James Kane, Southeast Partner at Madera Residential and former Managing Director at Starwood Capital, shares his extensive experience managing multifamily units in the thriving Southeast market. He discusses the region's promising growth potential, particularly for young renters, despite recent supply challenges. The conversation highlights attractive markets like Charleston and Greenville, innovative construction methods, and the impact of government policies on housing. Kane also reflects on how shifts in migration patterns post-COVID reshape the real estate landscape.
Building community connections within rental environments significantly enhances resident retention rates amid concerns of isolation and dissatisfaction.
The Southeast's apartment sales share has surged to approximately 30%, reflecting increased investor interest and post-pandemic growth in major cities.
Despite a recent influx of new apartment supply in the Southeast, underlying strong demand and historical trends suggest a resilient market ahead.
Deep dives
Importance of Community and Resident Retention
Building friendships within apartment communities significantly impacts resident retention rates. A study highlighted in the episode shows that individuals with more acquaintances in their living environments are more likely to renew their leases. However, many residents often feel isolated, which is where organizations like Apartment Life step in, aiming to foster connections and enhance resident satisfaction. By focusing on community engagement, such organizations contribute to improved retention in the competitive rental market.
Trends in Apartment Sales in the Southeast
The Southeast has seen a notable increase in the share of apartment sales dollars over the past 15 years, particularly following the COVID-19 pandemic. Emerging from under 20% during the early 2010s, the Southeast now captures around 30% of apartment sales, reflecting its growing importance in the national market. Major cities like Atlanta, Orlando, and Charlotte have seen significant improvements in their rankings for apartment sales, contributing to this trend. Such developments suggest a robust investor interest in the region fueled by population growth and strong economic drivers.
Supply and Demand Dynamics in the Southeast
Current trends indicate an influx of new apartment supply in the Southeast, leading to tough competition among landlords. However, the overall demand remains strong despite the imminent supply boom, and there is confidence in the market's resilience. The historical data reveals that prior to 2020, the region didn't experience exaggerated supply, indicating that high demand could balance new inventory levels. As construction slows, it is anticipated that the market may revert to healthier growth rates observed in the pre-COVID era.
Demographics and Long-Term Growth Potential
Population growth trends are expected to favor the Southeast, particularly among younger adults aged 20 to 30, who typically rent apartments. This demographic group is projected to account for a significant portion of the anticipated national growth, with six Southeast states leading in this regard. Florida, North Carolina, and Georgia are among the states capturing a large share of this growth, enhancing their attractiveness as rental markets. The underlying factors influencing this trend include affordability, job opportunities, and quality of life in these regions.
Single-Family Rental (SFR) Market Insights
The Single-Family Rental (SFR) market in the Southeast remains appealing to investors, with a substantial concentration of SFR portfolios in states like Florida and North Carolina. Despite facing challenges like slower rent growth due to excess supply, the fundamental demand for quality rental homes persists. In many Southeast cities, the cost differential between owning and renting creates a favorable environment for rental products, encouraging household formation. Investors are optimistic that as supply dynamics shift, SFR rent growth will rebound more significantly in the coming years.
Rental housing economist Jay Parsons breaks down the case for the Southeast's apartment and single-family rental markets. While some pontificators have openly fretted over slowing population growth, Jay shares data and forecasts showing the Southeast (as well as Southwest) — while moderating — remain much better positioned for growth (particularly among young adults more likely to rent) than other parts of the country. While the 50-year high in supply has created a big headwind across the Southeast of late, the drop in starts could flip the script in the near future. Jay looks back at the Southeast's pre-COVID performance as a potential indicator for what the next cycle could look like. Adding to the topic, James Kane — ex-Starwood Managing Director and current Southeast Partner for Madera Residential — joins the podcast to share his experience managing tens of thousands of units across the region, and shares his views on what Southeast markets look attractive going forward. Additionally, Jay brings back recurring segments like "New Digs," "Rental Housing Trivia" and "In the News."
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