In this week’s blog, I am turning it over to Auben’s Director of Business Development, Alex Becker. He will be discussing his thoughts and insights on the recent IMN Build-to-Rent Forum that he attended with Auben Chattanooga Market Director Jason Weathers!
The Build-to-Rent (BTR) industry has garnered considerable attention recently, with significant discussions about its growth and challenges. The Build-to-Rent East Conference provided an excellent platform for exploring the key trends and challenges shaping the industry. Let’s explore the highlights from the event and what lies ahead for this rapidly evolving sector.
A Positive Outlook for the Future of Build-to-Rent
Despite the current challenges, there’s an overarching sense of optimism surrounding the future of the Build-to-Rent industry. Developers, investors, and operators at the conference all expressed confidence in the long-term potential of BTR. The demand for rental properties is expected to remain high, particularly in urban areas, making the sector an attractive investment opportunity.
However, the path forward isn’t without its hurdles, and these challenges must be addressed to ensure the industry’s sustainability and profitability.
Challenges: Rising Costs and Market Conditions
The current market conditions are testing the resilience of Build-to-Rent projects. With rising interest rates, increasing building costs, and climbing insurance rates, many developers are finding it harder to make projects financially viable. In particular, these factors are making it difficult for some to get their projects “to pencil”—a term used to describe a project that is financially feasible and able to generate the desired returns.
While these conditions may present short-term obstacles, they also highlight the need for strategic planning and innovation in the development process. BTR operators are compelled to be more creative and efficient in their project approach, focusing on cost-control measures and operational efficiency to deliver value.
Operational Efficiency and Cost Control: The Key to Success
In the current climate, operational efficiency and cost control are more important than ever. For operators and investors to see results and meet their return expectations, focusing on these elements is essential. This means adopting smart building technologies, optimizing management processes, and ensuring that the entire lifecycle of a property—from development to day-to-day operations—is as cost-effective as possible.
In an environment with slim margins, the ability to run a tight operation can make or break a project’s success. Efficiency isn’t just about cutting costs—it’s also about delivering quality to residents while minimizing waste and unnecessary spending.
Hot Markets: The Midwest and Kansas City
One of the most exciting takeaways from the conference was the emergence of Midwest markets, particularly Kansas City, as hotspots for Build-to-Rent projects. These markets have become increasingly attractive due to their affordability, steady population growth, and job growth, as well as promising return metrics.
With many East and West Coast cities becoming saturated and expensive, developers are turning their attention to more affordable markets that still offer strong growth potential. Kansas City, for example, has seen a surge in interest from both investors and operators looking for areas with lower upfront costs but strong long-term potential.
The Midwest’s appeal lies in its balance of affordability and growth, providing a great opportunity for BTR projects to flourish while delivering solid returns.
Rethinking the Traditional Multifamily Model
The traditional multifamily pricing structure and operational model are increasingly proving to be obsolete and too expensive for current operators. As the market evolves, so too must our approach to pricing, property management, and returns.
The traditional approach to pricing rents and managing multifamily properties may no longer meet the demands of today’s market. Instead, more innovative approaches are needed, especially for operators looking to compete in a tightening market. Operators are under pressure to reduce overhead and increase operational efficiencies while still providing quality living spaces for residents.
Auben Realty’s Innovative Property Management Pricing Structure
One company leading the charge in adapting to this new environment is Auben Realty. The company has developed an innovativeproperty management pricing structure that minimizes owner expenses while still ensuring that performance targets are met. Their approach aims to provide a sustainable and efficient model for operators seeking to maximize returns while maintaining high standards of service and quality for residents.
Auben’s solution could be a game-changer for the industry, helping operators navigate the current challenges and optimize their financial outcomes without sacrificing quality or performance.
Conclusion
While the Build-to-Rent industry faces some headwinds, there is no doubt that the future holds great promise for those who can adapt to current market conditions. With a focus on operational efficiency, cost control, and innovative pricing structures, the industry can overcome current challenges and continue to thrive in the years ahead.
The Midwest, particularly Kansas City, represents exciting new markets for BTR development, offering affordability, growth, and strong returns. As the industry evolves, companies like Auben Realty are setting the bar for smarter, more sustainable property management practices, proving that there is always room for innovation—even in a challenging market.
The future of Build-to-Rent looks bright, and those who can navigate the current landscape with strategic foresight will be well-positioned for success.
