COVID19 Accelerates Trend of Millennials Moving from Apartments to SFR

COVID-19 is accelerating demand for single-family rentals, as some renters are feeling a greater desire to get away from the density of cities.

“Once they’re in the single-family homes, they’re finding they have more space and this facilitates a better work from home environment,” said CEO of SFR REIT American Homes 4 Rent David Singelyn during his company’s REIT week presentation. “This provides the long-term benefits. So, while COVID-19 was the inspiration to move to single-family rentals, these individuals now see the benefits of single-family rentals over multifamily, benefitting demand in the long-term.”

Both American Homes 4 Rent and Invitation Homes experienced low- to mid-single digit growth in new leases and higher occupancies since the initial stay-at-home ordinances were implemented. This trend differs from apartment REITs with portfolios in urban environments, where occupancies have been declining and new lease growth has decreased year-over-year in May by single digits in certain metros, according to the research team at Green Street Advisors, a commercial real estate research and advisory firm.Top of Form SFR operator Tricon Residential reported that same-home occupancy remained at a record level of 97.6 percent, while annualized turnover was below historical levels, at 20.2 percent for the month of May, according to a June report. Average blended rent growth remained at 5.1 percent, driven by 8.9 percent growth in new move-ins and 3.5 percent growth on lease renewals. The company collected 96.1 percent of May rents by the end of the month. Fewer than one percent of Tricon's SFR residents have requested a rent deferral because of economic hardship. The company operates in the middle market. American Homes 4 Rent reported that it collected 95 percent of April rents and 82 percent of May rents through May 5, 2020.

Even in markets like Houston, Orlando, Fla. and Las Vegas, which have been the most impacted by COVID-19’s economic fallout, operators have been able to realize positive new lease growth in recent months, according to the research team at Green Street Advisors.

“I expect this trend to continue as the millennial generation continues to age and forms families and have children and requires more space,” says Jonathan Ellenzweig, chief investment officer at Tricon Residential. “So, I think part of this trend really relates to the aging of the millennial demographic and not necessarily just COVID-19.”

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Work cited: Sebastian Obando, National Real Estate Investor, June 15, 2020

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