The Growing Opportunity in Build-to-Rent Multifamily

The Build-to-Rent Sector: A Growing Opportunity in Real Estate

The Build-to-Rent (BTR) sector continues to shine as one of the most dynamic areas in real estate today. This sector, consisting of purpose-built neighborhoods of single-family rental homes, has emerged as a key player in the multifamily continuum. It offers a unique value proposition: more living space and privacy than typical apartments, coupled with affordability and amenities that make it an attractive alternative to for-sale homes.

The Rise of BTR

BTR’s ascent began during the early years of the COVID-19 pandemic, fueled by a perfect storm of factors. The shift to remote and hybrid work models, an increase in household formation among younger millennials, and a growing desire for private spaces like garages and backyards led to a surge in demand for single-family rental homes. This demand is underpinned by the increasing unaffordability of homeownership in the United States. As of mid-2024, home prices are 47 percent higher than in early 2020, and home insurance premiums have risen by 21 percent between 2022 and 2023, according to Harvard’s Joint Center for Housing Studies.

In this context, it’s no surprise that institutional investors are flocking to the BTR space. One of the most notable deals in this sector was Blackstone’s $3.5 billion acquisition of Tricon Residential, a Toronto-based company. Blackstone didn’t just stop at the acquisition; they also announced a $1 billion investment to further Tricon’s development pipeline of BTR homes.

Evolving the BTR Model

While still in its early stages, the BTR sector is rapidly evolving. Early models focused on basic offerings—primarily houses with backyards. However, as the sector matures, so do the expectations of renters. Today, developers are paying more attention to aspects like parking, location, and the overall customer experience.

During the recent InterFace Multifamily Carolinas conference, industry experts discussed these changes. Lisa Taylor, Senior Managing Director of SFR and BTR at Greystar, emphasized the importance of adequate parking in BTR communities. Marcie Williams, CEO of RKW Residential, highlighted the need for frictionless customer service experiences, noting that renters are willing to pay a premium for convenience and service.

Timothy Graul, Vice President of Acquisitions and Investments at Bluerock, pointed out that BTR shares more similarities with traditional multifamily developments than previously thought. This alignment makes multifamily developers ideal partners for BTR investments, as they bring a deep understanding of the capital markets and customer needs.

The Road Ahead

As of mid-2024, there are nearly 120,000 BTR units under construction across the United States, with the South and West regions leading the way. In the South alone, there are over 76,000 units in the pipeline, accounting for 64 percent of the nation’s BTR developments. Major players like Hines and Crescent Communities are doubling down on their BTR investments, with large-scale projects underway in key markets.

The demand for BTR homes is not expected to wane anytime soon. The diversity in tenant demographics—ranging from young couples and families to empty nesters—indicates broad appeal. This flexibility, combined with the sector’s ability to offer affordable, amenitized living spaces, positions BTR as a compelling option for renters and investors alike.

As the sector continues to grow, education will play a crucial role in its success. Prospective renters and the general public need to understand the benefits of BTR living, and developers must ensure that their communities are clearly marketed as for-rent properties.

The BTR sector is in a sweet spot, offering a unique blend of flexibility, amenities, and affordability. As it continues to evolve, it’s poised to become an even more significant force in the real estate landscape.

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