Page 34 - IreitEbook

Apartments can also be grouped as garden-style or high-rise, though that

designation doesn’t factor into their class designations. For the record,

garden-style buildings can be up to four stories tall and typically consist of

multiple structures spread out across a larger property. Whereas high-rise

structures are normally built in cities where real estate is harder to come by.

Like office space, demand for apartments is highly connected to employment

trends – though not in the exact same way. While improved or improving

jobs numbers in specific areas can and do lead to more people looking for

apartment space, declining employment opportunities can have the same

effect.

Think about it: Dream homes are what you buy when you’ve got steady

income. Apartments are what you rent when you’re not so sure.

Well aware of that sweet spot they’re in, apartment-owning REITs make sure

to take advantage of whichever trend they happen to find themselves in.

When unemployment rises, apartment landlords tend to decrease monthly

rents and/or offer tempting concessions.

Ultimately, this brings in more business, which positively affects profits.

Then, during upswings, they'll raise those rents. Which… guess what?

Positively affects profits.

The only real potential downside is the possibility of oversupply. If REITs or

their stand-alone competitors get too enthusiastic about an area, it could

become over-saturated, leading apartment complexes to consistently deplete

each other’s profitability.

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