Blackstone Group LP, the biggest U.S. landlord of single-family houses, is carving out a new company to own apartment real estate, betting demand will outpace supply for at least three more years.
Blackstone is hunting for acquisitions to expand LivCor, a Chicago-based company formed last year from the purchase of stakes in 71 apartment properties valued at $2.4 billion. The firm is concentrating on suburban areas where there’s not as much new construction, including in the Southeast and in Texas, where more than half of the roughly 26,000 units it acquired are located, said Nadeem Meghji, who is overseeing the business.
“There is still a shortage of overall housing supply in the U.S.,” Meghji, a managing director at New York-based Blackstone, said in a telephone interview.
A stampede by investors into U.S. rental housing as the homebuying market collapsed in 2006 is still going strong in cities including San Francisco, Seattle and Houston, boosting rents and driving construction of apartments in and near downtowns. For Blackstone -- which has bought about 45,000 houses in the past three years to lead the burgeoning industry for single-family rentals -- LivCor represents its first major foray into the multifamily market.
U.S. apartment rents have climbed 13 percent on average since the recession ended in 2009, according to Reis Inc., a New York-based commercial-property research firm. Newer buildings charging higher rates helped push up the average, as developers look to cover their costs and modern amenities lure high-wage workers such as programmers and oil-industry engineers.
Growing Demand
The population of 20 to 34-year-olds, people in their prime renting years, exceeded 64 million as of the latest Census Bureau estimate for 2012. That represents about one-fifth of the U.S. population.
“When you look at the demand trends, there’s a good reason to be optimistic over the next certainly three to five years, and likely beyond,” said Jay Parsons, director of analytics at property specialist MPF Research, a unit of Carrollton, Texas- based RealPage Inc. “The cycle still has some legs.”
A surge in construction of multifamily dwellings in April propelled U.S. housing starts to the highest level in five months, the Commerce Department reported last week. Apartment and condominium projects jumped almost 40 percent from March, compared with a 0.8 percent increase for single-family homes.
Construction remains low by historical standards. Completions in buildings with five or more apartments averaged about 155,000 new units per year from 2010 to 2013, according to the U.S. Census Bureau. That’s below the annual average of about 245,000 units since 1999, according to the agency.