by: Robert Brunswick, Co-Founder and CEO, Buchanan Street Partners
Apartments have been the darling of real estate capital markets for the past seven-eight years. This deep into an outstanding run, some investors have begun to worry if the clock is approaching midnight for Cinderella. However, an examination of underlying demand dynamics suggests that the U.S. will require an extraordinary number of rental units over the next five to 10 years, even beyond. If supply remains in check, the following long-term lifestyle and demographic trends should allow apartments to remain the belle of the ball for some time to come:
“Renter nation” trend
Over the past decade, the U.S. has added nearly 10 million renters, the largest 10-year gain on record, as home ownership fell to a near-record low of 64 percent in 2018. The number of occupied apartment units rose by 20 percent over that same period. Over the next decade, the U.S. is projected to add another 10 million households, many of which will be rental households for the reasons explored below.
Population growth in key rental cohort
This year is projected to be the year in which the millennial generation (persons aged 23 to 37 years in 2019) surpasses the baby boomers as the largest living generation. This generation roughly coincides with the age cohort (20-34) which accounts for the largest share of home rentals. Nearly 30 percent of people in this age group were renters in 2018. This population of prime renters is expected to grow from 68 million today to nearly 70 million when its growth peaks in 2024.
The U.S. Census Bureau projects that the nation’s population will reach 404 million in 2060, reflecting an increase of 79 million from 2017. Of this number, a whopping 75 million are projected to result from net immigration. Without these immigrants, the Census Bureau projects the U.S. population to grow by less than 4 million. The racial and ethnic groups that make up the largest share of immigrant populations have significantly lower home ownership rates than non-Hispanic whites.
Delays in household formations; other lifestyle changes
Millennials and their recent predecessors have been getting married later and delaying children in favor of careers and improved financial security. Single people are much more likely to rent apartments than married persons, and the same goes for the childless vs. parents. Over the past decade, the single population has risen by 15 million, with 2014 marking the first year in our nation’s history when unmarried adults began outnumbering the wedded. At the same time, despite a decline in the overall divorce rate, “gray divorces” are on the rise. Among U.S. adults ages 50 and older, the divorce rate has roughly doubled since the 1990s. Unlike younger persons who divorce, older divorcees are less likely to house children and, thus, are more likely to rent apartments. In fact, many of these divorces are precipitated by children leaving the nest.
Housing affordability complicated by student loan debt
The struggle to make ends meet for many millennials—part of the first generation which is forecast to see its real wages fail to exceed those of their parents—has a profound impact on housing choice. Many are unable to amass the down payment necessary to purchase a home, particularly when saddled with large student loans. Nationwide, student loan debt outstanding has tripled over just the past 12 years from about $500 billion in 2006 to $1.5 trillion in the third quarter of 2018. Today, the prototypical millennial has a negative net worth and, partly as a result, first-time buyers now represent only 30 percent of all home purchases, down from the long-term average of 39 percent. Naturally, this is good news for multifamily landlords, at least once the millennials leave their parents’ house.
Demographic trends such as these move like ships. They are inexorable in the medium term and turn slowly. Thus, while an increasing unit supply may impact pricing in the short run, the long-term demand picture should keep wind in the sails of apartment investments for some time to come.
Robert Brunswick is co-founder and CEO of Buchanan Street Partners, a real estate investment management firm based in Newport Beach, Calif. - read the original article here.
JUNE 14, 2019
TAMPA, FL - Wingspan Development Group and ABC Capital Corp. are excited to announce the recently approved Jade at North Hyde Park, a dynamic new mixed-use development located in the heart of Tampa, FL. Throughout the development process, Wingspan and ABC Capital have worked closely to create something unique in the North Hyde Park neighborhood.
Jade at North Hyde Park is a five-story wrap style mixed-use project with 192 luxury apartment units and 3,100 square feet of retail space with 850 square feet of outdoor covered seating area fronting Willow Ave and Cass Street. The property is conveniently located within minutes to the Riverwalk and Downtown Tampa and is just blocks to the University of Tampa. Jason Macklin, Wingspan Development Group’s Director of Development, saw the potential of the location immediately. “We really like the Tampa market and are excited to be a part of the City’s continued growth. Jade at North Hyde Park will be a great addition to Tampa for a number of reasons; not only will the residential aspect of the project be top notch, but the retail component of the property will be a nice addition to the North Hyde Park community and a great amenity for the residents.” Other property amenities will include a 24-hour fitness center, a resort-style swimming pool, a gathering lounge, and a cyber cafe with a conference room.
Wingspan Development Group delivers quality projects across multiple real estate segments; residential, commercial and land development. In addition to Jade at North Hyde Park, Wingspan has several other active projects in the central Florida market. The firm’s core team has over 80 years of real estate and construction experience combined with an unparalleled commitment to detail and execution. By blending broad capabilities and a nimble organization, Wingspan capitalizes on diverse market opportunities to create value for clients and stakeholders. Wingspan has offices in Mount Prospect, IL and Milwaukee, WI.
For more information, contact Christopher Coleman at 847.394.6200 or info@WingspanDev.com
Chris Coleman, VP of Development at Wingspan, periodically shares his thoughts and observations on property development news.