News Release 10/ 15/ 2021

Northmarq’s National Build-to-Rent team issues special research report for booming market segment

Report identifies new markets, market drivers, and investment opportunities

MINNEAPOLIS (Oct. 15, 2021) – Northmarq, which is an industry leader in the growing build-to-rent market, has issued its Oct. 2021 special report, authored by the company’s national Build-to-Rent team and Research Director Pete O’Neil. Led by Jeff Erxleben, executive vice president/executive managing director, and Trevor Koskovich, president-Investment Sales, the group of 12 experts in debt, equity, and investment sales, has completed more than $1.5 billion in single-family built-to-rent sales transactions in the U.S. and has over 15 active listings and assignments.

“While this property type first appeared in Phoenix, we are now seeing activity across the country and built a team focused on the asset from start to finish. By combining financing and sales experts on the same team, we can provide the best insights to clients across the country,” said Koskovich.

As part of the specialty practice group’s responsibilities, they work with Northmarq’s Director of Research Pete O’Neil to compile a research report twice a year. The second half report, issued today, identifies three key trends:

  1. Financing continues to be more plentiful for investors in this market. Early in the development cycle, institutional and GSE lenders stayed away from this product, primarily because it was viewed as disjointed single-family homes rented without strong oversight. With the explosion of interest in the product, BTR communities consistently have a master-planned development of single-family homes for rent, often with significant amenities comparable to traditional multifamily.
  2. New markets appear in the development pipeline monthly, with recent growth in the Carolinas and Dallas-Fort Worth. In DFW, 25 projects are underway, slated to deliver more than 3,000 homes in the next 18 months. In Charlotte, nearly two dozen projects totaling more than 2,800 units are either under construction or in the planning phases in the Charlotte metro area.
  3. Renter demand drives this product, as occupancy nears 100 percent in almost every community. This demand is coming from older renters looking for flexibility to younger families looking for more space than a traditional apartment. For both types of tenants, the increasing costs related to owning are making leasing increasingly attractive.
    “More and more traditional multifamily lenders, including the GSEs, life insurance companies, traditional banks and private debt funds, are financing these properties. We’ve seen debt providers offering more attractive terms as this market expands and the competition from lenders trying to gain traction,” said Erxleben.

Billions of dollars of debt and equity capital are moving into this investment class with new entrants on the scene seemingly monthly. Lenders recognize build-to-rent’s impressive fundamentals and are offering developers and investors new options for structuring their financing. What was a niche product in only a handful of markets a couple of years ago is spreading across some of the fastest-growing areas of the U.S., particularly the Southwest, Texas, and the Southeast.

See Northmarq’s report here.