Chicago Firms Form Venture To Invest $1.5 Billion in Single-Family Rental Homes

Harrison Street and Core Spaces together plan to develop build-to-rent communities in large metropolitan markets such as Austin, Texas. (Getty Images)

Chicago firms Harrison Street and Core Spaces plan to invest $1.5 billion in developing and buying rental homes throughout the country.

The companies on Monday announced a joint venture to invest in build-to-rent communities in large metropolitan markets, saying they will invest as much as $1.5 billion in the emerging real estate sector.

The venture will pair Core Spaces’ build-to-rent platform and Harrison Street’s large scope, with $39 billion in assets under management in several property types.

Core Spaces and Harrison Street will focus on single-family rental homes within master-planned communities that have high-end amenities and are located in high-growth suburban areas with characteristics such as top-tier school districts, they said in a statement.

“Affordability challenges in the U.S. housing market and changes in lifestyle preferences are driving demand for single-family rentals and we believe our progressive design and hospitality-driven approach will differentiate our BTR communities in the single-family rental market,” Dan Goldberg, president of Core Spaces, said in the statement.

The firms join several others that have been pairing up resources to move into the BTR sector.

Earlier this month, Plano, Texas-based More Residential and San Francisco-based Stockbridge Capital Group said they plan to buy $4 billion worth of single-family rental homes.

Late last year, Miami-based Starwood Capital Group acquired Houston-based Land Tejas for an undisclosed sum, and Atlanta-based Invesco Real Estate bought a 75% stake in Avanta Residential, the single-family rental affiliate of El Paso, Texas-based Hunt Cos.

The Harrison Street-Core Spaces venture’s development pipeline already has $2.5 billion in total capital, with more than 6,500 units in areas including Austin, Texas; Denver, Colorado; Dallas, Texas; Orlando, Florida; and Nashville, Tennessee. The venture said it already has nine projects in various stages of development.

The firms have invested together in student housing deals on campuses including the University of Illinois at Urbana-Champaign, the University of California at Berkley, University of South Florida, Georgia Institute of Technology, University of Oklahoma, and Auburn University.

“The U.S. single-family BTR market is a rapidly expanding asset class with strong demographic tailwinds, and we are excited to draw from our U.S. student housing BTR experience alongside Core Spaces, an experienced developer and operator with significant residential real estate expertise, to identify attractive investment opportunities,” Harrison Street co-founder, Chairman and CEO Christopher Merrill said in the statement.

Harrison Street also invests in properties including life sciences, senior housing, and storage. It also has offices in San Francisco, London, and Toronto.

In another deal announced Monday, Harrison Street said it has acquired 11 medical office properties across six states from Ryan Companies. Tenants in the buildings include Edward-Elmhurst Health of Illinois, Froedtert Health & the Medical College of Wisconsin, and Children’s Hospital of Wisconsin.

Harrison Street and Ryan have completed 17 transactions in senior living, medical office, and healthcare, according to the statement.

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Source: Chicago Firms Form Venture To Invest $1.5 Billion in Single-Family Rental Homes

https://www.creconsult.net/market-trends/chicago-firms-form-venture-to-invest-1-5-billion-in-single-family-rental-homes/

This Year's Multifamily Pipeline to Set Record

 

The industry will add roughly 400,000 new rentals this year.

Marcus & Millichap is expecting the US to add roughly 400,000 new rentals in 2022, a record for the last few decades. Rental demand is anticipated to increase this year with rising interest rates and elevated single-family home prices.

“The new supply will play a key role in appeasing the housing shortage,” Marcus & Millichap predicts.

The Sun Belt is poised to account for one-fourth of the new units with Dallas-Fort Worth, Phoenix, Austin, Houston, Nashville, and Atlanta leading the way with each expected to add more than 10,000 units in 2022.

Migration to those metro areas is expected to combine to 250,000 new households this year.

Other Markets Still Intrigue

This is not to say that developers are focusing exclusively on these markets. At the recent GlobeSt.com Multifamily conference, investment professionals and experts explained where they are placing capital going forward.

Jerry Fink, the managing partner at the Bascom Group, says Las Vegas has the firm “most intrigued.” Fink likes the fundamentals, which include limited land for new development, a narrow new construction pipeline, and, the kicker, 10% rent growth.

The Colorado market, and specifically Denver, is also a favorite secondary market, according to Loryn D. Arkow, a partner at law firm Stroock, said. She added that she has seen client interest in Miami and other sunbelt cities, but said there is some concern that a bubble is looming in those markets. She is most confident in the northwest and Rockies.

In Arizona, Brian Tranetzki, principal and head of the multifamily at Taylor Street Advisors, said that Tucson was the most underrated market in the state. It is a discount compared to Phoenix, but there has been strong job growth and the economic growth drivers are equally as attractive.

