www.REBusinessOnline.com December 2023 • Volume 22, Issue 4 DEVELOPERS, INVESTORS JUMP ON BUILD-TO-RENT BANDWAGON By Kristin Harlow trong demand for single-family rental (SFR) homes comes from millennials looking to avoid the rising cost of homeownership, and from baby boomers seeking to downsize and avoid maintenance is-sues. Developers aim to capitalize on this demand with build-to-rent (BTR) communities, which are new homes purposely built to be rentals. Berkadia de nes BTR properties as those that consist of 50 or more at-tached and detached single-family The sector’s strong tenant demand, rent growth make it an easy proposition. Plus, the Midwest is playing catch-up in supply of units. S homes and townhomes. Additionally, no one lives above or below the renter, the home typically has high-end n-ishes and often comes with a garage and backyard. “We are seeing resident demand for maintenance-free, exible living,” says Michael Spero, senior director of investment sales with Berkadia in Kansas City. “The BTR product really plays well with the renter-by-choice category.” In its “Single-Family Rental & Build-see BUILD-TO-RENT page 12 Heyday Sun Prairie is a 170-unit BTR community in suburban Madison, Wisconsin. CONSIDER CONSTITUTIONALITY IN PROPERTY TAXATION Taxpayers should look beyond fair market value in deciding whether — and how — to protest assessments. By Cecilia Hyun, Esq. axpayers usually appeal prop-erty tax assessments by proving a market value different from the assessor’s nding, but they should not overlook constitutional guaran-tees of uniform and equal taxation. As an ad valorem tax, real property taxes are charged on the value of the underlying real estate, usually mea-sured as fair market value. In many states, taxpayers can demonstrate their property’s market value with a recent, arm’s-length sale price or by independent appraisal evidence. Two potential concerns emerge for taxpayers in an assessment appeal T centered on market value: the declin-ing reliability of data in volatile and rapidly changing markets, and the trailing nature of market data used by assessors. Those data issues can skew the mass appraisal techniques tax assessors often use, including com-parisons to sales of similar properties, when assessing real property. Volatility, rapid change Commercial property data can lose relevancy with surprising speed in a volatile market. For example, of ce properties continue to bear the conse-quences of increased remote work and occupants’ shrinking footprints since the pandemic. Many of ce properties with mortgages maturing in 2023 have lost half or more of their previously underwritten asset values. Badge swipes tracked by Kastle Systems show an average of ce attendance of about 50 percent throughout 2023. In early 2023, Cushman & Wake-eld attributed slowing construction to uncertainty in the of ce market along with challenges related to high-er interest rates, supply chain issues and labor shortages. Of ce properties may be in danger of becoming “zom-bie” buildings with utilization of 50 percent or less, while market watch-ers warn of doom loops or a domino effect of property failures, especially in dense central business districts. Most market participants are waiting for the other shoe to drop and for the market to reveal its bottom. Assessors are not immune to the valuation problems this market un-certainty creates. Assessors currently valuing properties are likely consid-ering comparable sales that occurred as far back as 2019 or early 2020. Even more recent sales are likely to be based on leases executed years earlier, or on nancing obtained prior to the pan-see PROPERTY TAX page 15 How to Maximize Multifamily Returns in 2024 page 16 2023 Viewpoints in Real Estate: Brokers Refl ect, Share Outlook page 17 Industrial Outdoor Storage Sector Gains Recogntion page 30
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