This trend appears in many parts of the country: development activities are concentrated between two metropolitan areas, usually along one or more highways that connect them. Orlando to Tampa along I-4 is another great example, and there are dozens more across the country.
From New Braunfels to San Marcos and closer suburbs, the stretch between Austin and San Antonio is starting to fill up, offering young families and singles an alternative to homeownership. The map below, featuring data from CoStar and supplemented with original research from Hunter Housing Economics, shows built-to-rent (“BTR”) units that have already been built, as well as those that are under construction and proposed in this area. BTR housing serves all previously unserved households who want housing in the suburbs with a yard or a small private outdoor space, but who cannot afford (or choose not to purchase) a single-family home.
The stretch between Austin and San Antonio is “filling up” with proposed BTR subdivisions.
Much of the BTR developments that now complement units in areas like San Marcos and New Braunfels are single-family detached homes, and as one gets closer to the larger cities of Austin or San Antonio, one finds more of townhouses and more “horizontal” style “apartments” (also called “cottages”), which offer tenants a better living experience than traditional apartments, as they offer a ground-floor entrance. ground floor and usually a fully detached house, with windows on four sides, and a small backyard. This type of rental product is just starting to take off and is seeing strong demand from singles, couples, retirees and dog owners. (The benefit for dog owners is that they can let the dog out the back door instead of putting it on a leash and walking it through hallways and/or elevators to get out).
Like cottages, townhouses built for rental tend to spring up near major cities. Townhomes typically offer more square footage, but also more shared walls, and are typically in “infill” locations. There is evidence of market support further away from major metropolises, provided they are close to schools and shops. Areas south of Austin, like Buda and Kyle, are experiencing strong population and household growth, amplified by continued migration of Californians seeking a lower tax environment and lower cost of living. weak in general. New schools are springing up there, which attract new residents. Rent reliefs in effect a year ago are now removed, thereby increasing effective rents. Family demand is under-satisfied in this region. Therefore, rents for new townhouses or duplexes in this area can reach $2,600 per month for 3-bedroom units and $3,000 per month for 4-bedroom units, if they include floor plans well-designed and with better features and amenities than existing homes. houses in the area. The cost to own similar units is close to $3,200 per month.
There is a significant rent premium over individually owned rental housing, especially housing that is not in a planned community. Search by Hunter
Tenant survey, 2023, showing the different types of premiums for new BTRs compared to SFRs and scattered SFRs. … [+]
This year, Housing Economics quantified the premium in the southern United States at $265 per month. Percentage-wise, renters are willing to pay 13.3% more for a newly constructed townhouse than for a home that is not new, according to the survey results. The premium compared to a rental apartment amounts to 24.3%.
In the area north of San Antonio, BTR projects such as Pradera, Village at Vickory Grove, Eschelon at Monterrey Village and Springs at Alamo Ranch have performed well. Rents in this area can reach up to $2,500 per month.
Another example of this type of “fill” between major cities is in Florida, along the I-4 corridor between Tampa and Orlando. This map shows buildings constructed for rent
The area between Tampa and Orlando is just starting to fill up, and build-to-rent developments … [+]
developments that already exist in Tampa, extending primarily northward at present. On the other side, from Orlando, there have been a few BTR projects in Kissimmee and St. Cloud, south of Orlando, as well as to the west, mainly near Interstate-4.
Build-to-rent project development activity is currently slowing, and we will certainly see a sharp reduction in BTR construction starts next year, due to a lack of capital. Developers planning to enter the market in 2025/2026 will likely find a smaller number of projects opening around them. Some of our clients are preparing to resume what could appear to be “distressed” BTR projects next year, while some investors who have tied up land are expected to find themselves financially incapacitated to finalize the purchase. The lack of capital in this area could represent an opportunity for well-capitalized investors to land a contract or close a deal that is not currently available. Next year should be interesting for BTR investors and developers.