August 18, 2023
Tenants get high-quality, convenient living without the permanency and costs associated with buying; investors get stable rental revenues without the hassle of managing new leases every six months.
New Zealand is rapidly becoming a nation of renters. According to census data, homeownership is at its lowest rate since 1951, with around 1 in 3 Kiwi households now renting. And the rental market in our major urban centres is bleak, with high rent prices, low housing stock, unhealthy homes, and dog-eat-dog rental viewings. Build to Rent (BTR) has been touted as the solution to some of our housing woes, and it’s burgeoning overseas. London has seen its BTR stock increase by 109% since 2017, and across the ditch, Melbourne and Sydney have been tipped to be the next BTR hotspots.
What is BTR?
As the name suggests, BTR developments are designed and built specifically for renting, not sale. While there is a lot of flexibility in BTR models, they are usually multi-unit or high-density dwellings aimed at the middle to upper market. They provide professionally managed, long-term rental accommodation for those who either can’t afford homeownership, or simply choose not to.
BTR offers an alternative to the mum-and-dad investor model that dominates the current rental market. It is a paradigm shift – the tenant becomes the customer, and the rental is the service. Amenities like lounges, gyms, and lobby cafés are attractive drawcards, while long-term leases allow residents to confidently put roots down in their home and neighbourhood. Tenants get high-quality, convenient living without the permanency and costs associated with buying; investors get stable rental revenues without the hassle of managing new leases every six months.
BTR also responds to the move towards ‘aspirational renting’, where rent is treated as any other pay-as-you-go service, like Spotify and Netflix. Tenants can plug-in and plug-out of amenities as their life requires. They aren’t buying the house – they’re buying the living experience.
Why are we talking about it?
BTR is not necessarily new, but it’s an emerging asset class for property investors. While it is still in its infancy in Australasia, recent reports indicate that the investment appetite is on the rise – with potential investment returns on rent of around 5 to 6percent.
At Ignite, we see BTR as an opportunity to harness best-practice design insight from the full range of our design disciplines to create a long-term asset for our client. With a deep understanding of the customer, we apply this cross-sector expertise to craft a bespoke design that speaks to the lifestyles and amenity needs of the residents. High-quality, efficient homes are complemented by vibrant hospitality spaces, boutique retail offerings, and connected community areas that support a feeling of belonging. Perhaps the customer demographic requires a flexible work-from-home lounge? Or maybe it requires an open green space for children to play? With BTR, we can design for the human demand – not just the market demand.
With our broad track record in the aged care sector, we can also draw several parallels between BTR schemes overseas and the retirement village model used in Australasia. Like retirement villages, BTR developments tend to be institutionally owned and operated. They both place the tenant’s satisfaction at the centre of the living experience with quality homes, long-term occupancy, and convenient amenities. During the design process, both building models can be approached as a whole asset to minimise operational expenses, while placemaking and social connectivity is prioritised with communal spaces, hubs, and circulation paths. While the demographic needs might be a little different in BTR, the core design drivers remain: design with empathy for the end-user and create a long-term, high-quality asset for our client.
At its core, BTR is about placemaking. The design response must create a tailored, convenient living experience that fosters a sense of community and keeps people coming back for more. We think the market should be exploring the BTR model as an option. In the next few years, we will likely see the benefits become more tangible for the rental market, investors, and tenants alike.