For this Field Note, we wanted to share some perspective on build-to-rent housing, an asset class we have been studying more closely over the past several years as part of our broader focus on suburban growth markets.
Build-to-rent has received a great deal of attention recently, but the underlying idea is not new. In many fast-growing areas, there has long been a gap between traditional apartments and single-family home ownership. Rising home prices, higher interest rates, and changing lifestyle preferences have made that gap more noticeable, particularly in suburban markets where families want more space but may not be ready or able to buy a home.
From our standpoint, build-to-rent is interesting because it shares several characteristics with the types of projects we have focused on historically. Site selection is critical, long-term population growth matters more than short-term trends, and controlling land at the right basis can make a significant difference in overall returns. In many ways, the success of a build-to-rent project is determined long before construction begins.
We also see similarities to self-storage and light industrial development in the sense that these projects tend to work best in the path of growth rather than in fully built-out urban locations. Suburban corridors with strong school districts, new retail, and expanding infrastructure often support long-term rental demand, even if lease-up takes time in the early years.
That said, build-to-rent also comes with its own challenges. Construction costs are higher than they were several years ago, financing can be more complex, and operating a scattered-site rental community requires careful management. Because of those factors, we have approached the asset class cautiously and have focused on understanding where it fits within our overall strategy rather than pursuing it simply because it has become popular.
One area where we believe build-to-rent may make sense is on larger land positions where the original plan allowed for multiple potential uses. In those situations, the ability to shift between self-storage, industrial, residential, or mixed-use development depending on market conditions can create flexibility that would not exist on a smaller, fully constrained site.
As with other new asset types we have evaluated, our intention is to move gradually and remain disciplined about basis, location, and long-term demand. Not every market will support build-to-rent, and not every project will make sense at current costs, but we believe it is an area worth understanding as suburban growth continues across the Texas markets where we operate.
Our approach remains the same as it has been across other cycles — focus on well-located land, structure projects conservatively, and only move forward when the fundamentals support the investment over a full hold period.
