PHOENIX, AZ - As the world grapples to tame the coronavirus pandemic and overturn the economic effects of this unprecedented event, commercial real estate (CRE) investors are monitoring all asset class financial positions to lessen short-term portfolio risk while augmenting investments for long-term growth. SVN | SFRhub Advisors, along with industry experts, predict ongoing consumer demand for housing will position single-family residential (SFR) rentals as an investment portfolio standout. A CRE brokerage firm, SVN | SFRhub Advisors, dedicated solely to SFR/BFR (Build-for-Rent) portfolios, recorded a 650% uptick in investment activity since mid-March 2020 for SFR/BFR portfolios on their technology platform, SFRhub.com, averaging 10,000+ listed homes.
Recent data from John Burns Real Estate Consulting (JBREC) outlines CRE sectors most likely to be affected following the pandemic, especially in the short-term, are hospitality, retail and office/co-working. Conversely, JBREC states SFR (while not unscathed in the short-term) should be positioned for faster market recovery and a better long-term play. Housing rental defaults will prove painful in the short-term, but the low supply of newly built rental homes in most markets, and capital seeking safety, yield and inflation hedge, should help SFR recover earlier than other residential real estate asset classes.
“Investors have reaped financial advantages of a 10-year bullish marketplace, notably the past few years with SFR portfolios, and the newer BFR market,” said Jeff Cline, executive director and principal of SVN | SFRhub Advisors. “For the first time in U.S. history, rental household growth outpaced U.S. home ownership.” He added “Looking ahead, consumer economic, lifestyle, and work-at-home popularity indicate global investors’ near and long-term outlook for capital growth and income opportunities in single-family detached homes for rent is better than it’s been for several years.”
BFR communities encompass single-family homes built from the ground up specifically for renters and not homeowners. These homes help to fulfill the vast housing need and rental shortage occurring across the U.S. According to JBREC, recently surveyed BFR projects had a very strong 97% stabilized occupancy rate prior to the COVID-19 pandemic.
U.S homebuilders may turn to REITs, private equity firms and individual investors to purchase completed or near completed single-family communities for rental investment if the new home buyer market continues to retract. “For the first time, we now have several private capital group clients with tens of billions of dollars to specifically invest in the BFR space,” said Michael Finch, executive vice president of SVN | SFRhub Advisors.
Demand from millennials and older adults/retirees has destigmatized renting and touted SFRs' benefits like increased space, yards and amenities representative of living in a single-family detached home. Skyrocketing unemployment, job uncertainty, and hefty student debt loans imply the SFR/BFR market should remain strong among millennials as home ownership moves farther out in time and remote working becomes more popular.