Strong job and population growth is rapidly driving the Inland Empire to the top of the list for workforce housing investment.
By Kelsi Maree Borland
The Inland Empire is rapidly rising to the top of the target market list for workforce housing investment. The region has seen substantial job and population growth, and workforce housing investors are finding strong opportunities in the market to drive rents in the workforce housing niche, particularly by California standards. Workforce housing investor Tower 16 Capital Partners has acquired its first multifamily property in the market, and plans to aggressively build a strong portfolio in the market over the next 12 months.
“We are focused on markets with good fundamentals, good population growth and good job growth,” Tyler Pruett, a principal at Tower 16, tells GlobeSt.com. “In terms of fundamentals, the Inland Empire is at the top of the list, certainly in California, for both job growth and population growth. That has been driven by the warehouse and logistics business in the market. We have been focused on B- and C- multifamily acquisitions. Specific to jobs that are being created in the Inland Empire, there is a large need for workforce housing to supply housing for those individuals.”
The firm purchased Hillside Village Apartments, an 80-unit multifamily project in San Bernardino, from an unnamed seller for $11 million. The property checked all of Tower 16’s boxes, including upside in rents through capital improvements. “This particular opportunity checked a lot of those boxes. We want properties where there are operational efficiencies that we think can be gained by bringing in a professional level of management. We’ll be using Cannon Management, and we have identified multiple areas to enhance revenues and reducing some operating costs,” Mike Farley, a principal at Tower 16, tells GlobeSt.com. “In addition to that, there is a lot of opportunities for physical upgrades that I think are in demand in the market. We think there are premium rents that we can achieve in that market.”
The firm has focused on growing workforce housing markets. In 2018, it built a portfolio in Las Vegas. Now, it plans to execute a similar strategy in the Inland Empire. “We are looking for opportunities to invest in market where we think the need is very strong and will continue to be strong for workforce housing,” says Farley. “That has led us to markets like Las Vegas, where we have acquired a number of properties in the last 12 months, as well as the Inland Empire. There has been very strong job growth and a relatively limited amount of new supply entering that market that is catering to workforce housing.”
The Inland Empire is a large market and include both Riverside and San Bernardino Counties. While Farley and Pruett weren’t specific about their focus submarkets within the Inland Empire, they said that they were looking for populated areas and job centers. “We are looking for properties that are close to jobs,” says Pruett. “We are not in outlying areas of the Inland Empire, but in areas where there is strong job growth and that are within striking distance to those jobs.”
In the next 12 to 24 months, they plan to repeat this strategy to built a portfolio of 2,000 units. “We see a need for this type of product, and we are planning on making more acquisitions in the coming 12 to 18 months,” says Farley. “We are hoping to build a position similar to what we have done in Las Vegas of a couple thousand units.”