Many Americans are finding it increasingly difficult to afford a traditional home, prompting many to opt for the more affordable alternative of renting.
More specifically, build-to-rent (BTR) homes are a residential segment offering a different experience. While renters in those assets won't get equity in return, they will be met with vibes similar to owning a home if the landlord can provide the right setting.
"I think it's a different rental product that hasn't existed in the past, at least not at the scale that an institutional investor can invest in," Jerimi Nuckolls, managing director of development for Coastal Ridge, which manages six BTR communities currently, told Globest.
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"It's another rental offering. You have less shared walls. You don't have people living above you or over you. So we're seeing our renters stay in the units longer. So our turnover is a little bit lower; just some added benefits, I think, within the rental residential market."
He added that backyards can be included for BTRs, which is tougher for apartment complexes to replicate. The company has prioritized adding kitchen islands, which are countertops or freestanding cabinets that can be accessed by residents from all sides, to its BTR developments to give them a home-like feel. Apartment complexes can compete with amenities, but those are two key elements that give BTRs a unique edge.
FLOCKING TO THE SUNSHINE STATE WHILE AVOIDING TEXAS
Coastal has recently observed the strongest demand for its BTR developments in Florida, particularly in South Tampa and Orlando. The company recently broke ground on a BTR project in North Tampa. Following this, two additional developments will begin construction over the next couple of years, one in Sarasota and another in North Tampa.
Coastal is experiencing higher rental rates across Florida, largely driven by rising construction costs.
Nuckolls revealed that the Ohio-based firm is actively exploring opportunities in markets like Columbus and the Carolinas, with a particular focus on Charlotte. However, the company has recently steered clear of Texas due to challenges in some Sunbelt regions, where an oversupply of housing has been deterring investors.
"We have really dialed back looking in Texas in the past 24 months," Nuckolls said.
"The land values have not come down at all. We still feel like there's a lot of speculative investing going on in Austin, in particular. People are paying for land that doesn't fundamentally make sense for apartments or for BTR, and we saw a lot of deals fall out and come back to us. So I think they're a little bit further behind in the cycle."
Nuckolls is hopeful that some of the product will clear out in the oversaturated supply markets soon.
FIGHT TO SAVE MONEY AND QUALITY
Nuckolls noted that multifamily developers have been looking to find ways to save money on costs, particularly over the past 12 months. That came ahead of even tariff policy from the new administration.
According to Nuckolls, some developers have been exploring larger projects or ones with hybrid components, such as a mix of BTR and conventional multifamily, in an effort to save money.
He also added, "We're seeing people try to incorporate townhome products into maybe cottage products."
Nuckolls said that the BTR sector is known for executing quality projects, and he expects that to continue over the next 12-18 months. "I think that's a benefit for the asset class," he said.
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