Unlocking Alternatives: Investing Beyond the Major CRE Asset Type

SFR / BTR: PERFORMANCE Interest surged in 2020 – 2022, and pricing remains high

• BTR supply ramped up only recently, creating an imbalance between supply and investor demand to deploy capital. Record-high construction costs, including lumber and labor, have limited new supply. • Rising home prices limit scattered-site acquisition-rehabilitation providers from acquiring homes in certain markets, and they face increased competition from individual buyer demand in the post-pandemic period. There is also a steep learning curve in SFR BTR, including land development bottle necks, zoning, tax calculations, site selection and management. • Institutional interest surged post-pandemic, driving both volumes and prices. Volume exceeded the $3B mark. • Cap rates had been steadily trending downward until the past couple quarters, as the overall rate environment has had an impact on the space.

SFR / BTR Volume & Pricing Trends

Average SFR / BTR Cap Rates

0.07

700.00

$280K

$3B

$260K

0.065

600.00

$3B

$240K

0.06

500.00

$220K

$2B

0.055

400.00

$200K

$2B

$180K

0.05

300.00

Cap Rate

$160K

$1B

Avg Price / Unit

0.045

200.00

Transaction Volume

Spread Over 10 yr Treasury

$140K

$1B

0.04

100.00

$120K

0.035

0.00

$100K

$B

17Q1

17Q3

18Q1

18Q3

19Q1

19Q3

20Q1

20Q3

21Q1

21Q3

22Q1

22Q3

23Q1

Spread - Multifamily (RHS) Spread - SFR BTR (RHS) SFR BTR Cap Rate (LHS)

2015 Q1

2015 Q4

2016 Q3

2017 Q2

2018 Q1

2018 Q4

2019 Q3

2020 Q2

2021 Q1

2021 Q4

2022 Q3

2023 Q2

Transaction Volume (LHS) Average Price Per Unit (RHS)

Source: CoStar, Cushman & Wakefield

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