Real Estate Investment Shifts
Apartment Values Lag Nationally While Malls Lead Real Estate Recovery After Slump
Apartment values went nowhere in the past year, making them one of the worst-performing real estate investments in the country, according to Press Enterprise. The finding comes from a new report by Green Street, a commercial real estate research firm based in Newport Beach, California.
The broader commercial real estate market is slowly climbing back after a rough four-year slump. But apartments are getting left behind, Daily News reported.
Apartments Have Lost 19% Since Their 2022 Peak
Green Street tracked 12 types of commercial real estate. Apartments ranked near the bottom in the past year, with values flat — meaning no growth at all, according to Daily Breeze. Since real estate peaked in 2022, apartment values have dropped 19%. That is the third-largest decline among all 12 property types Green Street follows.
A flat return sounds harmless. But when you factor in inflation and borrowing costs, flat is effectively a loss for investors. Apartment owners have not recovered the ground they lost when values started falling three years ago, OC Register reported.
Malls Are the Surprise Winners of the Past Year
While apartments stumbled, malls surged. Mall values rose 12% in the past year, the best result of any real estate type tracked by Green Street, according to Press Telegram. Mall values are now 3% above where they stood at the 2022 peak.
That turnaround is striking. Malls were widely written off as dying assets just a few years ago. Now they are outperforming nearly every other property type, including apartments, office buildings, and hotels.
Why Apartment Values Keep Struggling to Recover
A wave of new apartment construction has hit markets across the country. More supply means landlords face more competition for renters. That pressure keeps rents from rising fast enough to push property values higher, according to Daily News.
Rising interest rates over the past few years also hurt apartment investors hard. Higher rates make borrowing more expensive and push property values down. Even as the broader real estate market starts to heal, apartments are still working through those headwinds, Press Enterprise reported.
Commercial Real Estate Slowly Heals After Four-Year Slump
Green Street's report is not all bad news. Most commercial real estate types are recovering, according to OC Register. The four-year slump that battered office buildings, retail centers, and other properties is showing signs of easing across the board.
Apartments may eventually follow. But for now, investors who bet on apartments are watching other property types — especially malls — pull ahead. The gap between the best and worst performers in the past year was dramatic: 12% gains for malls versus zero for apartments, Daily Breeze reported.
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