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Yardi Matrix and Costar's most recent reports both indicate that multifamily and BTR rents are beginning to stabilize and trend positive after 7 consecutive months of rent cuts nationally. The latest data from Costar's daily asking rent series suggests Dallas-Fort Worth rents are poised for a recovery this year. Rents were mostly flat over the past two monthly readings, indicating the market is likely beginning to reach the bottom, consistent with their forecast of a rebound in the second half of 2024. They are projecting rents to rise to 1.2% at the end of this year, with rent growth above 3% in 2025 and beyond, reverting back near historical averages.
As record-high supply-side pressure is expected to decline after 2024's peak, there continues to be robust rental demand. 90% of markets are more expensive for ownership than renting according to Zonda chief advisory officer Tim Sullivan. The declining affordability of homeownership
makes the BTR sector primed for growth, especially among millennials and blue-collar workers between the ages 24-40 with salaries between $60,000 to $70,000 a year, which Yardi Matrix notes as the largest demographics driving the demand for single-family rentals. Additionally, as 52% of workers are back in the office and hybrid work continues to become the norm, more room for multiple workspaces and lack of shared walls make single-family rentals much more conducive towards working from home than noisy apartments.
Research and surveys show that people prefer to live in this type of product. According to John Burns Real Estate Consulting firm, build-to-rent units command an 18% to 19% premium over the newest nearby garden-style multifamily units. Developer, Middleburg Communities, shows a 15% to 20% premium over nearby similarly sized conventional multifamily units within their $500 million portfolio. This demand is validated by a wave of billions of dollars of new investments into the build-to-rent sector as developers, construction companies, lenders, and investment firms are discovering the unique characteristics that make the emerging asset class such an attractive investment.
Besides higher rents than traditional apartments, BTR projects offer fast construction times and the option for tenants to move in before the entire project is complete. According to Aaron Tishkoff, Middleburg's VP of investments, builders can complete up to 40 units a month, resulting in timelines from breaking ground to initial move-ins within as little as 8 months, compared to the 2-year timeline of typical multifamily projects. Because they are bringing money in the door sooner, this helps offset interest expenses on construction loans and lower total project costs. He explains how this allows their lenders to factor those early move-ins into their interest reserve calculations, saving hundreds of thousands of dollars, potentially millions depending on project size. Many notable investment firms are taking notice of these attractive characteristics, Blackstone intends to invest another $1 billion in new build-to-rent developments along with their $3.5 billion dollar acquisition of Tricon Residential, Invitation Homes plans to duplicate the $1 billion it spent on over 3,200 homes in 2023 with an additional $1 billion towards new home purchases in 2024, and Pretium announced recently it has invested $2.5 billion in build-to-rent homes across 37 cities.
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