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JPMorgan Bets on a Dash for the Suburbs
Covid-19 fears will accelerate a shift underway to suburban rental homes, said Mike Kelly, head of Americas real estate at J.P. Morgan Asset Management.
JPMorgan Chase & Co.’s asset management unit is developing single-family home rentals in the suburbs of Las Vegas — its first deal under a joint venture aiming to benefit from changing lifestyles caused by the Covid-19 pandemic.
Under a $625 million joint venture, J.P. Morgan Asset Management and real estate investment trust American Homes 4 Rent have been developing 34 single-family homes in the Sovana and Spring Valley areas of Las Vegas, according to Mike Kelly, head of real estate for the Americas at J.P. Morgan Asset Management. He said in a phone interview Thursday that the homes will become available for rent next month and should be fully leased by October.
Kelly predicts that fears over the spread of Covid-19 will drive more people to seek more spacious living situations outside cities, accelerating an existing trend among young people to settle in the suburbs. Many people who have found they can work well from home during the pandemic will continue doing so part-time even after the economy opens back up in cities, he said.
J.P. Morgan Asset Management and American Homes 4 Rent expect to invest a total of $625 million of equity in single-family home projects in the U.S., targeting high-growth markets in the west and southeast. This year the joint venture may invest about 30 percent of that capital in such projects, a new area of real estate investment for the JPMorgan’s asset management unit, Kelly said.
While the bank’s asset management unit had previously invested in multi-family properties, the joint venture formed last year has created opportunities to develop and rent single-family homes, capitalizing on a trend that took hold in the wake of home foreclosures following the 2008 financial crisis, according to Kelly. He said younger generations don't necessarily strive for home ownership as an investment in the same way their parents did, and the trend toward renting single-family homes will probably pick up in a fundamental shift in the way people work.
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“Because of Covid, we do think there'll be more opportunity for people to work from home more steadily,” he said. People who may not have wanted to commute every day may now be able “to live in the suburbs and commute to work two or three times a week, potentially even less.”
J.P. Morgan Asset Management, which is investing in the joint venture on behalf of institutional investors, is considering suburbs outside cities such as Seattle, Salt Lake City, Nashville, Charlotte, Raleigh, and Tampa, according to a source with knowledge of the matter. Kelly said that investors may pick up 100 basis points to 150 basis points more yield than from multi-family-home investments.
He declined to say how much the joint venture invested in the suburban Las Vegas properties.