Why operations matter more when rents cool
Scarcity alone doesn’t collect rent, though. What happens after Pier 4 buys the building is what does. Take gap to market, the difference between current rents and prevailing market rents on the same unit once a tenant moves out on their own terms.
If the current resident is paying $1,000 a month, once they vacate on their own terms the unit can be rented to a new resident at the prevailing market rent of $1,500, that’s a $500 gap, one running at roughly 41 to 42 percent across Pier 4’s portfolio right now. Jake Levy, Vice President, Finance at Pier 4, calls closing it “a two-way street,” : higher rents can lift returns for investors, while the additional income can be reinvested into the property to improve conditions for existing residents.
Pier 4 sees considerable room for rental growth in the coming years, with rents already rising in some of its markets. New housing supply remains constrained by persistent shortages and the time required to bring developments to market, while immigration, though recently slower, is expected to stabilize and support future demand.
Pier 4 expects these pressures to strengthen rental fundamentals and push rents higher over time. Its investment strategy is positioned to benefit from that growth, while also identifying properties where stronger management and operational improvements can create additional value after acquisition.
Find value behind the door
John Lucic, Vice President, Operations at Pier 4, points to space inside older buildings that may be generating little or no income at all. Storage rooms, oversized common areas and other underused parts of a property can sometimes be converted into another suite.
