The Light: The Great American Move | John Burns Real Estate Consulting

The Light: The Great American Move

As states, cities, and counties around the country slowly reopen, we predict The Great American Move. For safety reasons, financial prospects, life change improvements, personal comfort, and employment, we expect a surge in household and business relocations over the next few months that will provide new, strategic opportunities for the real estate market.

New Home Opportunities

Home builders should capture the pent-up demand from apartment dwellers, in-migrants (we expect more home buyers will migrate from cities to suburbs), families wanting more space, and residents relocating to new jobs. Our builder clients are reporting increasing new home demand in states that have started to reopen and rising home sales in exurban areas that appeal to commuters. Texas home builders are surprised at the demand, and some are even concerned they will run out of lots. We heard from several builders after the last issue of The Light that the first-time and family buyer profiles we identified were key components of their sales in recent weeks.

Apartment Opportunities

The traditional apartment market will face substantial headwinds, but some will also benefit from The Great American Move. While home purchasers are looking for more space, we anticipate apartment renters will move closer to jobs and to cities where businesses are hiring. Fewer jobs (or adjusted incomes) are likely to entice some renters to “double up” in larger units while others look for more efficient spaces at lower absolute rents. Understanding the local renter’s motivations and incomes will be crucial. Class A apartments are the most likely to experience rent softening with more affordable B and C properties the beneficiaries. Some of our clients are looking for “value add” opportunities where they upgrade Class B properties to create refreshed units and improved amenities that command elevated rents that are still below those of newly built Class A apartments.

Single-Family Rental Opportunities

The single-family rental space was the first to experience stronger demand as a result of the COVID-19 pandemic, as apartment residents and city dwellers sought out larger spaces. Most operators reported an uptick in demand during the last two weeks of March. Single-family rentals allow financial flexibility (no need to qualify for a loan, no down payment, no 30-year mortgage) and privacy, with enhanced “social distancing” opportunities for residents. Often, they are renters by choice and will pay a premium to live in a dedicated community with other renters and community amenities rather than in a privately owned rental home.

Housing and Commercial Real Estate Opportunities

We expect housing near the best commercial real estate locations will also benefit from The Great American Move. Retail stores will reopen in the best locations only—likely in grocery-anchored neighborhood centers. And we expect to see accelerated suburban mall redevelopment with new housing and a smaller amount of retail that provides proximity to employment and services, in environments that are less dense than traditional city centers.

Our research indicates some office submarkets will experience increases in demand, the result of tenants needing more space (for social distancing), while others will experience a decline as more residents continue the trend of working from home and some businesses disappear. Hotels that have strict cleaning standards and a recognizable brand may be the go-to for those who need to travel for business, especially if their competitors don’t reopen for a while. Industrial distribution centers may also expand to plan for easier, shorter delivery times.

Investor Opportunities

Investors should consider The Great American Move as an opportunity to invest in the markets where a) people want to live, b) jobs will quickly return, and c) businesses will relocate as the first step in the economic recovery from COVID-19.

As our research team monitors economic conditions across the country, our consulting team continues to work on portfolio and opportunity analysis for investors. Please contact Lesley Deutch or Ken Perlman for further information.

We are continuing our weekly webinars for our research subscribers, who are going to help our firm through to the proverbial light at the end of the tunnel. Their willingness to share insights with us during these times is making us all smarter.

Lesley Deutch If you have any questions, please contact Lesley Deutch, Managing Principal, at (561) 998-5814 or by email.
Ken Perlman If you have any questions, please contact Ken Perlman, Managing Principal, at (858) 281-7214 or by email.