The most unlikely market to make the cut: Albuquerque. It is the favorite underrated market of Jeff Adler, VP at Yardi Matrix. He called the market unloved, but said that it has strong fundamentals and has historically performed well with strong 7% rent growth.

David Harrington, EVP, and managing director at Matthews Real Estate Investment Services, and Fink are also bullish on core markets, and both like Los Angeles specifically. The Bascom Group is focused on what Fink called the doughnut around Downtown Los Angeles, neighborhoods like Boyle Heights. “We are finding tremendous demand for low-density, renovated two-story buildings,” Fink said.

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Source: This Year’s Multifamily Pipeline to Set Record

https://www.creconsult.net/market-trends/this-years-multifamily-pipeline-to-set-record/

2022 U.S. Multifamily Investment Forecast

 

Will Multifamily's Record Performance Carry into 2022? Trends, Insights, and Outlook for 46 Markets Across the U.S.

 

The health crisis unlocked a wave of changes to the economy and housing market that transformed the multifamily investment landscape. To help investors adapt to and capitalize on the unprecedented climate, the 2022 Multifamily Investment Forecast offers deep insight on the performance, investment, and financing landscape for the coming year.

Key Features Include:

• 2022 economic, housing, and demographic outlooks
• Apartment market index rankings
• Supply and demand forecasts for every market

 

 

Download Full Report

 

 

 

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https://www.creconsult.net/market-trends/2022-u-s-multifamily-investment-forecast/

284-Unit Luxury Apartment Complex Opens In Plainfield

 

PLAINFIELD, IL — A new luxury rental community is officially open in Plainfield. Located on Wallin Drive, near Route 30 and IL-126, the complex houses 284 units and a clubhouse with a resort-style pool.

Helmed by Mount Prospect-based firm Wingspan Development Group, Sixteen30 brings a mix of studios and one-, two- and three-bedroom apartments near downtown Plainfield. Pre-leasing for the units opened in July, and the development firm said Monday it surpassed its 30 percent leased milestone in about three months.

"Demand for luxury suburban rentals like Sixteen30 that offer people the space, flexibility and high-level amenities they want right now has been remarkably strong through the pandemic," Chris Coleman, vice president of development at Wingspan, said in a statement. "These deluxe properties are also highly appealing for their maintenance-free lifestyle, which is especially attractive as we head into colder weather as snow and ice removal are taken care of for residents." EIGHT BUILDINGS WITH NEO-FARMHOUSE EXTERIORS HOUSE THE UNITS, RANGING IN SIZE FROM 600 TO 1,500 SQUARE FEET AND PRICED BETWEEN $1,525 TO $2,750 PER MONTH. SPACES ARE EQUIPPED WITH STAINLESS STEEL APPLIANCES, WALK-IN CLOSETS, IN-UNIT WASHER/DRYER SYSTEMS, KEYLESS ENTRY, AND HIGH-SPEED INTERNET. MANY APARTMENTS ALSO HAVE A PATIO OR BALCONY.

The price also comes with additional amenities. Residents will have access to a large clubhouse, home to a coffee bar, fitness center and yoga studio, pet spa, and a 24-hour package room.

THE COMMUNITY, AT 14750 WALLIN DR., IS LOCATED JUST DOWN THE STREET FROM DOWNTOWN PLAINFIELD, SO ACCESSING RESTAURANTS, BARS, SHOPS, AND PARKS IS EASY.

"Until recently, Plainfield — like neighboring Naperville — has seen much more for-sale, single-family-home development than luxury rentals," Coleman said. "But as evidenced by our strong leasing numbers, there was definitely pent-up demand for the lifestyle and amenities offered a place like Sixteen30. And with up to three bedrooms available at the community, it's also become an attractive option for families who are renters by choice."

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Source: 284-Unit Luxury Apartment Complex Opens In Plainfield

https://www.creconsult.net/market-trends/284-unit-luxury-apartment-complex-opens-in-plainfield/

Higher Inflation Means More Competition for CRE Assets

 

There are three factors driving inflation right now, including a housing shortage.

Supply chain problems, labor shortages, and the housing shortage are all fueling inflation to eye-popping levels – and for CRE investors, that will mean greater competition for assets.

Headline inflation is up 7.1% from last year, the biggest uptick since 1982. And that rising inflationary pressure is forcing the Fed to switch gears and tighten policy. This will in turn put upward pressure on interest rates, raising the cost of capital for CRE investors, says Marcus & Millichap’s John Chang.

Supply chain is the first contributing factor to inflationary pressures: “It’s hard to move products from the manufacturers to the customers,” he says, pointing to shortages in raw materials, limitations on foreign port capacity, shipping container shortages, backlogs at domestic ports like those in Los Angeles and Long Beach, and a shortage of trucks.

