Everyone wants to figure out where the build-to-rent sector is at and where it’s going in the next year. More than 300 people gathered in Dallas for Zonda’s The Future of Build-to-Rent conference, looking for some insight on what exactly may be going on. Here are some of the most pressing questions from Day One.
Where is the sector at right now?
"I view us as a canary in the coal mine. In the first and second quarters of 2022, we ended up in a situation that was a precursor to all this activity. The canary in the coal mine died. It truly did—it just went flatline. The second half of 2022 saw some life come back, but we’re just not getting the formulas to work yet. The cyclical formula is all different—we went straight from building right to adjusting. We didn’t oversupply the market. We went into this with short supply. We don’t know exactly where things are; there’s less financing available to overbuild." —Greg Vogel, CEO, Land Advisors Organization
What do you think of when you think about managing your business?
"It all starts with listening to our residents. What do they want and look for in a home? For us, residents are predominantly looking for a true detached single-family living experience. They want a detached house with a private fence in the rear yard, three or four bedrooms, a driveway. We also seek to empower our residents as much as possible—driving their long-term satisfaction is good for them and good for the business and the sector." —Peter DiLello, senior vice president, Investment Management Group, Invitation Homes
Is there a danger of oversupplying this market?
"It’s generally accepted that the U.S. housing market is about 4 million homes undersupplied. The supply and demand fundamentals for single-family rentals remain strong, and the outlook is favorable. In addition, in 2023 home sales picked back up so the phenomenon of rent-from-sale will be short-lived. It’s robust enough to absorb a moderate, at best, increase in supply from builders." —Thomas Fichman, senior vice president of investments, Tricon Residential
What will separate the winners from the losers in build-to-rent?
"Location. I think people need to be able to drive rents. It’s that location piece and having something to provide a living experience. If it’s just a rental house, you’re not going to drive rents. Put that multifamily hat on—it’s a service and living experience. You’ll have a hard time competing otherwise." —Edward Steffelin, chief investment officer, Balcara Group
"Site selection, for sure. Add to that groups that are vertically integrated. In the beginning, companies that had their own property management made lenders hesitant. Now, groups with those pieces in place are looking a little better. Technology is the other thing that seems to stand out. I talked to a group this morning that had amenities I haven’t heard of or seen, but it will really set them apart. They are getting creative with the brand." —Shannon Hersker, senior vice president of debt and equity, Northmarq
"From a capital markets perspective, it’s leverage—do you have a moderate amount? People or institutions that have owned real estate for decades are typically low-leveraged borrowers. They are also looking to see if you are building flexibility into the product in terms of amenities. In the past, maybe you didn’t want more, maybe some on-site leasing. But now, operationally, maybe you can charge a little bit more for extra things like having the front and backyards mowed. That little bit of flexibility in product can help drive longevity and success." —Matthew Putterman, managing director, JLL Capital Markets
