While the build-to-rent market is expanding, institutional investment in an Australian build-to-rent sector is yet to establish a foothold.
In the past, apartments in the city centre were considered more of a stepping stone—but today, they’ve become aspirational, and are seen as great places to live.
Only recently have we got to that state in Australia with build-to-sell. Renting as opposed to home ownership is becoming much more standard, yet many Australians are still of the opinion that renting is a halfway point before you buy.
If you enter a market where investors see tenants as customers, it can revolutionise the way we look at renting altogether.
The flexibility of renting becomes even greater—the benefits in wonderfully managed properties is something we haven’t yet experienced in this country.
The Urban Developer spoke with Fender Katsalidis director James Pearce about the architecture of build-to-rent.
In terms of design, what are the biggest similarities and differences to regular multi-residential buildings?
JP: Build-to-rent developments are inherently comparable to build-to-sell buildings, but a key difference in build-to-rent is a greater mix of studio apartments than you would typically find in a build-to-sell development, which are a more affordable option and are appropriate for virtually any stage of life.
Build-to-rent also has a much greater focus on customer service and the way the buildings are managed: typically, you’ll find very large areas for communal amenities with staff on-premises to keep facilities neat, tidy and operational.
Lifestyle is another major difference: where build-to-sell is selling a physical apartment space, build-to-rent is selling a lifestyle.
Another fundamental difference is that since build-to-rent developers maintain ownership, they have a self-interest in ensuring a quality product throughout its life.
There is, then, a real commitment to making the building efficient to run long-term, through centralised services and organised systems.
Are there key pillars that developers or asset owners should look for when determining if a build-to-rent project is viable for a site?
JP: Many build-to-rent developers are looking at larger scale, which helps provide the right management and customer service. Most are considering 200-250 or more apartments in a development in order to be interested.
Another aspect for determining the viability of a site is that it should be in an area with a high rental need, ideally, with high rental yields already, or is an attractive area for those looking to rent.
Some key pillars for developers:
Designing from the inside out to get the functionality right within the apartments. In build-to-rent, people are constantly moving in and out, so the back-of-house areas need to cater for this along with the circulation.
Aesthetics, form and character of the building matter. Developers should resist the temptation to mould the building form for abstract aesthetic reasons as this could affect the functionality.
Timeless design is essential as a build-to-rent building will be marketing itself over its entire lifetime compared to build-to-sell developments which have a specific marketing period to sell.
Low running costs and resilient materials are vital to the viability of the build-to-rent model. Centralised services systems can be tuned more efficiently and ideal for sustainability and minimising energy use. There are fantastic environmental sustainable development (ESD) initiatives available in build-to-rent. The use of resilient finishes minimises or eliminates future maintenance.
Outward facing communal areas are a key part of the build-to-rent lifestyle offering. There is an opportunity with sites in the right areas to have publicly accessible cafes, bars, gyms, etc. This can provide additional revenue as well as integrate the development into the broader community.
Amenity is not just measured in square metres. More than the sum of their apartment and balcony area, plus a share of the communal areas, a great amount of amenity is in the extra services and events provided.
Achieving a sense of community is a key theme in many of your multi-residential projects. Is it more important for this to be carried through to build-to-rent projects, and how?
JP: With developers now seeing their customers as tenants, this has influence on the marketing and success of these projects.
For new customers, the appeal of the brand created for the development is going to travel via word of mouth, and that depends on people having a wonderful experience in these places—which will largely be through feeling a sense of community within the project.
We’re seeing about twice as much communal space in build-to-rent developments compared to build-to-sell. These communal spaces facilitate interaction, and as such are located in areas with the best aspects and outlooks.
What does Australia need from government (such as tax reform) to help this new asset class realise its full potential?
JP: When it comes to planning our applications, we would like our local councils and state governments to understand some of the sensibilities around this type of project.
Since they don’t have a box to put it in like a hotel, serviced apartment or high density residential – when they judge it based on those things, they miss out on the benefits build-to-rent has to offer. They don’t consider the level of amenity that comes with services, facilities and staff on-site.
It’s great to see authorities such as the NSW Government are starting to recognise this as a distinct housing type with its own opportunities and are encouraging these projects.
Although build-to-rent is relatively new in Australia, the developments are designed to be long-term assets. How do you achieve longevity in your design?
JP: Build-to-rent is financially a finely-tuned machine, where a building has to remain relevant in marketing itself to potential customers. A timeless design is often talked about, but for build-to-rent it is crucial.
We always want buildings that are fantastic and look wonderful—that’s more about having a sense of character, stateliness and elegance to last the life of the building.
And once again, for a building to remain competitive throughout its lifetime, it’s essential to keep running costs to a minimum.
Materials are a key consideration to ensure longevity, favouring those which are their own finish and don’t need to be painted or coated.
Timbers, stone or bricks weather and patina gracefully over time and look good while maintaining their character: there’s an authenticity to that material by looking like what it is and never trying to be something else.
Where does build-to-rent sit in the broader residential market and who is the main target audience you’re catering for?
JP: Though appealing to a younger demographic, particularly from overseas, build-to-rent has the appeal to cater to virtually all sections of the residential market.
This includes those starting their careers who value flexibility in their lives.
In many ways, build-to-rent already exists for different groups.
Aged care could be considered a form of build-to-rent for seniors, much in the way on-campus accommodation is for students.
As this model becomes more popular and renting becomes more standard, build-to-rent is likely to broaden into a much larger aspect of the way our communities live.
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