Winning the “Master-Planned Community of the Year” designation by the National Association of Homebuilders (NAHB) gets you a lot of attention. Located near Charleston, SC, the 5,000-acre Nexton development by esteemed developer Newland Communities is notable because of its excellent overall execution and its focus on innovation and wellness.
And, this community is also one of the latest to announce a newly-planned built-for-rent single family neighborhood with 282 “cottage homes” to be developed by Capstone Communities. Site work is under way now, and home construction is just a month or two away; final buildout is expected by mid-2022. In my own research and advisory work on built-for-rent single-family communities in many different markets, I have found three things that speak to the success of this approach:
1) The cottage-home approach, referred to as “horizontal apartments” by industry practitioners, is gaining momentum and share within the single-family built-for-rent sector, and,
2) Built-for rent neighborhoods (”BFRs”) within master-planned communities rent for a higher dollar amount than similar rental neighborhoods that are outside the gates. Newland Communities is considering several more built-for-rent communities within the Nexton community, as well as across their national footprint (11 states). Some of the future BFRs will target a particular demographic, such as 55+ renters, young families, and even second-home renters (typically grandparents who want to be close to their grandkids during certain parts of the year). Segmentation is going to be more and more necessary as more rental communities emerge as part of this accelerating trend.
3) Driven by compelling demographics and a chronic under-building of homes that are appropriate for first-time homebuyers through this whole cycle, $10 billion in equity (plus $20bbn to $40bbn in debt) is flowing into built-for-rent right now. There is a clear need for more of this type of development, and that has recently attracted the attention of institutional money.
“The Capstone development offers single-family rental homes in a suburban environment with amenities and services typically found in more urban settings, all of which are highly desirable right now,” said Nexton’s Vice President of Operations Brent Gibadlo. “The homes provide future Nexton residents yet another new housing choice in the heart of a thriving commercial and medical corridor just a short drive, or walk, from residents’ front doors.”
Built-for-rent communities work extremely well within master-planned communities, and the homes rent for a meaningful premium above similar product in stand-alone communities. A great example of this is in the legendary Lakewood Ranch master-planned community, located in western Florida, which has multiple rental single-family neighborhoods in planning, the first of which has already been met with extraordinarily strong demand.
Capstone Communities, a company with has a long track record in student housing, is diving into the build-for-rent sector, and will build and manage this development. Capstone is also currently under development on a similar 275-unit community in Huntsville, Alabama. The Nexton project will be Capstone’s second installment of its conventional cottage-style development program.
Capstone has seen the cottage-style concept prove highly successful in numerous student housing communities they have developed in multiple markets. Moreover, I have seen this development style (nicknamed “horizontal multifamily” by developers in the industry, because of the similarities between the way they are managed and the way apartments are managed) meet with strong success in markets all across the country. This style of development is gaining more and more devotees, from investors to developers to operators.
To create a true neighborhood feel and unique lifestyle for its residents, the Capstone development will feature open green spaces to host community events, courtyards with pavilions and barbeque stations, a central clubhouse and resort-style pool, fitness center, dog park and electric car charging stations. The homes will offer nine to 12-foot ceilings, quartz countertops, wood-grain flooring, in-unit washers and dryers, a smart home technology package and will have 24/7 on-call maintenance and optional enclosed garage parking. John Acken, EVP of Development for Capstone said that all of the units will have front porches, which will allow people to interact. “A sense of community is more important than ever, and our intentional greenspaces foster that experience,” he said.
Occupying nearly 27 acres, The Capstone site is adjacent to a 20-acre county park and the planned MUSC Health Community Hospital at Nexton. MUSC employees who live in the Capstone homes will enjoy a short walk to work with access to the community’s expansive network of walking trails, parks and green spaces.
Additionally, some of the region’s top employers are within a short commute of Nexton, including The Boeing Company, Volvo Cars and Mercedes-Benz Vans. As part of the Nexton community, all residents have access to a wide array of retail and dining offerings at Nexton Square including Halls Chophouse, Taco Boy, Poogan’s Southern Kitchen and Page’s Okra Grill.
The built-for-rent single-family surge is going to be sustained for the long term, based upon multiple demographic drivers that are well-established. Watch for many more new single-family rental neighborhoods within master-planned communities as well as standalone communities all across the country in the next 12 to 24 months, and beyond. Capstone is now opening such a community in Huntsville, Alabama, with one under construction in Daytona Beach, and others coming soon in Wilmington (NC), Myrtle Beach, and Port St. Lucie, Florida.