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 52,400 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 $2.5 million in annual revenue.

    • The residential lessor industry consists of about 52,400 firms that employ 362,100 workers and generate over $134 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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Apr 19, 2024 - Steady but Weaker Industry Growth
                              • The lessors of residential buildings industry is expected to see weaker sales growth this year, but demand is projected to remain steady, if a bit flat, over the next several years. The industry’s year-over-year sales increased by 14% in 2022 before dropping to 10.1% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to moderate further to about 4.8% in 2024. The industry will then see steady but mostly flat average annual growth of about 4.8% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
                              • A rise in application fraud is starting to hurt multifamily property managers’ bottom lines, according to a recent survey by multifamily software provider RealPage and reporting by Multifamily Dive. About 75% of multifamily managers report that rental fraud has increased over the last 12 months. The leading types of application fraud include false or manipulated identities, income misrepresentation, and identity theft. More than 70% of survey respondents said that most instances of fraud go undetected until after the tenant has moved in. Property managers surveyed said some of the most damaging impacts of fraud included reduced income/higher costs of 10-20% (77% of respondents), property damage (55%), harm to business reputation (51%), criminal activity in fraudulently rented units (49%), added costs from early lease termination/eviction (47%), and loss of good tenants due to bad behavior by fraudulent ones (42%).
                              • After suffering a drop in demand during the pandemic, occupancy rates for private-pay senior-housing communities are showing signs of improvement, according to The Wall Street Journal. In Q4 2023, the average occupancy rate for private-pay senior housing was just over 85%, according to industry trade group the National Investment Center for Seniors & Housing Care. While that’s still two percentage points below Q2 2020, it’s a significant improvement over the COVID-era low of 77.8% in the first half of 2021. Some industry observers say the turnaround is partly due to pent-up demand by seniors with the most acute healthcare needs, as they postponed moving to assisted living during the pandemic. However, demand for senior housing with little or no healthcare offerings remains soft. Nearly 90% of people between the ages of 50 and 80 want to stay in their homes as long as they can, according to a 2022 poll by the University of Michigan.
                              • Higher consumer prices, a leading indicator of inflation, came in hotter than expected, which could push mortgage rates higher, according to the National Association of Realtors (NAR). Bureau of Labor Statistics data show that the consumer price index (CPI) rose to 3.5% in March. The Federal Reserve has indicated that it won’t reduce the short-term benchmark interest rate until the CPI drops to the Fed’s target of 2%. NAR Chief Economist Lawrence Yan said, “March inflation figures were very bad, which also means bad news for interest rates. Mortgage rates, unfortunately, will move a notch higher and are likely to cross above 7% in the upcoming weeks.” High mortgage rates may price some would-be homebuyers out of the market and keep them renting longer than they would prefer.
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