Domestic Growth Markets Offer Opportunity in Affordable Housing

Demand for affordable housing is continuing to outpace supply—a problem that has been plaguing the country for years and one that Jonathan Needell, president and CIO of Kairos Investment Management Company doesn’t imagine subsiding anytime soon. As a result, there is ample investment capital active in the affordable housing sector. To curb the competition, Kairos is focusing on domestic growth markets.

“At Kairos, one of our strategies is capitalizing on the supply/demand imbalance by identifying areas in domestic growth markets in which to invest and targeting multifamily assets in those areas,” Needell tells GlobeSt.com. “By acquiring properties in domestic growth markets, we can more efficiently implement renovations and improvements that aim to raise the quality of affordable housing for residents.”

Markets that fit the mold have supply constraints with below market rents and improving vaccine rates. “We carefully research and consider market conditions to identify areas offering great potential for investment that are often overlooked or disregarded by other investors,” says Needell. “Our contrarian approach allows us to identify niche markets where we see growth opportunities.”

Following the pandemic, San Francisco and Las Vegas are both markets on the firm’s radar. While the markets are on different scales, they were both badly impacted by the pandemic and are already showing signs of strong recovery. San Francisco, for example, has already seen a rebound in office leasing, a strong sign of recovery. “Companies continue to safely bring back employees to the office and large-scale employers continue to set up offices in the Bay Area,” adds Needell. “An example of this is Facebook parent Meta, which signed a 1 million square-foot lease in the market in early December.” Last year, the firm acquired 209th Street, a mixed-used asset in the city.

Las Vegas, on the other hand, suffered from reduced leisure travelers, but already, visitor numbers are springing back, up 80% from spring 2020. “With lower costs of living and a favorable tax environment for businesses, many tech companies have relocated to the entertainment capital of the world, further highlighting the market’s strength and growth opportunities,” says Needell. In Las Vegas, Kairos acquired apartment community Siena Townhomes.

In addition to focusing on high growth markets, Kairos is also curbing competition by using internal investment management teams, which helps the firm tailor services to support each property. “Following a contrarian yet well-thought-out path can set investors apart from the pack and position them for future success,” says Needell.