CBRE Report: Shifts in Housing Preferences Signal BTR Opportunity
The sector’s rent growth remains significantly above pre-Covid levels.
Favorable market fundamentals, superior revenue growth and lower resident turnover within the single family built-to-rent sector signal opportunity for investors. BTR also provides an appealing alternative to scattered-site single-family rental, particularly among Americans 35 and older. These are among the findings of CBRE’s 2024 Build-to-Rent Overview.
The BTR segment experienced a 6.6 percent rent growth in the 4th quarter of 2022, during which the segment recorded 4.8 percent vacancy rate. Though still minimal when compared with more mature commercial real estate sectors, BTR investment is accelerating. Although BTR transaction volume was just $24 billion in 2021 and 2022, those figures represented a 250 percent increase over the previous five-year average.
Throughout 2023 into this year, BTR rents continued to surpass other multifamily sectors.
Pricing power
Vacancies in the BTR sector have grown at a pace similar to those of the overall rental market, but the sector remains tight at below 5 percent, giving BTR investors pricing power.
During the pandemic, migration away from the dense urban core of major cities benefitted BTR communities, as it did suburban multifamily communities. Larger and less costly housing units in suburban and secondary markets were the primary beneficiaries of the shift in demand. Due to these trends, BTR communities didn’t experience a Covid-era decline in rent. Rents for BTR reached an average of $2,100 during the fourth quarter of 2022.
At nearly 7 percent in that quarter, the rent growth being tallied by BTR remained substantially above pre-pandemic thresholds. Among BTR markets, the Tampa and Indianapolis markets outperformed others, and helped lift the national average rent growth for the sector to 6.6 percent. Columbus, San Antonio and Kansas City, trailing the leaders by large margins, filled out the remaining slots in the top five. Earlier this month, Parkland Residential landed financing for the second phase of Sweetwater Springs, a BTR project in suburban Atlanta.