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
Jul 22, 2024 - Multifamily Developments Trend Smaller
- Low- to medium-density multifamily building construction has grown to account for a larger share of the overall multifamily market in recent years, according to National Association of Home Builders analysis of US Census Bureau data. In 2024, there were 450,000 multifamily housing unit completions, marking the highest level in 37 years. Of those, 216,000 were buildings with fewer than 50 units, which was the largest share for low- to medium-density buildings since 2006.
- A recent survey by property management software firm Zego suggests that what property managers believe their tenants value most and what residents want don’t always match, according to Multifamily Dive. The survey questioned 600 multifamily property managers and more than 1,000 residents. For example, property managers believe turnover is typically due to renters seeking a lifestyle change when renters say their primary reason for moving is rent being too expensive. Property managers indicated that a tech-enabled lifestyle was a top renter priority, but tenants said their key concerns were security, maintenance, cleanliness, and community appearance. Technology is important to renters, but they want some aspects of the renting experience to be tech-enabled and others to have the human touch. Renters like digital platforms for taking surveys, paying rent, and community updates but prefer face-to-face interactions for lease renewals, move-ins, and receiving packages.
- Some multifamily developers are pulling back on project plans amid high interest rates, tighter lending standards, and increased construction costs, according to The Wall Street Journal. In April, multifamily starts dropped to 322,000, marking the weakest April for starts since 2020, according to Yardi Matrix. In 2023, about half a million new apartment units came online, and some industry observers expect a similar influx of apartment supplies in 2024. The surge in new apartment supply may mean having to reduce rent to fill them, which gives developers of new projects pause. Some regional banks have less money to lend as their existing portfolios of commercial real estate loans are marked down.
- While high interest rates of around 7% have been a drag on the single-family housing market, they have helped sustain multifamily demand as would-be home buyers stay in their apartments longer, according to a recent report by the National Association of Realtors (NAR). While demand is robust, the multifamily vacancy rate remains at a 10-year high of 7.8%, although many of the vacancies are due to a huge wave of new supply that has yet to be leased. Vacancies are most concentrated in Class A properties, which have a vacancy rate of 10.8% compared to the 5.6% rate for Class C properties. Stronger demand for more affordable apartment options indicates consumers are feeling the pinch of inflation.
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