ATLANTA — When considering a single-family, build-to-rent (BTR) development or acquisition, the main priority of the developer or investor is to focus on finding a place where people want to live, said Zach Persky, vice president of acquisitions for Quinn Residences. Access to jobs, retail corridors and good school districts are all important factors for potential residents.
Persky was one of the speakers on the BTR panel at the 15th annual InterFace Multifamily Southeast conference, which took place Wednesday, Dec. 4 at the Cobb Galleria Centre in Atlanta. Kyle Palmer, managing partner of Palmer Real Estate Investment Services, moderated the discussion.
Editor’s note: InterFace Conference Group, a division of France Media Inc., produces networking and educational conferences for commercial real estate executives. To sign up for email announcements about specific events, visit www.interfaceconferencegroup.com/subscribe.
While the BTR segment may still be in its infancy, its fundamentals are solid, according to the panel. Demand comes from would-be homebuyers who are priced out of the single-family market. These purpose-built rentals have many of the same perks of for-sale homes, such as yards and private garages, without the handicaps of down payment and mortgage commitment.
BTR construction completions nationally totaled more than 50,000 units in the first half of 2024, a 25 percent spike from the same period a year ago, according to a BTR report from Northmarq. Construction has also begun on more than 40,000 units in the first six months of the year.
Fellow panelist Jim Chapman, president of Jim Chapman Construction, said he prefers sites for BTR projects that are more suburban if not exurban. “They’re easier to get zoned, and people want to live there just as much as people want to live in Class A, garden-style communities,” he said.
Chapman’s firm also gravitates toward college towns, not with the goal of renting to students but for focusing on the “excellent demographics that circle around the economic engine.”
John DeMario, regional vice president with RKW Residential, said BTR fills a need specifically in the Southeast because of the strong population growth the region experiences. “We have continual conversations asking, ‘Are we building enough housing for our population growth today?’ As people go through their life cycle and want to get out of traditional multifamily, do we have enough housing in those areas for that market?”
DeMario continued that BTR developments provide an opportunity for residents to figure out what characteristics they like in a home and what part of town they prefer. But some may opt for BTR simply because they are waiting for interest rates to go down.
“The one thing in 2025 that we don’t know is how many people are sitting on the sidelines in BTR,” said DeMario. “They may be ready for [purchasing] a home but they’re waiting for the opportunity to jump.”
Chapman discussed the long-term potential of the BTR segment. “I tend to think that we’re in the first inning of BTR, but I don’t know if there are nine innings or 18,” he said. “Someone told me recently they thought BTR had a certain duration of 10 or 15 years, but I don’t agree with that at all. It’s here to stay.”
Persky noted one challenge for the BTR space is that homebuilders such as D.R. Horton can decide last-minute to switch a community from for-sale residences to for-rent units. “The leasing in this business is naturally slower than multifamily. Suddenly one competitive community pops up, and the leasing becomes a pretty big battle,” said Persky. “So, supply impacts are felt severely.”
On the other hand, one of the advantages of BTR is the stickiness of the renter. Persky stated that there is less turnover in BTR communities than traditional multifamily, which can help insulate owners from supply issues.
Paul Lange, president and CEO of Rotunda Land & Development Group, echoed this sentiment, stating that the pace of BTR leasing is a different velocity than multifamily.
“We believe that BTR is a better mousetrap. We find that we don’t typically lose a head-to-head battle with an apartment,” said Lange. “Long term, the BTR space has a lot of tailwinds. There are a lot of demographic strata that it serves that multifamily doesn’t.”
For DeMario, it’s too early to say what type of BTR development is most successful. But his recommendation is townhomes for sites closer to city centers and single-family layouts for suburban markets.
“The BTR space is still trying to figure out what it wants to be and how it is best served. One of the things we’re going to find out soon is where the consumer wants to go,” said DeMario. “There are a lot of different options that renters are trying. The market will tell us which ones suit [renters] best.”
— Kristin Harlow