US Garden Apartment Investments Offering Outsized Return Potential


US Garden Apartment Investments Offering Outsized Return Potential

The garden apartment subtype of the US apartment sector is producing very encouraging total returns for property investors, beating all sector returns except industrial. The outperformance of garden apartments has prevailed not only for the quarter ending September 30, 2021, but over the twenty-year average as well.1

 

Affordability limitations and constraints on homeownership contribute to the strength of garden apartment investments by locking in demand by necessity. Such properties are concentrated in the medium-quality range and offer lower rents compared with high-rise apartments.

 

Institutional investors have historically focused more of their apartment holdings on high-rise properties where new construction is more plentiful.

 

In 2021, institutional investors appeared to be noticing the attractiveness of garden apartment properties as shown in a near-doubling of net acquisitions versus the ten-year average as of September 30, 2021. Joint ventures comprised more than a third of this activity.2

 

In light of the generally older vintage of garden apartment stock, more investment opportunity is available especially for value-add investments that will prolong the useful life of these properties.

 

1National Council of Real Estate Investment Fiduciaries. September 30, 2021.

2Real Capital Analytics. December 31, 2021.

Important disclosures

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More about the authors

Martha Peyton, Ph.D. CRE Managing Director and Global Head Real Assets Research

Martha Peyton, Ph.D. CRE, is managing director and global head real assets research primarily responsible for the development and application of research to real asset strategies. 



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