Apartment investors beware

Apartments may be the hottest sector in commercial real estate, but beware of a potentially mammoth competitor lurking outside the gates: the federal government.

Lee Arnold, the CEO of Colliers International Tampa Bay, Central Florida and Southwest Florida, warned that government-sponsored entities such as Fannie Mae and Freddie Mac may start renting foreclosed homes.

Arnold, speaking at the CCIM commercial real estate conference in Fort Myers, cited a recent Federal Reserve white paper that suggested as much. These government entities together own thousands of homes all around the country and could swamp the rental market, competing directly with apartments.

Investors who have been paying top dollar for apartment complexes might want to expand their competitive analysis to include foreclosed homes. Occupancy projections might not be so rosy in that light.