From the Wall Street Journal:
While few investors believe that apartment buildings will be a bad investment, the best rent rises of this cycle are likely “in the rearview mirror,” said Andrew McCulloch, an analyst at Green Street Advisors, a real-estate investment trust research firm.
Such concern is weighing on the stocks of real-estate investment trusts that own and develop apartment buildings. Shares of Camden Property Trust have gained about 1% this year, while sector giant Equity Residential is up 2.2%. In comparison, stock prices of industrial real-estate giant Prologis Inc. are up 18% year to date, while Brookfield Office Properties Inc. has gained 11%. Zelman & Associates, a real-estate research firm, expects net-operating-income growth to slow over the next year at the 10 apartment REITs it covers.
Investors and developers are changing course in response. “Eighteen months to two years ago, you really could have owned apartments in any major U.S. city and made very attractive returns,” said Jay Leupp, a portfolio manager at Lazard Asset Management. Now “we are being more cautious of the apartment investments that we make” and diversifying.