iStock/Keith Szafranski Caption
On their earnings calls, a number of apartment REITs expressed optimism that falling gas prices might prove to be yet another tailwind pushing rents higher in 2015. 

Take for example, Tom Grimes, COO at Memphis-based REIT MAA, which has a largely suburban portfolio and residents who rely on the automobile.

“I think that everybody is enjoying having a little bit more money in their pocket as a result of that [lower gas prices],” Grimes said in the call, which was transcribed by “And we believe that, that will benefit for us down the road. Our rent-to-income ratio is very low at 16%; this just helps this. Does it make a difference today in our sort of lower demand part of the cycle? I don't think so. But it will have a compounding effect as we get into the year.”

Arlington, Va.-based AvalonBay Communities has a more urban portfolio that MAA’s, which means fewer residents rely on cars. Yet, the company still could see a little help from energy prices. On his call, Tim Naughton, CEO of AVB remarked that “perhaps you do get a little bit of lift from additional disposable income relative to falling oil rates.”

Even in Texas, the epicenter of the U.S. oil industry, Houston-based Camden Property Trust expects low gas prices to be a benefit to many consumers.

“Obviously, Dallas-Fort Worth is more diversified than Houston, from an oil perspective,” CEO Ric Campo said on his earnings call. “It's a transportation hub, and with low oil cost or low gas cost, it actually improves the Dallas economy. San Antonio gets a minor lift from $40 oil. Austin gets about a 1.5% increase in their annual GDP from $40 oil as well because of its tech business and low-cost gasoline also helps Austin.”

A Slight Lift

But how much of a lift can landlords bank on from falling oil prices? Conor Wagner, a senior associate at Green Street Advisors, says most REITs weren’t comfortable offering real numbers.

“No one gave a strong specific answer [about how much it will affect rents],” Wagner says. “They look at it as a general benefit.”

Others think the affect may be less than is expected. “While it’s probably incorrect to say that lower oil prices and, in turn, a little more cash in renters’ wallets won’t impact rent growth at all, the influence appears likely to be very slight,” says Greg Willett.

Willett points to other factors like supply, the sustainability of robust job production and wage growth as bigger factors.

“To keep rent growth for that product segment where it has been of late, wage growth needs to get back on track at some point,” he says. “Lower oil prices, then, maybe give operators a little breathing room helping to achieve the middle-market rent growth already budgeted for 2015. But those lower oil prices likely don’t mean that middle-market rent growth will accelerate from the pace already seen.”

But Willett also points out that, when it comes to energy prices, things can change in a hurry.

“Most energy experts are calling for oil prices to move back to somewhere in the range of $60 to $80 per barrel in the last half of 2015,” he says. “If that happens, all the savings on energy that consumers are seeing right now gets cut in half in just a few months.”