This strategy shift could enable the REIT to follow in the footsteps of its Sun Belt-focused peers by delivering more rapid dividend growth in the coming years, which could help it produce higher total returns.Mr. That's leading it to expand into that area so that it can capture some of the region's faster growth. However, the REIT can see the demographic shift to the Sun Belt region. A smart moveĮquity Residential's coastal strategy has been highly successful over the years.
That could allow it to increase its dividend at an accelerated pace in the coming years. However, with Equity Residential shifting a larger portion of its portfolio to faster-growing markets, the REIT's income should grow at a higher rate in the future. For comparison's sake, Equity Residential only increased its dividend by 3.7% this year. MAA boosted its payout by 15% this year, while Camden Property gave its investors a 13.3% raise. Meanwhile, Camden Property Trust ( CPT 1.21%), another REIT primarily focused on Sun Belt markets, delivered 15.1% blended rent growth in the first quarter.īecause those REITs are benefiting from faster rental growth rates, they're delivering bigger dividend increases. For example, MAA ( MAA 1.33%), a Sun Belt-focused apartment REIT, reported a 16.8% blended rent growth rate (new and renewal leases) in the first quarter. While that's a strong growth rate, rents are rising even faster across the Sun Belt region. The REIT's rental rates grew by an average of 13.3% in the first quarter. Rental rates are growing briskly, driven mainly by a recovery in demand as the pandemic's effects have subsided, enabling companies to bring more employees back to their urban offices. A growth accelerantĮquity Residential's legacy portfolio is prospering these days. However, it's aiming to grow its income from its four expansion markets to 20% in the future as it continues to recycle capital. It has acquired 4 billion dollars' worth of recently built communities and invested $1.1 billion in development projects.Įquity Residential currently gets less than 5% of its income from those expansion markets. It has recycled that capital to expand into Denver, Dallas, Austin, and Atlanta, where rents are growing faster. Since 2018, the residential REIT has sold off 4.6 billion dollars' worth of older apartment communities in select coastal markets.
That's leading Equity Residential to make a similar move. Likewise, more companies are relocating and expanding in the Sun Belt to take advantage of the influx of people and the region's better business climate. However, more people are migrating away from the coasts to warmer and cheaper cities in the Sun Belt region.
#4SHADOW INVESTMENT STRATEGIES DRIVERS#
These drivers have enabled the REIT to grow its dividend at a 6.4% compound annual rate since 2011. The REIT has complemented the growing rental income from its existing apartments by adding new properties to the portfolio via development projects and acquisitions. That has helped keep occupancy levels high and rental rates rising.Īs a result, Equity Residential's net operating income has climbed steadily over the years. Demand for apartments in those cities has remained strong due to healthy job markets that draw a steady stream of job seekers, who often need to rent because of high housing costs. Equity Residential's strategy of focusing on high-cost coastal markets has worked well over the past decade.
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