Sunbelt Boom Fuels RMR Residential Growth

Without question, more Americans have been flocking to Sunbelt regions since the pandemic, which has resulted in higher demand for multifamily. Typically these markets are considered more business-friendly and offer a warmer climate.

In fact, Rob Lester, chief investment officer of RMR Residential, the multifamily platform of The RMR Group, who will be a speaker at GlobeSt.'s multifamily panel this Spring in New York City, calls the demand he's been seeing in the Sunbelt from residents to tenants "robust."

THE SUNBELT REGIONS WITH ROBUST DEMAND

Particularly, much of the activity is coming from other Sunbelt regions like Dallas, Denver, Colorado, the Carolinas and even Florida markets.

"We have a lot of demand from our equity partners and from discussions with brokers," he said, in regards to particularly The Sunshine State.

But of course, an influx of supply in these markets has presented some challenges. While Lester acknowledges it's being well absorbed, he said it's leading to mostly flattening rents in some markets.

Also, RMR Residential, which manages approximately 20,000 units nationally, is a believer in another Sunbelt region — Atlanta.

"Atlanta is a great long-term market," Lester acknowledged.

That's with good reason, as the city ranks fifth in the nation for in-migration, according to a recent report by state utility firm Select Georgia.

USING DATA TO FIND VALUE

Currently, even as uncertainties remain in the economy, RMR Residential is looking at two opportunities in particular. During a slower time for transactions, the firm is seeking to acquire and find value-added properties.

In exploring these opportunities, RMR Residential is leveraging its data, which tracks various demographic trends.

"We've got 20 years of data in the Sunbelt, and that extends to tenants and jobs as well as rents," Lester noted. More specifically for rents, the company is using the data to predict where they will grow not only this year — but in 2026 as well.

"As the market transitions from a period of interest rate uncertainty and oversupply, we believe this is an opportune time to invest in multifamily real estate as we expect it to enter into a phase of steady, demand-driven growth," said Lester.

The appetite to make investments comes after RMR Residential recently made three acquisitions, including 240-unit ARIUM at Lowry in Denver, 225-unit ARIUM Pompano Beach, Florida and 400-unit ARIUM Sunrise in The Sunshine State.

TRANSACTIONS SET TO PICK UP

In terms of the entire multifamily space, Lester sees mostly positives ahead. Currently, there is pent-up demand for properties as billions of dollars of capital remain on the sidelines. And while Lester does not spend too much time worrying about and predicting where interest rates will wind up, he believes investors are starting to accept the levels they remain at and are currently about as low as they are going to get in the short term. Putting those two together, he believes that could lead to the floodgates opening later in 2025.

Barring any unforeseen events, Lester predicts a "robust second half of the year," for transactions.

But it may not be all smooth sailing. Lester noted multifamily rent growth may move at a slower pace for at least another 12 months.