The last 18 months or so have been the proverbial roller coaster for the real estate industry. COVID-19 wreaked havoc on the nation but unlocked tremendous latent demand, changed where and how people lived, and left dramatically rising prices in its wake. Jeff Adler, Vice President of Yardi Matrix, has a measure of the pulse of just about all real estate sectors (retail, office, self-storage, but especially apartments and build-for-rent). Keep reading below for some of the key takeaways form our podcast with Jeff.
The strength of the apartment market
- The apartment market is HOT. Demand is far outstripping supply.
- In most cities, apartment rents have surged beyond pre-COVID levels as demand has already absorbed excess supply.
- There is a lot of capital coming out of the office and retail sectors attracted to the multifamily and industrial sectors.
Build-for-rent’s time to shine
- The single-family rental (SFR) and build-for-rent (BFR) sectors are following a trajectory in terms of growth and tech development that is similar to the trajectory of the multifamily sector coming out of the S&L crisis.
- In many markets, BFR rent appreciation is outpacing apartment rent change.
- There is a wave of people entering their prime home buying years. BFR communities can capture those households that want the perks of owning a detached home without the financial commitment.
A look into the future
- With excess supply absorbed and activity humming, expect to see apartment supply ramp up again in 2023–2025.
- All rapidly growing metropolitan areas are hot residential rental markets, especially those in the Carolinas, Florida, and Texas.
- Investor activity will follow the migration of people. The demographic that was previously drawn to the hustle and bustle of urban cores is now maturing and moving to suburban locations.
- Jeff believes the inflation seen today is going to be more permanent than transitory given stubbornly high housing costs and the migration of people from high-cost areas to lower cost areas.
- Increased construction efficiency in the form of modular, offsite construction would be great for the industry. However, these improvements are capital intensive and there are many regulatory obstacles, and so that transition will take time.
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