Strong housing demand across the country for housing, is attracting institutional investors to deploy capital in the single-family rental and built-to-rent sectors, according to a Berkadia report.
Among the largest markets where SFR investment is strongest are Atlanta, Jacksonville, Indianapolis, Nashville and Charlotte, while smaller areas attracting SFR attention are Myrtle Beach, Port St. Lucie, Wilmington, Boise and Huntsville. Southeast markets in particular are performing well in SFR thanks to demographic trends, favorable development conditions and positive economic environments.
More than 20% of SFR homes in the larger markets are owned by institutional investors, with Atlanta’s institutional investor share at 28.4% and Jacksonville’s at 26.1%. Each of the markets has experienced population growth of between 4.9% and 11.2%, well ahead of the 3% national average expansion rate, a factor driving rental markets.
In the smaller markets, the cost of renting a home is more affordable than home ownership as demand combines with limited for-sale supply to drive up asking prices on single-family homes. Single-family starts have ramped up considerably compared with activity before the pandemic in response to the housing shortage, said Berkadia. The increase in supply provides an opportunity for institutional investors to increase their activity in these markets, in which they are generally under-allocated, the report said.
Migration is expected to remain positive in the near term for these areas, which will contribute to the health of the SFR market. Over the next two years, in-migration is expected to exceed out-migration by 20,000 residents in each market. In addition, these markets are expected to have 1% or more annual average employment growth over the next two years, which supports income gains that will enable SFR operators to raise rents above the national average increase.
“These emerging single-family rental markets offer promising opportunities for institutional investors, driven by strong demographic and economic fundamentals,” Berkadia said.
“As net in migration and employment growth continue to bolster these areas, the demand for rental housing is expected to rise, providing a favorable environment for investment. With a high quality of life and affordability compared to ownership, these markets are poised for sustained growth, making them attractive targets for expanding institutional portfolios.”
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