BTR Developers Compete With Homebuilders for Available Land

Homebuilders have a new contender to compete with: build-to-rent developers. There is an infamous dearth of developable land for housing development, and now new demand from build-to-rent investors—with a much different business plan to justify land costs—are buying dirt.

“We have seen increasing interest from a significant number of developers in search of land for the build to rent market,” Noah Breakstone, CEO at BTI Partners, tells GlobeSt.com. “We probably receive about three to four calls a week to acquire developed land parcels. There is significant capital chasing deals for this new market.”

As a result, these two builder segments are now in competition for space. “From what we can see, the BTR developer is essentially competing with new homebuyers in adding additional pressure on the limited supply of new residential product,” says Breakstone. “Both market segments—BTR and the new, for-sale market—need developed land and are competing for new development opportunities.”

The impact has contributed to already rising land costs. However, with construction costs also increasing significantly, Breakstone says that land prices have a cap. “The strong demand for developable land is causing land values to increase significantly, but, at the end of the day, the market sets the sales price,” he explains. “Homebuilders and master developers, like us, will pay as much as it makes economic sense after considering labor and material construction costs, impact and permit fees, interest rates, and so forth.”

In Florida, where BTI is active, there is ample new entry from developers that are following migration patterns and population growth. As a result, land prices are also increasing due to the demand. “Florida is seeing an influx of new homeowners from all over the US, so the appetite for developable land is at an all-time high,” says Breakstone.

BTI has managed to compete by focusing on land sites near growth areas, where prices continue to be affordable, allowing the company to build affordable homes, according to Breakstone. “Fortunately, BTI has been well poised in owning land positions near major job hubs with population and job growth throughout Florida where land values continue to be affordable and result in more affordable, new home prices.”