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Demographic Tailwinds Continue Propelling Build-To-Rent

Marquette's Chris Yuko discusses the growth of the Build to Rent segment in Forbes

The confluence of several demographic trends spells robust demand ahead for the build-to-rent (BTR) segment of the multifamily industry. So says a report released four months ago from global real estate services firm Cushman & Wakefield.

Millennials are marrying and starting families, a life stage linked in the past to first-home purchases. But today, college debt, elevated mortgage rates and a dearth of homes for sale have compelled them to remain renters.

Given its merging of renting with single-family home lifestyles, BTR represents a bridge for Millennials to home ownership.

However, it’s not just Millennials propelling the trend, Cushman & Wakefield points out. BTR demand will also be driven by downsizing.

Baby Boomers will seek an intermediate step between houses where they raised families and apartments or senior communities. As well, there exists a burgeoning population of “pet parents,” some of whom helped make up the 20 percent of U.S. households adopting pandemic pets. Cutting across generations, these folks will seek greater room for their four-legged friends to roam.

Other factors

Among the many additional catalysts of BTR expansion is the growth of major cities’ exurbs, which Cushman & Wakefield reports saw the greatest inbound migration in 2022 and 2023. There, more abundant land exists for rental communities offering the kind of living area associated with single-family home communities.

Given its suburban community appearance, BTR also answers the need for rental housing in areas and municipalities across the U.S., including development-friendly states, that have looked with less favor on traditional multifamily rental complexes.

Of course, the increasingly prohibitive cost of home ownership remains likely the most compelling factor favoring BTR growth, Cushman & Wakefield reports. When the oldest Baby Boomers turned 44 in 1990, Boomers controlled 20 percent of the nation’s net worth. By contrast, when the oldest Millennials turned 43 last year, that generation represented only 6 percent of the nation’s net worth.

Difficulty in cobbling together down payments combined with steadily climbing home costs will mean a longer tenure in rental housing for Millennials, according to the Cushman & Wakefield report.

Evolving segment

With continued growth of the BTR segment, the kind of communities being developed is evolving. So says Chris Yuko, director of development for Marquette Companies, which recently commenced construction on The Sylvan, a community with 300-single-family homes, townhomes and apartments in suburban Houston’s The Woodlands.

Developers “are being asked to cater to residents at various life stages and lifestyle levels,” says Yuko, adding that the range of housing types at The Sylvan reflects that dynamic. Care has also been taken in its design to replicate an established enclave.

“Our overall landscaping plan, which preserves the natural landscape and forestation by retaining dozens of old-growth trees, enhances the architecture, giving the community the look and feel of a traditional neighborhood.”

Oswego, Ill. is an ideal example of open exurban area referenced in the Cushman & Wakefield report. There, national real estate and property development firm Lynd, possessor of an ever-larger portfolio of BTRs, is developing Home at Ashcroft, which features 178 one- and two-story houses with two-car garages, extended driveways, private yards and in select residences, basements. A focus of the community this year is a $2 million clubhouse with fitness center, yoga area and outdoor swimming pool.

“In addition to fostering healthy bodies, minds and spirits, Lynd’s wellness programming turns neighbors into friends and developments into communities,” says Anthony Tiritilli, president of development. “It’s the ultimate amenity.”

Managing a BTR property requires different skills than overseeing traditional rental communities. So says Diana Pittro, executive vice president of RMK Management Corp., with 38 properties and more than 8,800 units under management in Midwestern states. For instance, BTRs’ budgets and expenses are different from those of apartment communities.

Greater numbers of dollars are allocated to landscaping and groundskeeping in larger BTR developments, less to corridors, elevators and amenity spaces associated with apartment towers or garden-style rental communities.

Look for “demographic tailwinds” to keep BTR numbers climbing higher, the Cushman & Wakefield report concludes. “The average prospective home buyer can afford 34 percent less house than just two years ago, all while home prices continue to climb,” author Sam Tenenbaum wrote in December. “Given these circumstances, the case for build-to-rent is clearly a compelling option in today’s market.”

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