The Commercial Real Estate Alpha Site

By Ruiqi Chen, Editor at LinkedIn News

Updated 2 hours ago

JPMorgan Chase is buying and developing US$1 billion worth of rental homes.

The Wall Street bank’s asset-management division has agreed to a joint venture with Haven Realty Capital to create “entire communities of new homes,” according to Bloomberg, starting with 2,500 homes in three neighborhoods in Atlanta. JPMorgan took a similar step in 2020, when the bank worked with American Homes 4 Rent on a US$625 million venture. Haven Realty’s founder said he believes demand for single-family rentals will remain high, despite the housing market’s recent cool-off.

Jay Parsons• Rental Housing Economist (Apartments, SFR) and PropTech VP

For anyone thinking that deal flow and new rental housing development would grind to a halt due to high rates … not so fast. We certainly will see acquisitions and new starts slow, but announcements like this one (JPMorgan investing in a $1 billion fund to development build-to-rent single-family communities) are a good reminder: Investors love rental housing — both MF and SFR. Few thoughts:

1) Remember that higher rates and inflation impact pretty much all investments. Yields will compress, but investors needing to place capital still find SFR/BTR and multifamily attractive relative to other options. Rentals are relatively liquid and they produce cashflow.

2) Hearing from lenders that they’re still open for business but being very selective — which usually means narrowing business to established developers with whom they have long relationships. Also requiring lower LTVs, more equity — which narrows the pool.

3) I know a lot of people (myself included) want to see more for-sale homes getting built — especially starter homes. But few outside the industry understand how difficult that math has gotten this year. BTR (like multifamily) is usually lower risk than traditional homebuilding because a) a single buyer is often locked in very early for the entire project, b) it’s less vulnerable to shifts in rates, c) the ability to build at scale more efficiently without custom packages for each home.

4) We’ll continue to see capital favoring the Sun Belt (like this JPM deal that starts in Atlanta) given stronger structural demand fundamentals and lesser policy risk. Opportunistic and local buyers will still target coastal cities but investors increasingly nervous about risks. Skeptics will worry about supply; and supply will certainly be a short-term risk to account for, particularly if demand remains soft. But remember that supply is structural while demand is cyclical. Supply will taper back, and demand will be there in the long term.

#BTR #SFR #rentalhousing #Multifamily #CommercialRealEstate. #CRE #DPCRE

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