Q4 2024 REIT Earnings Report
In Q4 of 2024, multifamily real estate investment trusts (REITs) exhibited a range of performances, reflecting both challenges and strategic advancements within the sector. Overall, the multifamily REIT sector in Q4 2024 displayed a blend of resilience and caution. While some companies reported strong earnings and maintained high occupancy rates, others faced challenges such as declining lease rates and NOI. The sector’s performance was influenced by factors including increased competition from new rental units, higher interest expenses, and varying regional market dynamics.
Capital Markets
In Q4 of 2024, U.S. REITs raised $12.5 billion through secondary debt and equity offerings, including $7.3 billion from debt and $5.0 billion from secondary common and preferred equity offerings. This capital raising activity reflects REITs’ efforts to strengthen their financial positions amid market challenges.
Additionally, mergers and acquisitions (M&A) activity took a breather in 2024, with just two deals announced or completed totaling $12.9 billion, compared to $44.4 billion in 2023. This slowdown in M&A activity may indicate a more cautious approach by REITs in the current market environment.
Operational Performance
Nearly two-thirds of REITs reported year-over-year increases in NOI, with an average increase of 1.7% from one year ago. This suggests that most REITs are experiencing positive operational performance, despite the challenges faced by the sector. The multifamily REIT sector has demonstrated resilience with strong performances from certain companies, it also faces challenges that require strategic navigation. The market sentiment remains cautiously optimistic, with a focus on maintaining high occupancy rates, managing operational costs, and adapting to evolving market conditions.
Rent Growth and Occupancy
The U.S. multifamily market experienced a slight year-over-year effective rent growth of 0.5% in Q4 2024. This modest increase is anticipated to accelerate in the coming quarters as occupancy rates rise. The multifamily vacancy rate decreased in Q4 2024, with net absorption of 60,000 units, indicating strong demand for rental properties. This trend is expected to continue, contributing to higher occupancy rates soon. While multifamily REITs have generally maintained high occupancy rates, rent growth has varied, with some regions and companies experiencing stronger increases than others. The sector continues to navigate challenges such as increased competition from new rental units and higher interest expenses, which have influenced rent growth and occupancy trends.
Transaction Activity
Regarding transaction activity, Equity Residential emerged as the leader among multifamily-focused apartment real estate investment trusts. The company executed a significant acquisition, purchasing 11 apartment complexes comprising over 3,500 units for $964 million from Blackstone. This acquisition, which included properties in high-growth markets such as Atlanta, Denver, and Dallas/ Fort Worth, marked the largest U.S. multifamily purchase by a public REIT in seven years.
To summarize, in Q4 of 2024, the multifamily REIT sector showed both resilience and caution. Some companies posted solid earnings and upheld high occupancy rates, while others encountered challenges like falling lease rates and declining NOI. The sector’s performance was shaped by factors such as increased competition from new rental units, rising interest costs, and regional market variations. Analysts remain cautiously optimistic, observing that while some indicators suggest stability, the sector is still navigating economic uncertainties and fluctuating market conditions.
