Tickers: AVB, CPT, EQR, ESS, MAA, UDR
Subsector: Apartments
Headline: Seeing early signs of RoC decel in some Sunbelt markets
We updated our apartment rental rate tracker for November data for the key REIT submarkets, and we are starting to see the beginnings of a disinflation in transacted rental rate growth in several of the Sunbelt markets. This comes following our addition of MAA and CPT to the Short Bench list over the weekend given their higher exposure to these markets which (1) are coming up against much tougher base effects in the coming months and (2) are well-ahead of the Coastal Gateway REITs on recovery/rental rate growth. Acknowledging that this is the seasonally weakest part of the year for apartment leasing historically, we do believe that a RoC decel sets up an interesting short/funding short opportunity against the Coastal and SFR longs. At the very least there could be a relative performance divergence intra-sector to arb. See Figure 2 below for some key submarket callouts. We also re-ordered the tracker a bit to better show both the trend in RoC but also the second derivative directly below. As a reminder, this dataset tracks the change in actual transacted rents for same store apartment units, so in our view is a good representation of actual trends seen on the ground versus CPI survey data. Some sequential changes in the y/y RoC worth watching:
- Birmingham, AL: -101bps
- Phoenix, AZ: -37bps
- Tampa, FL: -111bps
- Raleigh, NC: -100bps
- Memphis, TN: -77bps
Figure 1: Apartment Rental Rate Tracker
Figure 2: RoC Decel in Several Sunbelt Markets
Tickers: PGRE, SLG, VNO, BXP, KRC, DEI, ESRT, JBGS, BDN, CUZ, HIW, WE
Subsector: CBD and Suburban Office
Headline: Kastle Systems Back-to-Work Barometer
Office Utilization: Kastle Systems released its weekly office utilization tracker for the 7-day period ending 12/1, which showed an +810bp sequential increase in the 10-city average utilization rate as expected to to 40.6%, which is the highest reading since the start of the pandemic (Figure 1 below). As a reminder, the prior week was biased down by the Thanksgiving holiday, so it makes sense therefore to see a sharp snapback to the upward trend. As a reminder this metric tracks "bodies through turnstiles," and is different than "occupancy" which represents tenant leased/occupied space as a percentage of total square feet. All 10 markets showed significant increases for the week, led by Austin (+13.3% to 59.3%), Houston (+13% to 54.9%), Dallas (+10.8% to 52.3%) and notably New York (+8.7% to 37%). New York has been flying up the list towards the middle of the pack over the last 2-3 months post-Labor Day. San Francisco and San Jose remain consistently the worst performers.
Figure 2: Kastle Back-to-Work Barometer for Week Ending 12/1
Source: Kastle Systems
Prior Notes:
12.7.21 - REITS DAILY BRIEF | 12.7.21 | (SLG)
