Single-Family Build-to-Rent Properties Special Report: An Expanding Product Type in a Greater Number of Markets

Capital is being put to work, with developers acquiring land sites and accelerating the pace of construction starts.

MINNEAPOLIS, MINNESOTA (May 19, 2022) The single-family build-to-rent (SF BTR) market continues to gain momentum, with the pace of deliveries and construction starts accelerating, and operating performance at existing properties strengthening, according to a special report on Single-Family Build-to-Rent Properties released by Northmarq and authored by Research Director Pete O'Neil.

More capital is flowing into single-family build-to-rent properties. During the second half of last year, several institutions announced plans and partnerships to move into the SF BTR space or expand into additional markets. Now that capital is being put to work, with developers acquiring land sites and accelerating the pace of construction starts. In addition, debt continues to be available for acquisitions of existing communities and the financing of development projects.

Developers have been ramping up the pace of construction starts of single-family build-to-rent communities in response to demand growth. The rise in single-family build-to-rent starts, up 20 percent in 2021 to nearly 60,000 units, outpaced the rate of starts in the overall single-family for-sale market.

"While development activity for single-family rentals gained momentum at the national level, builders are showing a clear preference for certain regions in the country, while holding off on construction in more mature but lower-growth local economies," said Trevor Koskovich, Northmarq’s President-Investment Sales.

Some topics included in the special report:

  • Investment Market - Investment activity for SF BTR properties accelerated throughout 2021. Transaction volume in the fourth quarter topped the total for the full year in 2020.
  • Florida and Nashville Market Spotlight - The first SF BTR projects began to deliver in Florida in the second half of 2019, and development has ramped up in recent years. The Nashville market currently has about one dozen existing single-family rental communities, totaling approximately 1,000 units, and it’s one of the best markets at using quality-of-life to attract new residents .
  • Financing Climate - What was once a niche product has become increasingly familiar with lenders, who are seeking to add these loans to their portfolios. Lending terms for new SF BTR acquisition loans generally track terms for acquisitions of new, Class A apartment communities.
  • Macroeconomic Impacts - The first few months of 2022 have included greater economic volatility and the highest inflation measures in approximately four decades. Home ownership is expected to remain expensive for as long as there is a shortfall in the supply of homes, which will likely last at least through the rest of this decade. The SF BTR option will account for a greater share of the overall rental-housing stock and will gain in acceptance and desirability.