A Look Back at the Biggest Trends of 2021 and What They Could Mean for this Year
It is safe to say that 2021 shaped up to be an eventful year in the real estate world.
Amid soaring residential real estate values, we witnessed the much-anticipated end to the federal eviction and foreclosure moratoriums, as well as the dramatic collapse of Zillow Offer. What’s more, the single-family build to rent trend grew massively, as did hotel to multi-family conversions.
And those were just a few of the major trends and events that impacted the real estate market last year. Yet, as we look ahead to what this year could have in store, it seems like many of those trends will also play a role in 2022. So, here’s a summary of the biggest trends from 2021 and what the continuing impact of these could be on the real estate market this year
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Single-family build to rent market will continue to flourish
Single-family build to rent communities were a huge talking point in 2021. Many states experienced massive growth with this type of development, with a flurry of new projects announced along with existing projects entering rental markets. Booming demand for single-family rentals, especially in suburban locations, coupled with a shortage of supply, has fuelled growth in this sector.
Usually developed as managed communities that include upscale amenities, this type of real estate is often aimed at young professionals looking for a certain level of comfort and convenience in their home.
While the residential build to rent model is nothing new when it comes to apartment complexes, it’s the specific focus on single-family communities, which hitherto had not been the focus of build to rent investors, that makes this a trend to pay attention to.
Nearing the end of 2021, single-family build to rent developments accounted for 6 percent of all new homes being built in the country. And this could likely be an area of real estate that will continue to experience an upward trend in investment throughout 2022 and beyond. In fact, forecasts predict up to $40 billion worth of investments in build to rent communities this year. What’s more, there have already been a number of big announcements of new single-family build to rent projects within the first few weeks of this year, in Illinois, Texas and Arizona.
End of eviction moratoriums will enable a return to normality
The end of the poorly-thought out federal CDC eviction moratorium last year was welcomed by landlords across the nation. It meant that many landlords were finally able to regain some control over their investments, as well as proceed to evict tenants that were refusing to pay rent or apply for rental assistance.
As we discussed last year, there were no real winners when it came to the moratoriums. Many small and medium sized landlords faced financial ruin, while tenants who missed rent payments racked up huge debts that could impact them for years to come.
When the CDC moratorium finally ended, the “waves of evictions” that some predicted failed to materialize. Instead, what we’ve seen in large part is landlords stepping up and providing support to tenants who genuinely can’t pay, working with them to access rental assistance programs. As for situations where landlords have been forced to proceed with evictions, court backlogs have significantly slowed down the process.
However, while the federal moratorium is now over, a number of state level eviction moratoriums have remained in place. We’re now beginning to see the end of these as well. New Jersey, as one example, ended its moratorium on Jan 1 this year. Meanwhile New York brought its moratorium to an end on Jan 15.
With the last of the state level moratoriums finally drawing to a close, we’ll start to see the return of natural market forces within local rental markets. For one thing, with more units being able to be re-tenanted, this should ease rental unit inventory constraints that have impacted many markets since the onset of the pandemic.
Hotel to multi-family conversions on track to become the next big investment
With many hotels lying vacant across the nation, as a result of the pandemic and competition from platforms such as Airbnb, investors have been snapping up units and converting them into much needed multi-family developments.
Throughout 2021 and 2020 there were almost 4,000 conversion projects. Among this figure are high profile developments such as the 800-room Dearborn Hyatt Regency in Detroit which is being converted into a 400-unit apartment, and the 435-room Champions World Resort in Florida being converted into 352 rental units for local workers.
Given how economical hotel conversions are compared to ground up construction projects, coupled with well-thought-out incentives being provided by forward looking city governments, many of these units are reaching the market as affordable housing, helping to alleviate the chronic shortage of affordable housing in the nation.
This sector is projected to grow significantly in 2022 and beyond. In fact, a recent research paper by JLL forecasts that the total market value of hotels sold for conversion to be between $25 and $30 billion over the next five years. And with more local governments waking up to the huge benefits these developments deliver to local communities, the appetite to relax zoning and offer sensible incentives to developers should only grow.
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The bottom line
2021 was by no means a regular year. We started the year with huge restrictions placed onto both individuals and housing markets. Thankfully, normality steadily returned as the year progressed.
But even in such a turbulent and unpredictable year, opportunities were abundant for real estate investors that read the market right, stayed on top of trends and applied business fundamentals to deals.
To find out more, speak to one of our advisors today.