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Inflation Has Hit Tenants Hard. What About Their Landlords?

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Geography also matters. Even amongst the most important landlords, those with a presence in Sun Belt cities corresponding to Miami, Tampa, Nashville and Phoenix saw far faster rent growth than high-cost coastal markets like San Francisco, where rents fell substantially through the pandemic lockdowns as white-collar employees fled for distant locations.

Inflation F.A.Q.

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What’s inflation? Inflation is a loss of buying power over time, meaning your dollar is not going to go as far tomorrow because it did today. It is usually expressed because the annual change in prices for on a regular basis goods and services corresponding to food, furniture, apparel, transportation and toys.

What causes inflation? It will probably be the results of rising consumer demand. But inflation may also rise and fall based on developments which have little to do with economic conditions, corresponding to limited oil production and provide chain problems.

Is inflation bad? It will depend on the circumstances. Fast price increases spell trouble, but moderate price gains can result in higher wages and job growth.

Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets basically have historically fared badly during inflation booms, while tangible assets like houses have held their value higher.

Mid-America Apartment Communities, a publicly traded owner of 101,000 units concentrated in Georgia, Texas, Florida and North Carolina, has benefited from all these trends. Its latest tenants make $91,319 on average and are of their mid-30s. In the primary half of the 12 months, its latest and renewed leases increased 17.1 percent over their previous rates, driving the most important increase in its dividend per share in many years.

“We feel superb concerning the opportunity for pricing going forward and still imagine now could be the time to push rate versus volume,” said Tom Grimes, the corporate’s chief operating officer, explaining to investors on a quarterly earnings call that he’d slightly raise prices than worry about turnover, which stays low. “Demand is sweet, and our priority is for growing rents.”

It’s harder to trace the funds of privately owned real estate portfolios, which may range from just a few hundred to just a few thousand units — midsize landlords, in relative terms. But interviews suggest that even when they continue to be profitable, rising expenses have weighed more heavily on their bottom lines.

Take Swapnil Agarwal, whose Houston-based Nitya Capital has grown swiftly to encompass 20,000 units. He says insurance premiums, payroll costs and maintenance have combined to push his expenses to $7,000 per unit this 12 months from $5,500 in recent times.

“It’s ironic, because our net operating margins haven’t gone up, actually they’ve gone down,” Mr. Agarwal said. The image may improve as he renews leases at market rates. “Yes, the rent growth is there,” he said, “nevertheless it has to sustain there for some time due to costs going up.”

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