The single-family rental market, an emerging subset of the apartment sector that began attracting investors after home prices crashed during the last economic downturn, has not slowed this year from coronavirus. In fact, COVID-19 is spurring demand.

A total of $8.4 billion across 14 commercial mortgage-backed security deals has been issued as of September. That is double the amount through the same time last year, according to CoStar data.

Millennials have been fueling the demand in the urban multifamily market for several years. But they are getting older, and the coronavirus outbreak in the United States may have just been the catalyst prompting them to finally make the move to a larger home, Stephen Buteau, managing director of residential mortgage-backed securities for bond rating agency DBRS Morningstar, told CoStar.

“I think they were enjoying what the cities could offer in terms of restaurants and dining and different activities,” Buteau said. “But with COVID, they’re now shifting some of their priorities to either more space at home, so they can have an office to work from home, or for a yard and the ability to get outside where they feel somewhat safer.”

Bond issuers have told DBRS and other rating agencies that demand for rental homes has increased noticeably in the past six to eight months.

Earlier this month, John Affleck, CoStar vice president of market analytics, said the desire for larger spaces in the suburbs is outweighing demand for all the new studio and one-bedroom units in city centers.

Catapulting the bond issuance total is the latest single-family home deal from Cerberus Capital Management, sponsor of FirstKey Homes 2020-SFR2, which is to be issued with a total loan balance of $2.5 billion. That makes it the second-largest commercial or housing rental securitization of the year and the largest single-family home deal going back at least three years.

The collateral for the transaction is a $2.5 billion loan originated by Morgan Stanley Mortgage Capital Holdings. The loan is secured by FirstKey Homes’ interest in 14,288 single-family suburban properties.

Institutional and private money such as Morgan Stanley’s has been fueling the single-family rental market since about 2017. The amount of money flowing to the sector has been so strong that in 2018 both Freddie Mac and Fannie Mae ended efforts to lend to the sector because it was performing successfully without their involvement, the two mortgage companies concluded.

There continues to be a lot of demand from various investors because the operating fundamentals of the sector have been strong, Buteau said. Rent collections have been among the strongest over other property types, and vacancy rates are low.

Another recent example of institutional capital interest came last month when a group of investors led by Blackstone Real Estate Income Trust made a $300 million investment in Tricon Residential, a Toronto-based owner of single-family rental homes.

The current strength in the single-family home sector does not come without some caution. The sector grew as a result of the Great Recession in 2007-2009 and has never been through a downturn.

In rating single-family home securitizations this year, DBRS has been stepping up the stress levels it applies to deals, including increased vacancy and decreased property-value projections.

“We at DBRS Morningstar are still cautious on the sector,” Buteau said. “Some of the strong fundamentals, the rents, rental collections, vacancy rates have held up through the [coronavirus] crisis. But, some of our concern going forward is, were they held up or supported through the government interventions that took place.”

And, he added, it is still not clear what happens in the sector if unemployment rates stay elevated for a long period of time or if another wave of the coronavirus materializes.