Seeking to expand in the strong rental market, investors face many of the same challenges as would-be home buyers.

About 63% of real estate investors recently surveyed cited the availability of inventory as the top challenge for the residential real estate investing business, according to the Winter 2021 RealtyTrac Investor Sentiment Survey, which measures investors’ perspectives on real estate investing.

Rising home prices were cited as the second biggest challenge today. Sixty percent of investors see them as a concern.

“Similar to our last two surveys, the problems of low inventory and rising home prices are those most often cited by individual investors across the country,” says Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “Together with supply chain disruptions which have caused product shortages and increased material costs, it is not surprising that individual investors think that the market is not as healthy today as it was a year ago.”

Investors believe they’ll continue to face the same challenges over the next six months in the market: the lack of inventory (57%), rising home prices (46%), increased material costs (35%), and rising interest rates (34%).

The National Association of REALTORS®’ latest housing report showed the inventory of existing homes for sale reached the lowest number on record in December. As are home buyers, investors are seeing a shrinking number of housing options.

Concerns over increasing inflation are also growing among investors, the survey shows. About 39% of respondents said they believe that higher inflation will increase the cost of labor, materials, and supplies and make it more difficult for them to generate adequate profits. Thirty percent of investor respondents also said that they believe more inflation could lead to higher mortgage rates, which could hurt affordability and weaken demand.

“A looming concern is that of inflation,” Sharga says. “About 88% of the investors surveyed were concerned about inflation having an impact on their business, whether that was due to higher material and labor costs, higher interest rates, or rising consumer prices that might weaken demand from potential home buyers and renters.” Still, 54% of the real estate investors surveyed say they aren’t backing off and plan to continue to buy and rent properties.

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Investment management company Blackstone this week reported that high returns in its real estate investments fueled record-setting fourth-quarter results.

“Blackstone reported the most remarkable results in our history on virtually every metric,” Stephen Schwarzman, co-founder and chief executive, said as the company released its earnings results this week.

Its $280 billion real estate business generated nearly half of its earnings last year, Blackstone officials said on the earnings call.

The areas of rental housing, logistics, and life science offices comprise more than 70% of its equity portfolio. Rents in these sectors are growing at two to three times the rate of inflation, Blackstone says. All three sectors have seen rapid growth during the pandemic.

E-commerce has driven a rush to logistics spaces and warehouses, and vacancies are becoming more difficult to find. Blackstone also continues to make an aggressive push into rentals. It has focused on acquisitions of multifamily real estate investment trusts, affordable housing, and rental buildings, The Real Deal reports. Recently, Blackstone reported it would acquire $1 billion worth of affordable single-family rentals, adding 4,000 homes to its portfolio over the next two years.

About 80 percent of the firm’s real estate portfolio is comprised of logistics and rental housing, which the company says it believes is more insulated from market and inflationary pressures with its shorter-term leases.

“Blackstone’s fourth-quarter results represented a remarkable finish to a record-breaking year,” Schwarzman said.

Blackstone nearly doubled its net income to $2.9 billion since the fourth quarter of 2020. Its real estate investment trust and its Core+ business accounted for the majority of those increases. Its real estate ventures appreciated by 12% and its Core+ segment by 7.2%, The Real Deal reports.

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As COVID-19 travel restrictions began to lift last year, foreign investors flocked back to U.S. commercial real estate. Foreign investments exceeded pre-pandemic levels in 2021, a new report from Real Capital Analytics shows.

Foreign investors purchased $70.8 billion of U.S. commercial real estate in 2021. That marks the highest total since 2018’s $94.6 billion.

The countries most represented in international U.S. commercial investments in 2021 were Canada, Singapore, South Korea, and the United Kingdom, according to the report.

Investors did shift their focus in 2021 away from traditional investments like office buildings and hotels in major cities such as New York, San Francisco, and Chicago. Instead, last year, they were drawn to growing sectors like warehouses, rental apartments, and specialized office buildings for pharmaceutical businesses, The Wall Street Journal reports. Investors also changed up their target markets, homing in on the Sunbelt and smaller markets over coastal cities last year.

