As the COVID-19 pandemic hit, the impacts were felt swiftly across industries, communities and markets. Social distancing practices were quickly adopted while the use of shared community spaces began to decline. People across the globe are now spending a majority of their time in their homes, oftentimes leaving office spaces vacant and multi-family living less desired. This shift has amplified one of the biggest, recent housing sensations in commercial real estate—purpose built Build-for-Rent (BFR) communities.
Prior to COVID-19, BFR communities—subdivisions encompassing detached single-family homes built from the ground up specifically for renters—had experienced an accelerated acceptance and demand as the nation faced affordable housing shortages, tracing back to the Great Recession. For the first time in U.S. history, rental household growth is outpacing home ownership over the past few years. The Urban Institute states that the growth in rental households will exceed that of homeowners by 4 million from 2010 to 2030, concluding that the nation is currently not prepared for this increase in rental homes.
While a strong demand for BFRs has existed, the pandemic emphasized the importance of a comfortable living environment that many lacked from multi-family spaces. Renters post-COVID-19 will be seeking larger, more private living spaces that offer amenities including touchless delivery services, home offices, private backyards and more, while doing away with shared spaces such as club houses and community pools. These newly-built BFR homes will likely be sustainability focused, having a significantly reduced carbon footprint, using little to no electrical power from the ‘grid’ while producing only a tenth of the carbon footprint of traditional construction.
As working from home (WFH) becomes more widely accepted and practiced during the pandemic, large companies, such as Facebook and Twitter, are already embracing workplace practices supporting remote workers who benefit from a work/life balance, little to no commute and increased productivity. This WFH shift opens opportunities for workers to relocate to more spacious, affordable suburbs where BFR subdivisions are being developed, avoiding premium rents for compact apartment living in dense markets such as New York City and San Francisco. In a recent survey by Facebook, 40 percent of employees said they are highly interested in full-time remote work and 75 percent of those employees stated they were considering moving to a different city, if working remotely.
Renting today is not by necessity as it was in previous decades. According to America’s Rental Housing 2020 report by the Joint Center for Housing Studies of Harvard University,
older and higher-income renter households are satisfied with their rental situations with 75 percent of overall renters—and 72 percent of genX renters—affirming that renting best fits
their current lifestyle. The growing popularity in BFR is due to the increasing rental trend among millennials, who desire living in single-family detached homes and baby boomers,
who elect to live a lock-and-leave, maintenance and repair-free lifestyle.
BFR communities have recently attracted the interest of big players, including JP Morgan and American Homes 4 Rent, who announced they will partner to develop thousands of single-family rentals with expected completion this year. Within the single-family rental market, BFR assets are favorable among investors with longer and higher tenant occupancy, less turnover cost and little to no capital expenditures for five to 10 years. With rents
and occupancies expected to rise due to pent up housing demand, the BFR asset class is expected to strongly continue and thrive, especially in the upcoming five to 10 years
following recent COVID-19 impacts.