on a more frequent basis gives apartments a potential advantage. The essence of a core real estate asset is its ability to produce a more stable, durable income and dividend yield and to preserve value over time. Core is not risk-free, but it offers less risk than other

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