“It is a different world,” Riaz Cassum, global head of international capital coverage for JLL, a commercial property firm, told The Wall Street Journal. “You’re starting to see big institutional investors looking at Dallas, Charlotte, Denver, Nashville, Austin, and other high-growth, low-tax markets.”

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The self-storage industry is seeing rapid growth as a result of the pandemic spurring more people to reorganize their homes, to find extra space as they work from home, and to move to the suburbs or move in with more family members.

Thirty-eight percent of Americans reported being self-storage users, according to a newly released StorageCafe survey of about 17,000 survey responses.

The report identified some of the latest self-storage trends, including:

• Gen Xers (54%) and baby boomers (51%) are the most likely to use self-storage. Millennials are also showing increased interest at 40%.
• Living in a spacious home doesn’t negate the need for self-storage. About 42% of residents of homes sized from 1,500 to 2,499 square feet use self-storage, along with the same percentage of residents in larger homes, from 2,500 to 3,500 square feet.
• About one-third of Americans say they put furniture in self-storage, the most common item to store. That is followed by clothing, home appliances, sporting items and hobby gear, and business items.
• Downsizing is the main reason Americans rent a storage unit. Next are moving or needing more storage space at home.
• By state, Idaho has the highest percentage of the population that uses self-storage, at 59%; next is Utah at 54%, then New Mexico at 53%, New Hampshire at 49%, and Wisconsin at 48%.
• The most popular storage size unit is 10’ x 10’, followed by 5’ x 10’.

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The commercial real estate market is roaring back. U.S. commercial real estate investment volume in 2021 totaled a record high of $746 billion, a newly released CBRE report shows. That marks an 86% increase over the previous year.

In context, however, that is a comparison to when the COVID-19 pandemic struck the U.S. in 2020 and sparked significant declines across the commercial sector.

But 2021 marked the commercial industry’s comeback. Multifamily led all sectors for investment volume in the fourth quarter as well as for the year. It saw $136 billion in the fourth quarter and $315 billion for the year, according to CBRE. The industrial real estate sector came in second for the most commercial investments, up 55% year over year and reporting $64 billion in the fourth quarter alone.

Sun Belt markets showed some of the strongest annual growth rates, led by Las Vegas (232%), Houston (191%), and South Florida (179%). However, Los Angeles and New York continued to have the overall highest level of commercial investments in 2021, CBRE’s report shows.

Real estate investment has long been investors’ favored way to combat inflation, CBRE’s Todd Tydlaska told the Commercial Observer. “It’s a defensive move to go into real estate,” he said. “Investors are trying to find yield, and real estate offers relatively attractive yield on a risk-adjusted basis.”

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Have a Happy, Healthy and prosperous New Year.

Photo courtesy of FlashBuddy and pixabay.com

Seeing the opportunity and high demand, institutional investors are snatching up as much U.S. real estate as they can. Investors purchased 18.4% of homes in the fourth quarter—a record high, according to housing data from Redfin.

Investors are seeing opportunities in turning homes into rentals and commanding higher rents or have plans to flip homes to take advantage of rising prices. Investors were defined in the study as any institution or business that purchases residential real estate.

Investors are snatching up the highest amount of properties in Atlanta, Charlotte, N.C., and Jacksonville, Fla.

Investors purchased 80,293 homes in the fourth quarter, up nearly 44% from a year earlier, according to Redfin’s data. Limited housing inventories are constraining investors from purchasing even more.

Invitation Homes CEO Dallas Tanner told CNBC that after buying 1,500 homes in the last quarter, “we wish we could buy more. Demand is so large.” Tanner says the housing supply is tight. He says the properties they’re buying they plan to hold onto over the long haul within their ever-expanding portfolio of properties.

“While record-high home prices are problematic for individual home buyers, they’re one reason why investor demand is stronger than ever,” says Sheharyar Bokhari, Redfin economist, about the study’s findings. “Investors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy. The supply shortage is also an advantage for landlords, as many people who can’t find a home to buy are forced to rent instead. Plus, investors who ‘flip’ homes see potential to turn a big profit as home prices soar.”

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Reprinted with permission