“Basically, people want to buy more stuff than our supply chain can handle right now, so there are shortages and that means prices go up,” he says. Retail sales are up 16% over 2019 numbers, while the amount of product moved by trucks in the US is down 5.1% over the same period.

The second issue? Labor shortages, which continue to stoke inflation. Quite simply, “the US has never experienced a labor shortage like this,” Chang says, “at least not in the last 22 years, when records have been kept. As a result, companies are competing for personnel, and that’s driving up wages.” Average hourly earnings are up 5% over last year, and sectors like accommodations and food services have seen labor cost increases of more than 15%. And “rising wages create broad-based long-term inflation,” Chang says.

The third challenge is the housing shortage: there are not enough houses to buy or apartments to rent right now, and the problem will likely continue at least in the near term. There are currently about 1 million houses for sale in the US right now, about two months’ worth of supply; typically, four to six months’ worth of supply is required to maintain stability in the market.  Housing prices shot up 14.9% last year in response to the shortage.

In addition, there are only about 480,000 apartments available for rent, a vacancy rate of 2.6%, the lowest on record. Rents rose 15.5% last year.

“The Fed will be taking action to curtail the rising costs,” Chang says. He notes that Fed Chairman Jerome Powell has already announced plans to accelerate the end of quantitative easing that was put in place during the pandemic, and says this will likely put upward pressure on long-term interest rates. The overnight rate is also on track to increase three times or more this year, which will put upward pressure on short-term interest rates.

As a result, Chang says, interest rates are likely to continue to rise. The ten-year Treasury rate is already up about 30 basis points from the beginning of December to a little over 1.7%.

For investors, this will equate to more competition.

“Commercial real estate is viewed as one of the best places to invest money during periods of high inflation, especially properties that can increase rents with the market, like apartments, hotels, and self-storage properties,” Chang says. “Rising interest rates, and increased investor demand, implies that levered yields will compress this year. Basically, more commercial real estate buyer competition will push cap rates lower while the cost of capital, or interest rates, rise. That means CRE levered returns may tighten.”

But several property types still offer higher yields, like well-positioned office assets, retail assets, medical office buildings and some hotels, he says – and properties in softer markets harder-hit by COVID restrictions could also offer higher yields and stronger multi-year returns.

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Source: Higher Inflation Means More Competition for CRE Assets

https://www.creconsult.net/market-trends/higher-inflation-means-more-competition-for-cre-assets/

First Ever 4Q Occupancy Increase in 2021

 

In the 4th quarter of 2021, the U.S. apartment market saw occupancy tighten for the first time ever during the seasonally slow leasing period.

The nation’s apartment market generally operates on a predictably seasonal cycle. The last few months of the year are typically the slowest for the market, as renters hunker down for the holidays and the start of winter. This time frame follows prime leasing season – the cyclical bump that generally occurs during the 2nd and 3rd quarters.

However, COVID-19 disrupted the market’s seasonal behavior in 2021, resulting in big demand and therefore a big increase in occupancy at the end of the year.

U.S. occupancy climbed 30 basis points (bps) in the 4th quarter, pushing occupancy to 97.4% at the end of the year. In comparison, in the past three decades, occupancy has declined an average of 40 bps during the 4th quarter.

Markets that logged the nation’s biggest occupancy jumps in the 4th quarter of 2021 were New York and Newark, with the growth of around 100 bps. A handful of areas weren’t far behind, with increases of 70 to 80 bps seen in St. Louis, Houston, San Antonio, Cincinnati, and San Francisco.

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Source: First Ever 4Q Occupancy Increase in 2021

https://www.creconsult.net/market-trends/first-ever-4q-occupancy-increase-in-2021/

Webcast 2022 Economic Overview and Real Estate Outlook

 

General Information Thursday, January 27, 2022 Register Now >>

Summary Join us for a lively discussion with the Honorable Henry M. Paulson, Jr. The CEOs of Marcus & Millichap, TruAmerica Multifamily and ICSC are honored to host the former CEO of Goldman Sachs and 74th Secretary of the United States Treasury. The conversation will span the economic outlook, inflation, Federal Reserve Policy, and factors impacting commercial real estate.

 

Featuring Henry M. Paulson, Jr., 74th Secretary of the United States Treasury/Former Chairman & CEO, Goldman Sachs Robert E. Hart, President & CEO, TruAmerica Multifamily Tom McGee, President & CEO, ICSC

Hosted By: Hessam Nadji, President & CEO, Marcus & Millichap

 

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https://www.creconsult.net/market-trends/webcast-2022-economic-overview-and-real-estate-outlook/