Surging demand for build-to-rent projects has pushed Texas to the top of the nation for home rental construction in the pipeline, with Dallas-Fort Worth at No. 2 among all large metros based on the same metric.  

Courtesy NexMetro Communities

NexMetro Communities’ Avilla Boat Club rental community is located in Fort Worth.

The Lone Star State’s total of nearly 22,000 BTR projects on the way is over 56% higher than Arizona, which is the next closest state with nearly 14,000 projects in the pipeline.

The only metro to surpass DFW’s almost 8,500 home rental projects under construction was Phoenix, which has more than 13,000 BTR projects in the works, according to an analysis from Point2Homes using data from Yardi Matrix. 

Texas’ three other largest metros each placed in the national top 10 for under-construction projects of the multifamily housing option that feels more like single-family residential. Houston was at No. 5 in the nation with more than 4,600 BTR projects under construction, followed by Austin at No. 6 with 4,300-plus units on the way and San Antonio at No. 8 with nearly 3,000.

“As urban areas become more congested and expensive, there’s a growing trend towards suburban living,” Yardi Matrix Manager of Business Intelligence Doug Ressler said in a statement. “BTR properties in suburban areas offer more space and affordability while maintaining connectivity to urban centers.”

The biggest chunk of BTR projects under construction in DFW are Fort Worth’s more than 1,800 rental homes in the pipeline, CultureMap Dallas reported. More than a third of those will be part of Living Fully Orchard Farms development in Fort Worth.

McKinney has nearly 1,300 units on the way, the only other city close to Fort Worth’s total, though Princeton and Melissa also have huge BTR communities on the horizon. Oxenfree at Princeton will feature more than 400 BTR units, while Wolf Creek Farms will bring nearly 350 units to Melissa. 

The state’s strong job market, openness to remote work and business-friendly climate were cited as reasons for the growth of BTR in Texas. BTR’s affordability was also a factor, as Ressler said renters can save around $1,000 per month compared to elevated home prices and high mortgage rates. 

“The biggest hurdle to buying a home for BTR residents is high mortgage rates, so BTR homes provide an affordability solution in today’s increasingly expensive housing market,” Ressler said. “On average, renting a BTR unit is cheaper than buying a starter home.”

Atlanta’s nearly 7,000 BTR projects on the way placed it at No. 3 in the nation, followed by Charlotte at No. 4 with more than 5,300 units in the pipeline. 

The last few years have proven resilient for student housing, with the sector remaining strong. We spoke with Jack Palms, VP of Acquisitions at RREAF Holdings, on why student housing stands out and what the future holds for the sector.  

Q: With a notable surge in investor interest, what factors do you believe are driving this enthusiasm for the student housing market right now?

A: Investors have always had a strong interest in multifamily properties, which is, in essence, what student housing imitates. However, student housing offers owners and investors an additional line of security. Year-over-year student housing has continued to have histrical performance both in terms of rent growth and occupancy.

Q: How does the investment landscape in student housing differ from other real estate sectors, and what advantages does it offer to investors? What specific attributes or metrics are investors prioritizing when evaluating opportunities in student housing?

A: Student housing allows owners/developers to “lock in” leases for an entire year and not have the physical occupancy volatility of traditional multifamily. Student housing typically has an additional layer of credit through parental guarantees.

Student housing investors will investigate metrics such as school infrastructure, enrollment, enrollment projections, new school initiatives, proximity to campus, campus development activity, and school conferences. At RREAF, we are focused on acquiring student housing assets located near Power 5 Schools and Tier 1 Research Institutions.

Q: How does risk assessment differ in student housing compared to more traditional real estate investments?

A: Simply put, your tenants are students in college, which comes with different levels of credit, insurance, and asset damage risk. This can come in the impacts of occupancy or rent growth, and these risks are always weighed into the “risk-adjusted returns” for the asset type, whether that is a core, value-add, or development deal.

What are the key drivers that make student housing a resilient investment option, especially in today’s challenging economic climate?

In previous challenging economic climates, we saw an increase in higher education as this tends to correlate with a tougher labor market. This makes student housing somewhat predictable in that preleasing and lease terms provide a predictable revenue stream for owners and investors and reduce the risk of vacancies.

What factors could influence growth over the next 5-10 years? Looking ahead, how do you see the future of student housing continuing to evolve? 

With new technology replacing several jobs, there might be a shift in people wanting/needing to attend school to enter the workforce. Students will continue to seek out the large tier 1 institutions, prioritize assets near the campus, and provide notable amenities.

For an extended version of this interview, click here to visit ApartmentBuildings.com.