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TREND UP: SFR BTR CRE ROI
The Henley Group (THG) brings you news you can use. We take a deeper dive into the alphabet soup of the emerging multifamily trend.

Adding New Acronyms to Investment Portfolios
High cost of entry into the residential market and fierce competition from a myriad of institutional investors is handicapping some investors and developers from deploying equity into traditional commercial residential segments such as Multifamily and Student Housing. Instead, they have turned to Single Family Rentals (SFR) and a subset of this market, Build-To-Rent (BTR).

SFR, currently valued at approximately $3.4 trillion, is a fast-emerging CRE market segment with 810,000 new households expected to sign leases for single-family rentals over the next 5 years, or approximately 162,000 per year, according to Green Street.
Could homeownership be on the way out?
Rent growth in one year alone has tripled from 2.6% in 2020 to 7.8% in 2021, with 2022 projected to be even higher (source: CoreLogic). It’s plain to see that SFR for the near term is extremely positive and should be in every CRE investor's portfolio.

With rising home prices squeezing buyers out of the market, builders and developers are catching on and constructing single family rental communities with the purpose of renting, hence Build-To-Rent (BTR), and investors are taking notice.

This subset is very attractive as it is easier to build and invest in a dedicated, 200-unit BTR complex, for example, versus investing in a portfolio of individual, single family homes scattered at various locations. Plus, BTR stabilizes faster than multifamily high-rises of similar unit count. In most cases, as per unit construction is completed, each can be rented immediately compared to multi-story buildings which require an entire building to be constructed before units can be occupied to generate rent.
BTR is putting down roots
Serious Traction
According to data released in March 2022 by the National Rental Home Council and John Burns Real Estate Consulting, BTR accounted for 26% of single-family rental homes in the fourth quarter of 2021, compared with 3% in the third quarter of 2019, when they first started tracking the numbers.

Purchases of existing individual homes by single-family rental home landlords during that time decreased to 57% from 81%. (source: Arleen Jacobs, “Build-to-rent gains traction over buying homes one at a time” Pensions & Investments, May 24, 2022).

Even as rising home prices cool with the upsurge in interest rates, SFR is here to stay and will likely continue to outpace all traditional residential segments for years to come.

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