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Updated 11 months ago,

User Stats

46
Posts
44
Votes
Tyson Scheutze
Property Manager
  • Investor
  • Charleston, SC
44
Votes |
46
Posts

What's in Store in 2024 in SFR?

Tyson Scheutze
Property Manager
  • Investor
  • Charleston, SC
Posted


I wanted to take a moment and discuss some questions about SFR and respond with some specific trends we expect to see more of in 2024. Many of the topics below were hot topics for debate by SFR industry leaders at the recent IMN CONFERENCE in Scottsdale Arizona.

Institutional SFR buyers are moving on to other asset classes.

Nope. We think some of the easy money has definitely already been made, and we spoke with many people who said they were pruning and optimizing their portfolios, while also reevaluating what they buy and where they buy. But we believe SFR has a long runway as a solid asset class for years to come.

BFR will replace scatter-site SFR as the preferred vehicle for owning SFR.

Yes. We are leaning heavily into this statement. Some of the same organizations currently disposing assets are looking at new BFR communities in various stages of development. The reasons are the same as what has always made multifamily so attractive: uniformity, density, etc.

Now is a bad time to develop/build?

Not true. Supply chain issues seem to have largely normalized. The labor market is still challenging (and not showing signs of improving based on the escalating average age of most contractors). But as one participant said, given the difficulties of getting new BFR online (particularly capital restraints), those who can get new BFR developments to lease-ready status in the next year or two should be handsomely rewarded by a lack of inventory.

Multifamily’s wave will crest causing the asset class to struggle

Many different thoughts on this. Most reports say, given affordability constraints and overall market volatility, renters are staying put for much longer periods of time, reducing turnover. However you also have huge amounts of multifamily inventory hitting the market simultaneously. All of the product is nearly identical in target market reach (Class A, high rent). We see the party slowing down but see a lot of upside in Class B and Class C product which have not been able to make it out of underwriting for the past couple of years (and really has not been built for several decades, at this point).

Institutional buyers will return in 2024?

There were many hopeful SFR industry people at IMN in Arizona, desirous of a better pace for acquisitions in 2024. It wouldn't take much to beat 2023. But we remain cautious in our optimism as the capital stack requirements are still making it really difficult for large and small aggregator/operators to be able to craft the right deal structure. Unless rates lower it may be status quo. We hope to see some movement by end of Q2

Atlanta is losing its luster?

People still love the Southeast and its shining star, the ATL. But the market du jour is clearly Charlotte, with nearly every owner/aggregator we talked to interested in this market. It doesn’t hurt that the Charlotte MSA is now Statesville to Rock Hill, Hickory to Salisbury with coverage at all points in between. We also heard a lot of chatter and a lot of interest in some traditionally less sexy, midwestern markets like Kansas City, Columbus, etc.

Capital is coming in from the coast?

As acquisitions have slowed, there is much more focus on the day-to-day, including a lot of chatter about OpEx and the biggest issue for most fans of the Southeast: insurance. In addition to many insurance providers pulling out of the state of Florida, we heard of big insurance issues in coastal cities in South Carolina, Georgia, etc. That being said, many of these same markets are too strong to ignore but we heard a lot of people reconsidering what are the best coastal markets, with cities like Jacksonville replacing Tampa/St. Pete.

  • Tyson Scheutze