Major real estate investment and untapped opportunity

Real estate has certainly seen a dramatic year, with rising prices, bidding wars, and many other novelties. Fixating on the drama can obscure the amazing potential for entrepreneurship and opportunity provided by this dynamic market. Writing for the Triangle Business Journal, Sougata Mukherjee explains how.

One element of the current hot housing market that is occasionally overlooked is the role played by massive real estate investors. But they have certainly been playing a role. JP Morgan, for instance, has recently poured $100 million into its Sunbelt Residential Fund I to buy and lease homes in the American Southwest. Canadian investor Brookfield Asset Management purchased around 10,000 homes in the United States in 2020 alone.

Now, the Blackstone group has purchased Home Partners of America, a company that leases out homes while giving tenants an option to buy out later, for a staggering $6 billion.

Home Partners of America are a major force in the residential real estate market, as the $6 billion price tag indicates, owning around 17,000 houses in 74 metro areas across the United States. As of the time of writing, they are currently leasing over 250 homes with a right to buy in the St. Louis Metro area alone.

This influx of cash from major investment groups is largely possible because of the one primary factor that is driving up the market more broadly, namely low interest rates. At the same time, homes are getting more expensive as real estate investors snatch up the already low supply.

According to Mukherjee, however, this emphasis on rising prices and low supply obscures the opportunity for other businesses to grow. Yes. The red-hot housing market draws a lot of attention. But all the activity in this sector is not occurring in a vacuum. Opportunity abounds, especially in construction and contracting.

The last year saw a surprising amount of growth in entrepreneurship. As major investors are pouring a lot of money into real estate, there is room for contractors and entrepreneurs to meet their maintenance and operational needs. As Mukherjee writes, “Blackstone does not have time to mess with home services. They want a company that can perform every conceivable home maintenance work with one or two companies under a contract, perhaps initially as a retainer.”

The last year has shown that despite the struggles and challenges posed by COVID, there is a strong entrepreneurial spirit in St. Louis. Data from the Census Bureau shows that new business applications and formations have risen sharply in St. Louis over the last year. In St. Louis County they rose 32.7% in 2020, while in the City of St. Louis they rose by 37%.

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