As build-to-rent (BTR) demand rises, single-family rental (SFR) development has become more efficient in creating a distinct, community-focused experience for renters. Newly released U.S. Census Bureau data confirms that SFR/BTR development continues to be robust and stable, with its annualized pace of construction in the first quarter of 2025 matching the previous quarter’s tally.
Cap Rates Push Higher as Underwriting Standards Stabilize
Arbor’s Small Multifamily Investment Trends Report Q4 2023, developed in partnership with Chandan Economics, is a snapshot of a strong and resilient subsector continuing to navigate ongoing market dislocation. The report shows that distress has remained limited, even with valuations and measures of risk pricing in flux. As conditions start to stabilize, there are signs that deal activity is picking up.
Key Findings:
- Small multifamily prices fell 3.2% during the quarter.
- Cap rates climbed 33 bps — the largest single-period jump since 2009.
- Property-level cash flows remained healthy as rent collections continued to strengthen and expense ratios normalized.