Private equity firms from Blackstone to Berkshire are betting on a continued surge in residential real estate, and the latest data on existing home sales adds even more reason to be optimistic about the sector. Student housing, senior housing and rental units are all of interest to PE this summer.
Existing-home sales rose in July, marking two consecutive months of increases, according to the National Association of Realtors. Total existing-home sales — completed transactions that include single-family homes, townhomes, condominiums and co-ops — grew 2.0 percent from June to a seasonally adjusted annual rate of 5.99 million in July. Sales inched up year-over-year, increasing 1.5 percent from a year ago (5.90 million in July 2020). “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available,” says Lawrence Yun, NAR’s chief economist.
Meanwhile, investors are betting on college housing, as students return to campus, Bloomberg News reports. Blackstone Inc. (NYSE: BX) is forming a $784 million joint venture with Landmark Properties to invest in U.S. student housing. “We’ve seen a very quick uptick in student housing occupancy to pre-Covid levels, which is one of the reasons we’re so bullish on the space,” Jacob Werner, Blackstone senior managing director in the real estate group, told Bloomberg. Other PE teams investing in the space include: Brookfield Asset Management Inc. in tandem with Scion Group LLC; and TPG partnering with Cardinal Group Investments.
On the other end of the demographic spectrum, senior housing is drawing interest. Clearwater Living and Berkshire Realty Ventures teamed recently for a second time on a capital fund aimed at developing and acquiring senior living assets. And finally, rental units are appealing to PE. A real estate investment trust sponsored by Jones Lang LaSalle Inc. is taking a stake in a $1.2 billion portfolio of more than 4,000 rental homes, as demand for suburban housing has surged during the pandemic.
We’ll be watching to see how the trends continue this fall.
– Mary Kathleen Flynn