Investors Clash Over the Future of the Single-Family Rental Space
Investment experts are torn over the fervency in the single-family rental and build-to-rent markets with some saying it’s all hype and others saying it’s the birth of a new asset class.
The single-family rental market is the fastest growing segment in commercial real estate—but not all apartment investors are bullish on the sector. Investment experts at the recent GlobeSt.com Multifamily conference sparred over the future of the asset class with some calling it all “hype” and others saying it was growing into a multifamily-adjacent asset class.
Jeffrey Adler VP at Yardi Matrix and a speaker at the conference, was in the latter group. He views the build-to-rent space as a multifamily-adjacent asset class. The sector already has $30 billion in capital committed, and more is on the way. “There is a fair amount of ramp up.”
David Harrington, EVP and managing director at Matthews Real Estate Investment Services, has worked on several BTR projects, and says that the BTR sector is a response to new demand, calling it a new lifestyle decision. Like Adler, he expects the BTR market to grow—but he added a caveat. Whether or not the product will be successful, he said, we’d have to wait to find out.
Jerry Fink, managing partner at the Bascom Group, on the other hand, was the contrarian. He said that the bullishness for the sector was “mostly hype.” His market view was mostly about location of build-to-rent community, which is typically on the fringe of a city “You have to build these in remote areas where you can get the land to build cheap. In infill areas, you’ll never see them.”
The experts also noted that the demographic patterns are not what you’d expect. The assumption is that older millennials with families are moving into these properties, but actually, not even half of the occupants have children. Adler said that couples in need of a yard for a pet is a more common tenant profile. There are some BTR communities popping up near good school districts, but there has also been pushback from schools that don’t want the influx of students from these new communities.
While Adler was the biggest advocate for growth in the space, but he also noted some challenges with the business plan: housing prices. The rents on BTR homes are not much different than suburban multifamily, but the space will stay relevant as long as home prices stay high.