IMN SFR Forum (West) Points to Sector’s Growth

“Build to rent is hot” was the consensus of speakers at the opening session of the IMN SFR (West) 8th annual conference in Scottsdale, AZ. They summed up a positive state of the industry in the “SFR Market Overview: Prognostications from the Powerhouses” panel discussion.

Build to rent properties fill dedicated subdivisions. The sub-asset class is the number one acquisition target of many capital groups, said Jeff Cline, executive director of SVN. He predicted the doubling or tripling of this property class in the coming years. During the last 18 months, over 26,000 build to rent homes have been created. “We’ve only just begun,” he said, referring to the “massive development” of 13 million single-family rentals projected for the next decade.

The panelists’ conclusions closely align with the IMN Day One audio interview hosted by Arbor Realty Trust. Click here to listen to the Arbor State of the SFR Market Q&A #1.

What’s Driving SFR Demand?

The IMN speakers agreed that SFRs started with the buying of distressed assets. They noted a significant shift occurred with the US now facing a housing shortage. Building and financing housing has become a national concern.

Job growth and migration are stimulating the SFR market, according to the panelist Molly Boesel, senior economist at CoreLogic. “The US is experiencing amazing economic growth with the longest expansion in recent history,” she said. “Some parts more than others.”

“People want to see where the jobs are. They don’t want to buy right away,” Boesel said. She added in relocating for work, people move with their families. With the current economy, new jobs are attracting people to urban areas. People want to live near their places of employment, in homes with amenities, in safe neighborhoods with good schools. Such demographic trends are heightening demand for more rental units. These trends are also underscoring the lack of workforce housing.

In many cities, housing stock is becoming more obsolete. For example, the average age of a residential building in New York City is 90 years old, according to Multi-Housing News.

What’s Driving SFR Opportunities?

Such conditions in cities have led to repositioning and a fix-and-flip market for rentals. Also, political leaders are pushing for more environmentally responsible urban planning. These efforts can mean reducing a city’s carbon footprint with higher density SFRs, closer to urban centers.

Panelists pointed out how dynamic institutional capital is readily available. Investors have shown steadfast interest in real estate for its risk-adjusted returns and market resilience. The SFR market has proven itself to be a solid investment asset class. M&A activity in the last 18 months has shown an enormous demand for yield. With easily obtained debt and equity, including private equity, options for creating capital stacks continue to grow.

Top Markets

For SFR opportunities, Atlanta, Phoenix, Orlando, Dallas, and Las Vegas are top markets today, said Boesel. Investors are showing heightened interest in secondary and tertiary markets, including in the Southeast and the Rust Belt. That area refers to the manufacturing region centered in the Midwest. It encompasses Ohio, Indiana, Illinois, Michigan, and Wisconsin, plus Pennsylvania.

PropTech and Future Trends

The panelists stated that new technology is expanding the ease of investors to access property all over the United States. Instead of acquiring real estate in an area where one lives, buyers are making more demand-driven investments. Mobile technology is increasing the efficiency of managing property and construction. New tools also assist in financing. Payment apps could replace ACH (Automated Clearing House) payments increasing convenience and security while decreasing risks of errors.

For additional information on PropTech and future trends, check back with the Arbor Realty Trust blog, which will feature Arbor’s IMN SRF Forum (West) Audio Q&A #2. The conversation of experts will provide a post-IMN conference recap diving more deeply into these topics and more.

For additional information on single-family rental growth and financing, visit Arbor’s SFR financing page.