In the search for commercial real estate asset classes that are best positioned to weather the economic fallout of the coronavirus-mandated shutdown, it may be time to take a closer look at single-family rentals (SFR). Brokerage firm SVN | SFRhub Advisors cites its own data along with findings from industry consultants to support this thesis.
On its own platform, SVN | SFRhub has seen a 650% uptick in investment activity since mid-March for SFR/BFR (build-for-rent) portfolios. Turning to research from John Burns Real Estate Consulting (JBREC), SVN | SFRhub says that although single-family rentals won’t be inured to short-term shocks, they’re better positioned for relatively fast recovery than, say, hospitality, retail and office/co-working.
Housing rental defaults will prove painful in the short-term. However, 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, according to JBREC.
The more recently emerging BFR subset of rental housing encompasses 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, EVP of SVN | SFRhub.
“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. “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.”
For comments, questions or concerns, please contact Paul Bubny