Build-to-Rent Housing Surges to Record Highs

The build-to-rent sector celebrated its most successful year in 2023, with a record-breaking 27,500 new single-family rental homes completed—a 75% jump from 2022.

Jordan B. & Han-Gwon Lung
April 19, 2024

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Good morning. The build-to-rent sector had a record year in 2023, completing 27,500 homes—75% more than in 2022. Phoenix, Dallas, and Atlanta led with nearly one-third of 2023’s units.

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Market Snapshot

S&P 500

GSPC

5,011.12

Pct Chg:
-0.22%

FTSE NAREIT

FNER

675.87

Pct Chg:
+0.13%

10Y Treasury

TNX

4.58%

Pct Chg:
-0.069

SOFR

1-month

5.33%

Pct Chg:
0.0%

*Data as of 4/18/2024 market close.

HOUSING BOOM

Build-to-Rent Housing Volumes Hit All-Time High

Build-to-rent home volumes are hitting fresh highs in the U.S. and breaking records, thanks in large part to one key region.

By the numbers: In 2023, the build-to-rent sector witnessed unprecedented growth. A record-breaking 27.5K rental homes were completed nationwide, a 75% uptick from 2022 and almost 300% more than in 2021. Three key metros—Phoenix, Dallas, and Atlanta—led the charge, collectively accounting for nearly 33% of all new build-to-rent units added last year.

The Build-to-Rent Housing Boom: New Single-Family Rentals Reach All-Time High, With Another 45,000 on the Way

BTR boom: Fourteen of the top 20 metro areas reached a decade high in construction, led by Phoenix with 4,030 homes—a 164% increase from 2022. Dallas and Atlanta also posted strong numbers, with Dallas contributing 2,700 homes and Atlanta nearly 2,000. The top states for build-to-rent were Texas, Arizona, Florida, Georgia, and South Carolina.

Emerging markets: Momentum is growing, particularly in Florida, North Carolina, Georgia, and Michigan. Florida’s North Port leads with 749 homes built and 994 in progress. Raleigh, North Carolina follows with 743 completed and 355 upcoming, and Lakeland, Florida has 489 finished with 317 more planned. Savannah, Georgia, and Ann Arbor, Michigan are also expanding rapidly with significant constructions underway. Huntsville, Alabama stands out, preparing to add nearly 2,500 new homes to its existing 262, fueled by job growth and new residents at the Port of Huntsville.

➥ THE TAKEAWAY

Zoom out: With mortgage rates and housing prices still near all-time highs, homeownership remains out of reach for most Americans. But the allure of bigger living spaces, including private backyards, has intensified post-pandemic, driving an average annual increase of 6.6K BTR units pre-pandemic to tens of thousands annually since 2021. Although construction activity has surged in recent years, forecasts indicate a likely moderation in the pace of new developments in the future.

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✍️ Editor’s Picks

Mortgage rates surge: U.S. 30-year mortgage rates have shot back up to 7.13%, signaling a bumpy recovery for U.S. real estate as purchases stabilize.
On the rise: Due to high rates, expected returns for private credit are exceeding private equity and real estate for the first time. Join thousands of investors who are accessing this growth on Percent. (sponsored)
More cutbacks: Google (GOOGL) will cut an unspecified number of real estate and finance positions, part of its second round of layoffs since January.
Can’t wait any longer: The 5 biggest Wall Street banks are reporting a 27% uptick in securities, debt, and M&A activity—its highest level since 1Q22, when the Fed started raising rates.

🏘️ MULTIFAMILY

Rent growth rankings: Tertiary markets show the highest rent growth potential. Top performers include Allentown, PA (can’t make that up), and Wichita, KS, at 4.2%.
Workforce revolution: JBG SMITH’s Impact Pool exceeded goals, creating and preserving 3K workforce housing units in the Washington region since 2020.
Vintage Hollywood: Panot Capital secures a $50.8M loan from Israel Discount Bank of New York (ISDAY) for 10 Hollywood vintage apartment buildings with 482 units.
Artful living: Ray Phoenix, a new multifamily residential building in Phoenix, offers spacious units, amenities, and site-specific art by Alex Israel.
Garden-style living: Royal Palm Companies secures $86M for a 420-unit complex called Tuscany Village in Sanford, set for completion by 2026.
Affordable dreams: Maracor Development plans 240 affordable apartments in a six-story building near the Warm Springs BART station in Fremont.

🏭 Industrial

Storage success story: IPC Alternative Real Estate Income Trust acquired four self-storage properties in Atlanta and Montgomery for $25.5M.
Texas-sized growth: Southwest Logistics Property Co. enters Austin with a 400KSF industrial park development, scheduled for completion in 2Q25.
Cool construction: Arcadia Cold Storage & Logistics will build two Chicago-area cold storage facilities totaling 600KSF, with 80K pallet positions.

🏬 RETAIL

Gold Coast goldmine: Chicago’s Newcastle Investors purchased three 92% leased, 42.3KSF Gold Coast properties for $44M, with rents around $112–$190PSF.
Strip mall success: A suburban Houston shopping center with Big Lots, Dollar Tree, and Harbor Freight Tools as tenants sold to an unnamed Washington investor.
Taco Tuesdays: Taqueria Xochi will open its third D.C. location at The Yards in the Capitol Riverfront neighborhood, after signing a 2.4KSF lease.

🏢 OFFICE

WeTry: Embattled WeWork aims to exit bankruptcy by May, seeking $400M from SoftBank & others, as a potential takeover by Adam Neumann’s Flow startup looms.
Tenant tightrope: Office landlords remain reluctant to fund tenant improvements amid shaky fundamentals, turning to lower-cost solutions like second-generation spaces.
Loan drama: In December, 280 Park Avenue’s $1.1B debt moved to special servicing, requiring $100M to extend its maturity by 2 years.

🏨 HOSPITALITY

Disneyland’s makeover: Anaheim just approved Disneyland’s (DIS) $2B redevelopment, expanding the Disneyland Resort with new elements on existing land.
Powering Up hotels: Neway Hospitality secures $11.3M in C-PACE funding for a 275-key, dual-branded hotel construction in downtown Houston.
Final Four fever: Phoenix and Cleveland hotels shine during Final Four season, with outstanding RevPAR, ADR, and occupancy increases.

📈 CHART OF THE DAY

Nationally, median rent-to-income ratios among new lease signers in market-rate apartments fell 120 bps from their peak to 22.5%, after 16 straight months of wage growth outpacing rent growth. Who knows how long it will last?