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New Trends That Will Reshape BTR Projects

By Lynn Pollack

May 24, 2022 at 07:45 AM

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One is that BTR projects will be developed in the earlier phases of a master plan.

As build-to-rent continues on its hot streak, industry watchers should expect to see BTR projects developed in the earlier phases of a master plan in a move that allows developers to generate cash earlier in the project’s lifespan.

“We are seeing build for rent products being developed in the earlier phases of a neighborhood’s lifecycle than we typically see with traditional multifamily offerings,” said Barry Cox, vice president of consulting for John Burns Real Estate Consulting.

And many of the projects in emerging submarkets are absorbing at the same or better rates than those in established submarkets.

More than half of the 651 build-for-rent (BFR) communities in the John Burns database (51%) were built in the past five years and more than one-quarter (27%) were built in the past two years. BFR operators are buying land most actively in the Southeast (9% to 14% of lots) and in the Southwest (10% to 11% of lots).

Builders will also be required to use more creative and efficient home designs to control costs while preserving the quality-of-life today’s tenants demand, and developers are also likely to incorporate ESG planning into master plans to help them raise capital, achieve entitlements, an appeal to a consumer base for whom ESG commitments matter deeply.

John Burns Real Estate Consulting experts also say to expect urban residents relocating to the suburbs to demand walkability, with retail and entertainment venues to follow.

And as build-for-rent expands to new markets, “anticipate the potential for resistance among local officials,” John Burns analysts note. “Be prepared early to educate city officials on BFR communities, including target tenant incomes and ongoing maintenance guarantees.”

That means using “highly visual” methods of educating local authorities, according to Dustin Moudy, vice president, consulting at John Burns in Houston.

“This includes helping local municipalities understand the typical demographic profile of these tenants, which generally includes higher income households with profiles similar to existing households,” Moudy said.

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