US REITs benefiting from demographic shifts

By Reporter
 — 1 minute read

Australian investors should look to US real estate investment trusts to benefit from current generational housing trends, a new study from AMP Capital has found.

Home ownership in the US has seen a “steady decline” since the global financial crisis as members of Generation Y delay purchasing suburban houses in favour of renting closer to the “urban core”, the company’s Generation Rent whitepaper said.

“The greater propensity for Millennials to rent isn’t necessarily a surprise,” said AMP Capital client portfolio manager for global listed real estate Chris Deves said.


“After all, this is the same generation that pioneered the ‘sharing economy’, a collaborative approach to consumption, which draws heavily on the notion of renting.”

Mr Deves said this was an important tailwind for real estate investment trusts (REITs) on a through-cycle basis, especially in the apartment sector.

“Apartment REITs are generally high quality and consolidation in the sector has left a set of large, well capitalised companies with seasoned management teams, making them attractive for real estate investors with a long-term investment horizon,” he said.

“Cyclical affordability issues and demographic change has and will support demand for apartment rentals in city centres. During the property cycle, the US apartment REITs should therefore be in a stronger position to push rents, and quality management teams with insight into the needs of Millennials will be best placed to deliver value for investors of all sizes.”

While the move towards renting is also present in the Australian real estate sector, AMP Capital said investing in the US space is “the best way to play this trend” as it offers the largest and most liquid set of listed apartment landlords.

“Australian investors should consider a global strategy for listed real estate in order to access these kinds of thematics, which may not be as readily investible in their local market. A global approach also offers geographic diversification for the real estate portfolio,” Mr Deves said.

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US REITs benefiting from demographic shifts
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