Build-to-Rent: The New Real Estate Strategy for Bulgaria

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Over the past decade, a new trend in housing construction and real estate investment has emerged in a number of developed economies: build-to-rent (BTR). It is not just a form of construction, but a comprehensive investment model focused on stable income, long-term employment, and professional property management. Existing at the intersection of the residential, commercial, and financial sectors, build-to-rent is emerging as a sustainable response to the housing crisis and changing social attitudes. What exactly is a BTR? It is a model in which buildings or entire complexes are designed, built and managed with the sole purpose of being rented out. They are not intended to be sold to individual buyers, as in standard residential projects, but remain the property of an institutional investor or fund that manages them long-term. In the UK, the US, Australia and Germany, this model is experiencing rapid growth, with over 88,000 BTR units in operation in the UK alone in 2024 and over 150,000 more under construction. Institutional investors find advantages in this model that are difficult to achieve through traditional strategies. First and foremost — stable cash flow. In an era of economic uncertainty and volatility in capital markets, rental income becomes a key factor. Even with a decline in asset values, rental income remains relatively stable, especially if the projects are well-managed and located in demand. In addition, BTR allows control over the entire user experience — from design to technology to tenant services. This turns the property into a “product” that can be differentiated, branded and positioned in the market in a way that individual apartments in a condominium cannot. Younger generations — especially millennials and Gen Z — are also playing a role in the growing popularity of BTR. Sociological and economic factors such as postponing home purchases, mobility, the search for flexibility, the lack of sufficient savings for a down payment, as well as changing attitudes towards “ownership” are creating a huge and stable market for long-term renters. BTR is addressing this audience with offerings that include everything from coworking spaces, fitness centers, pet areas to smart energy management and security systems. It is also important to note the difference between BTR and buy-to-let — the latter is the classic model in which individual investors purchase a property with the intention of renting it out. In BTR, the scale is completely different: entire neighborhoods or high-rise buildings with dozens or hundreds of apartments, professionally managed, with centralized services and maintenance. This allows for economies of scale, standardization of service and lower vacancy rates. BTR property management platforms are also critically important — in terms of technology, these are often integrated rental systems, maintenance, tenant communication, CRM solutions, and even dynamic pricing systems (similar to hotels). This automates management and brings the tenant experience closer to that of a high-end hotel — with clear contractual terms, 24/7 support, and the ability to provide mobile service. The data speaks for itself: in the US, over 97,000 units were completed using the BTR model in 2023 alone, and the number is expected to exceed 150,000 by 2026. In the UK, BTR represents nearly 10% of all new housing construction in city centres. The model is also growing in countries such as Germany, Poland, the Netherlands and Spain, where municipalities are increasingly looking at it as a solution to housing shortages and high purchase prices. However, what can Bulgaria learn from this practice? First of all, there is a structural shortage of professionally managed rental housing in our country. The predominant part of the market is informal — small investors, individual owners, without management or service standards. This creates uncertainty for tenants and opacity for investors. BTR offers an opportunity to professionalize, standardize and bring this sector to a new level. Secondly, BTR could solve part of the problem of empty new housing. In a number of cities, there are buildings that cannot be sold at the asking prices, but at the same time the demand for quality rental housing remains high. If investors reorient part of their portfolio towards long-term rentals with professional management, this could turn out to be a profitable strategy. Thirdly, BTR has potential in university towns, industrial zones and even in smaller settlements with a dynamic labor market. The mobility of the IT sector workforce, industrial hubs (Plovdiv, Ruse, Stara Zagora) and migration from Ukraine and other countries are creating new demand patterns — housing that offers flexibility, convenience and low initial costs for accommodation. Of course, there are challenges. First of all, there is a lack of institutional investors with a long-term horizon in the housing sector in Bulgaria. Financial institutions in our country still view housing mainly as assets for individual sales, rather than as instruments for long-term profitability. A change in mentality is needed, as well as the creation of a regulatory environment that encourages such investments (including through tax breaks, targeted municipal land and incentives for professional management). Furthermore, the cultural perception of “owning a home” in Bulgaria is still strong. A huge share of the population owns homes, and the rental market is perceived more as a temporary solution. But in cities with a more mobile population and high property prices — such as Sofia, Varna, and Burgas — the build-to-rent model can prove to be a good solution for young professionals, expatriates, and people looking for flexibility. From an urban perspective, BTR also offers advantages in planning entire neighborhoods with integrated services, energy efficiency and sustainable construction. This is in line with modern urban planning principles and can be combined with other innovative solutions such as energy cooperatives, sustainable transport and green areas. Last but not least, BTR enables the development of new professions — professional property managers, rental platform operators, operational engineers, residential customer experience specialists. These roles are part of the so-called “experience economy,” in which housing is not just square footage, but a value-added service. Build-to-rent is a model that goes beyond housing construction. It represents a new philosophy for housing, urban environment and investment. Although it is still unknown in Bulgaria, its potential is there. This will require a visionary approach from investors, municipalities and politicians, as well as a change in cultural attitudes. But in a country where the demand for quality, affordable and flexible housing is growing, build-to-rent may turn out to be not just a novelty, but a necessity.