How to Profit From Rising Rents: Build Apartments

January 12, 2016   |  Wall Street Journal

How to Profit From Rising Rents: Build Apartments - WSJ.

After six years of rising apartment rents in U.S. cities, investors from all corners of the real-estate industry are piling into new projects in a bet that the boom still has a long way to run.

Over the next three years, developers are expected to build almost one million apartments in the U.S., more than the nearly 900,000 constructed over the previous three, according to researcher Axiometrics Inc.

In 2014, multifamily rental construction reached 328,000 units, its highest in nearly 30 years, according to an analysis of U.S. Census data by Jed Kolko, a senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley.

The main lure for investors: rising rents. Average rents nationwide rose 4.6% in 2015, THE BIGGEST GAIN SINCE BEFORE THE RECESSION, according to real-estate researcher Reis Inc. Rents have increased by more than 20% since the beginning of 2010. Most economists expect 2016 to be another strong year. The average monthly U.S. apartment rent now stands at nearly $1,180, up from about $1,125 a year ago, according to Reis.

“I sound to myself like a broken record because I’ve been saying the same thing for quite a few years now,” said Mark Obrinsky, chief economist at the National Multifamily Housing Council. “Demand remains high for apartments.”

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