Lessors of Residential Buildings
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 54,000 lessors of residential buildings and dwellings in the US lease single-family homes, apartment buildings, and town homes. The industry includes owner-lessors and firms that rent real estate and subsequently sublet property to others.
Vulnerability to Trends in the Housing Market and Economy
The housing market is cyclical, and market conditions affect property income and values and the ability to collect rent.
Capital-Intensity of Operations
The residential owner-lessor business is extremely capital intensive.
Industry size & Structure
The average residential lessor operates out of a single location, employs about 6-7 workers, and generates $2.8 million in annual revenue.
- The residential lessor industry consists of about 54,000 firms that employ 370,000 workers and generate over $153 billion annually.
- The industry has a low level of concentration; the top 50 companies account for about 30% of industry revenue.
- Large firms with residential lessor operations include Essex Property Trust, AvalonBay Communities, Equity Residential, and Mid-America Apartment Communities. Some large firms are vertically integrated and operate as residential real estate developers.
- Despite the size of the industry, many large firms operate regionally.
Industry Forecast
Lessors of Residential Buildings Industry Growth
Recent Developments
Oct 22, 2024 - Residential Rents Moderate
- Although residential rents went down in September, Federal Reserve rate cuts are expected to boost the economy and residential rental markets, according to a recent report by Yardi Matrix. The national average multifamily rent dropped $3 to $1,750 in September compared to August. The average single-family rental also dropped $3 to $2,167 over the same period. Despite softer rents, the Fed’s interest rate cut in September, a robust labor market, and steady GDP growth are expected to underpin the health of the residential rental market. In the first quarter of 2024, more than 300,000 new apartment units were absorbed, most of them in the Sunbelt and Mountain West. Higher apartment inventories in these regions are expected to put downward pressure on rent growth in 2025.
- The number of building permits issued for housing projects with five or more units decreased 10.8% month-over-month and declined 17.4% year-over-year in September 2024. Housing starts for projects with five or more units dropped by 4.5% month-over-month and fell by 15.7% year over year in September. Housing with five or more units saw completions decrease by 8.7% month-over-month but rise 41.9% year-over-year in September. Multifamily construction activity is waning amid a tighter financing environment and the recent wave of new apartment completions, according to the National Association of Home Builders (NAHB).
- High interest rates have increased the costs for new multifamily construction and reduced property values, prompting some developers to halt or delay projects, according to The Wall Street Journal. This year, about 610,000 apartment units are expected to come online, the most in any year since the 1980s, according to data firm CoStar. However, as financing new projects has become costlier, CoStar expects new apartment supplies to slip to fewer than 350,000 units in 2025 and 275,000 in 2026. The influx of new apartment building has created an oversupply in some regions, leading to lower property values and weak rent growth, which has reduced developer and investor appetite for new projects.
- In August, the US Justice Department filed an antitrust suit against real estate software firm RealPage, alleging its technology enabled landlords to engage in price-fixing, boosting rents beyond market norms for millions of renters, according to The New York Times. The suit was filed in the Middle District of North Carolina and was joined by several states, including North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington. RealPage’s YieldStar software allows landlords to share rent, occupancy rates, and other data points that would otherwise be confidential. An algorithm uses the data to suggest rent rates, which the government suggests are often higher than competitive market norms. RealPage argues its software was deliberately developed to comply with the law, and the firm plans a spirited defense. The firm has said rent increases in recent years have resulted from other forces, including a nationwide housing shortage.
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