Economic uncertainty and federal firings impact REIT outlooks, with worries about job market stability.
From Yahoo Finance: 2025-05-06 12:44:00
Apartment REIT leaders share insights on how tariffs and economic uncertainty could impact business, noting robust market fundamentals but concerns about job market stability. Tenants are holding on to leases due to high mortgage rates and home prices, with fears of federal job layoffs causing uncertainty in D.C. housing market. Rents may rise with decreasing oversupply, especially in markets like Dallas and Atlanta. Rent changes are projected to turn positive by 2026, prompting firms like AvalonBay to invest in Texas multifamily properties. During the last cycle, per-unit pricing in Austin reached $275,000. In February, Camden outbid AvalonBay, buying Emerson at Leander in Austin for $68 million, or $192,000 per unit, a 16 percent discount from its appraised value. Distress from 2022 to last year is affecting Sun Belt values, prompting investors to take action.
Lenders are no longer extending loans or caps on interest rates, according to Equity’s Brackenridge. S2 Capital weathered the Sun Belt’s downturn and acquired buildings from struggling syndicator GVA. GVA faced foreclosure and forced sales due to soaring interest rates on floating-rate loans.
S2 Capital and WindMass Capital acquired GVA’s Austin assets for $50 million. They also became general partners for a 1,768-unit GVA portfolio in Dallas, Nashville, and Knoxville. Equity is seeking acquisitions in Dallas, Denver, and Atlanta, but is cautious about Austin due to oversupply.
REITs, including AvalonBay, anticipate a 5 percent increase in expenses due to tariffs, potentially making some projects infeasible. Uncertainty and high rates complicate deal underwriting. As new development slows, contractors are more willing to lower prices to offset rising material costs.
Contractors are eager to negotiate lower margins as the pipeline of projects shrinks. AvalonBay noted increased bid coverage and subcontractor availability. This trend is seen as positive for the market, according to Chief Investment Officer Matt Birenbaum.
Read more at Yahoo Finance: Federal firings, economic uncertainty stain REIT outlooks