CoreLogic: US Coasts Lead SFR Growth as Sun Belt Slows
According to CoreLogic's latest analysis, single-family rental (SFR) markets are cooling in the Sun Belt while coastal metros take the lead.
Jordan B. & Han-Gwon Lung
October 23, 2024
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Good morning. According to CoreLogic's latest analysis, single-family rental (SFR) markets are cooling in the Sun Belt while coastal metros take the lead. Plus, private-label CMBS issuance is set to exceed $100 billion in 2024.
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Market Snapshot
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*Data as of 10/22/2024 market close.
SFR RENT TRENDS
Coastal Markets Lead Single-Family Rentals as Sun Belt Rent Growth Slows
Single-family rental (SFR) markets are shifting as coastal metros outpace the Sun Belt in rent growth, according to CoreLogic's latest report.
Steady as she goes: In August, SFR rent growth slowed to 2.4% YoY—the lowest increase since fall 2023. Monthly rent growth also lagged, rising just 0.2% compared to the usual 0.3%. Overall, SFR rents have still climbed by a third since the start of the pandemic.
Zoom in: CoreLogic divides SFRs into two main groups: attached and detached units, and four price tiers ranging from lower-priced to higher-priced rentals. Detached SFRs saw a 2.3% increase in rents, while attached units grew 2%. Higher-priced rentals led growth at 2.9%, while lower-priced rents fell by 0.2%.
Multifamily supply: The pandemic-era multifamily boom—driven by significant investor capital—has cooled, with excess supply pushing vacancies and depressing rents in major cities. This makes the steady SFR growth more notable, despite higher maintenance costs for dispersed single-family properties compared to centralized multifamily buildings.
Winners and losers: Among the 20 largest metros analyzed, seven recorded rent growth above 4%, with median rents exceeding $3,000. Leading markets include Seattle (5.8% growth, $3,507 median rent), New York City (5.5%, $3,346), and Washington, D.C. (5.5%, $3,140). Meanwhile, Sun Belt cities like Austin (-2.3%, $2,180) and Phoenix (0%, $2,442) showed minimal or negative growth, reflecting a broader cooling trend.
➥ THE TAKEAWAY
Big picture: Coastal markets are driving SFR rent growth, while Sun Belt metros, which saw rapid rises over the past four years, are seeing slower momentum. As multifamily markets grapple with oversupply, single-family rentals may be an appealing alternative—particularly in higher-priced coastal regions.
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✍️ Editor’s Picks
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CMBS resurgence: Private-label CMBS issuance is set to exceed $100 billion in 2024, driven by strong single-borrower deals.
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Green buildings, greener wallets: Section 179D tax deduction turns energy-efficient improvements into major savings, attracting tenants and increasing property value for commercial owners.
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Last call? TGI Fridays is facing potential bankruptcy as the restaurant sector battles decreased foot traffic and rising operational costs.
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Global victory: The IMF optimistically forecasts global inflation to drop to 4.3% in 2025, with the US economy expected to grow around 2.8% by EOY.
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Mormon mission: Farmland Partners (FPI) sold 41.6 KSF acres of farmland to The Church of Jesus Christ of Latter-day Saints for $289M.
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End of an era: Howard Lorber is retiring as CEO of Douglas Elliman, succeeded by board director Michael Liebowitz.
🏘️ MULTIFAMILY
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Real resilience: PGIM Real Estate and Citymark Capital are launching a $500 million joint venture to acquire multifamily loans amid a looming $650 billion in maturing debt through 2026.
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Rising demand: The BTR sector is expanding rapidly, driven by high homeownership costs and a national housing shortage, with significant growth anticipated in Sun Belt and Midwest markets.
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Triangular triumph: Faring Capital plans to build 315 townhomes and apartments on a 14-acre site in Carson, replacing a former car dealership near the 405 Freeway.
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Lofty deals: John Schreiber, ex-Blackstone executive, is set to acquire Chicago’s 292-unit Cobbler Square Lofts, previously owned by late billionaire Sam Zell, marking his second major multifamily deal this fall.
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Gramercy gain: Canvas Investment Partners purchased 210-220 E. 22nd Street, a 95%-occupied Gramercy Park complex with 205 KSF, for $105M.
🏭 Industrial
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Hot market: Miami's industrial sector hit a record with over 6 million square feet of new deliveries in Q3, despite cooling construction and rising vacancies, while rents remained steady at $17.10 per square foot.
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Office-to-industrial: Foundry Commercial received $750K from Plano to redevelop a 1980s office building into two industrial warehouses, capitalizing on the growing demand for logistics.
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Inland deals: Rexford Industrial (REXR) paid $70.1M for a 278.65 KSF Fontana facility (fully leased to Eaton) at $251.6 PSF, above the market average.
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Big winners: Ares Management obtained a $475 million CMBS loan for a 4.8 million-square-foot, 25-building industrial portfolio across 12 states, with financing led by J.P. Morgan and arranged by Cushman & Wakefield.
🏬 RETAIL
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Beyond expectations: Bed Bath & Beyond is making a retail comeback with 5 new smaller 15 KSF stores in 2025, with the assistance of its new strategic partner, Kirkland’s (KIRK).
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Mall mayhem: A San Francisco mall faces a foreclosure auction on Nov. 14, with the proceeds to pay off $626M in debt to various lenders.
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Investment buzz: Phillips Edison & Co. (PECO) acquired Bethel Shopping Center, a 101.1 KSF retail property in Connecticut, as part of a larger $879M portfolio deal.
🏢 OFFICE
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Flex work soars: The US coworking sector enjoyed 7% growth to over 7.5K spaces in Q3, with Nashville experiencing the most noticeable growth.
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Recapitalizing Manhattan: RXR Realty (RXR) and Hudson Bay partner on a $320M loan for 620 Avenue of the Americas, a struggling Manhattan property.
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Office owners' dilemma: The NYC office market is still seeing some turmoil, with 8.5 MSF unlisted in 2020 vs. 3MSF in 2019 and a 23.5% vacancy rate.
🏨 HOSPITALITY
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Taxing times: InterContinental (IHG) Chicago's assessed value shot up by 284% this year, reflecting improving real estate values along the Magnificent Mile.
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Hotel hustle: Sam Hirbod secured new lenders to cover $165M in debt, saving the Signia by Hilton San Jose hotel (HLT) from foreclosure.
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Southern expansion: BD Hotels marks its first project outside New York City with a $75M construction loan for The Nora Hotel in West Palm Beach.
📈 CHART OF THE DAY
What REIT Share Prices Say About Where Commercial Real Estate Values Are Headed
CBRE reports that publicly-traded REITs, which often react more quickly than private markets, are currently pricing in future cap rate compression due to anticipated interest rate declines and ongoing economic growth.
Historically, REIT-implied cap rates have led private market rates downward, as seen in past cycles like 2003-04 and 2010, suggesting a similar trend may occur in 2025.
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