Multifamily REITs Face Slower Growth

Equity Residential is seeing fewer development opportunities, CEO David Neithercut said recently.

NEW YORK CITY—Analysts at Barclays predict a more muted growth environment for multifamily REITs as the year progresses, especially in the second half. “While we remain constructive on apartment fundamentals, we think there is limited upside from here,” according to a Barclays report issue Friday. Analysts cite “the lukewarm market reception” to the recently announced results for the fourth quarter of 2015 and the REITs’ full-year guidance for 2016.

For starters, after digesting REITs’ recent guidance as well as meetings with their management teams, Barclays is expecting fewer quarterly earnings reports this year to beat consensus estimates. “We expect peaking new supply and moderating job growth (particularly on the West Coast) to constrain organic growth this year,” according to Barclays, which is projecting a deceleration of 53 basis points in the sector’s growth overall this year, and says that same-store NOI will decrease 83 bps year-over-year. RBC Capital Markets recently noted that apartment REITs’ average SSNOI guidance of 5.1% is 50 bps less than the actual results the apartment trusts obtained in ’15.