12.6.21 - REITS DAILY BRIEF | 12.6.21 | (WE NOVEMBER OPERATIONS UPDATE)
12.5.21 - SUNDAY NIGHT REIT READ | 12.5.21 | (PGRE, EGP, PLYM, MAA, CPT, O, EPR)
12.2.21 - REITS DAILY BRIEF | 12.2.21 | (WE)
12.1.21 - IGNORE CNBC RE: WEWORK RESTATEMENT | 12.1.21 | (WE)
12.1.21 - REITS DAILY BRIEF | 12.1.21 | (U.S. OFFICE UTILIZATION, WE)
11.30.21 - REITS DAILY BRIEF | 11.30.21 | (AMH)
11.28.21 - SUNDAY NIGHT REIT READ | 11.28.21 | (COLD)
11.23.21 - REITS DAILY BRIEF | 11.23.21 | (U.S. OFFICE UTILIZATION, WE)
11.21.21 - SUNDAY NIGHT REIT READ | 11.21.21 | (WE)
11.19.21 - REITS DAILY BRIEF | 11.19.21 | (CUBE)
11.17.21 - REITS DAILY BRIEF | 11.17.21 | (STYLE FACTOR WORK)
11.16.21 - REITS DAILY BRIEF | 11.16.21 | (U.S. OFFICE UTILIZATION)
11.15.21 - CUBE ANNOUNCES STABILIZED ACQUISITION | 11.15.21
11.15.21 - REITS DAILY BRIEF | 11.15.21 | (WE, ILPT)
11.14.21 - SUNDAY NIGHT REIT READ | 11.14.21 | (CUBE, EXR, LSI, NSA)
11.11.21 - REITS DAILY BRIEF | 11.11.21 | (LSI, NYC CBD OFFICE)
11.10.21 - REITS DAILY BRIEF | 11.10.21 | (UHAL, CONE, COR, NSA, PSA)
11.9.21 - REITS DAILY BRIEF | 11.9.21 | (U.S. OFFICE UTILIZATION, SFR)
11.7.21 - SUNDAY NIGHT REIT READ | 11.7.21 | (APARTMENT RENTAL RATE TRACKER, POSITION MONITOR UPDATE)
11.4.21 - REIT RECAP | 11.4.21 | AMH 3Q21 RESULTS
11.4.21 - REIT RECAP | 11.4.21 | CUBE 3Q21 RESULTS
11.4.21 - REITS DAILY BRIEF | 11.4.21 | (COLD, IRM, EARNINGS SURPRISE MONITOR)
11.3.21 - REITS DAILY BRIEF | 11.2.21 | (LSI, POSITION MONITOR UPDATE)
11.2.21 - REITS DAILY BRIEF | 11.2.21 | (PSA, U.S. OFFICE UTILIZATION)
11.1.21 - REIT RECAP | 11.1.21 | PSA 3Q21 RESULTS
10.31.21 - SUNDAY NIGHT REIT READ | 10.31.21 | (3Q21 EARNINGS SURPRISES, POSITION MONITOR)
10.28.21 - REIT RECAP | 10.28.21 | CPT 3Q21 RESULTS
10.28.21 - REITS DAILY BRIEF | 10.28.21 | (EXR)
10.28.21 - REIT RECAP | 10/28/21 | INVH 3Q21 RESULTS
10.28.21 - REIT RECAP | 10/27/21 | AVB 3Q21 RESULTS
10.27.21 - REITS DAILY BRIEF | 10.27.21 | (3Q21 Earnings, AVB, EXR, Office)
10.26.21 - REIT RECAP | 10/26/21 | EXR 3Q21 RESULTS
10.26.21 - REITS DAILY BRIEF | 10.26.21 | (EQR, REXR)
10.25.21 - SUNDAY NIGHT REIT READ | 10.24.21 | (POSITION MONITOR)
10.21.21. - REIT RECAP | 10/21/21 | REXR 3Q21 RESULTS
10.20.21 - REITS DAILY BRIEF | 10.20.21 | (EGP, PLYM, REXR, ILPT)
10.19.21 - VIDEO | American Homes 4 Rent (AMH) Thesis
10.19.21 - REITS DAILY BRIEF | 10.19.21 | (COLD, SLG, VNO, AMH, U.S. Office Utilization)
10.18.21 - REITS DAILY BRIEF | 10.18.21 | (PLD)
10.17.21 - SUNDAY NIGHT REIT READ | 10.17.21 | (PLD, POSITION MONITOR)
10.15.21 - REIT RECAP | 10/15/21 | PLD 3Q21 RESULTS
10.13.21 - REITS DAILY BRIEF | 10.13.21 | (PLD)
10.10.21 - SUNDAY NIGHT REIT READ | 10.10.21 | (POSITION MONITOR UPDATE)
10.8.21 - BLACK BOOK ROUND-UP | AMERCO (UHAL)
10.7.21 - BEST IDEA ROUND-UP | AMERICOLD REALTY TRUST (COLD)
Please e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
