This comment piece is written by Frank Filskow. He leads the build-to-rent team at Make Architects, where he is an expert in large-scale residential development with a focus on wellbeing and sustainability.

The build-to-rent sector in Australia

Australia’s build-to-rent sector is rapidly expanding. With the asset class still in its infancy, developers are keen to understand where the opportunities lie and align their products with local preferences and market conditions. Regardless of location, the hidden value lies in long-term, ‘sticky tenants’.

Make’s recent BTR roundtables in Sydney and Brisbane confirmed that the Australian market is where the UK market was ten years ago: it’s very early and there are lots of opportunities. Australian developers can turbo-charge their progress by looking to the UK example, avoiding mistakes and making good design decisions.

Retaining long-term residents to improve returns

Established BTR operators are familiar with the high cost of turning over rental units. The expense of marketing, redecoration and short-term vacancies can significantly reduce margins on a BTR operational model.

Understanding the needs of residents is key to retaining them and developers need to be nimble in adapting their model as they learn what residents will pay and stay for. Likewise, building a trusted and compelling brand is crucial to tenant loyalty.

Amenity versus service

Building and operating on-site amenities comes with significant costs, including staffing. The challenge is balancing the delivery of an exceptional resident experience with cost-effective rents.

Initially, UK BTR operators thought residents were making a lifestyle choice and invested in generous amenities. However, it has emerged that luxury extras are not the primary attractor. People still aspire to own their homes and save money, so operators are now focused on providing services and experiences that meet tenant needs whilst simplifying or reducing living costs.

As such, the UK industry is recalibrating and we’re seeing a concentration on the amenities residents genuinely use. Like the hospitality industry, build-to-rent is an operations-driven model. The product is the service, and service the differentiator.

Services such as pet care, package handling, storage solutions, guest rooms and car-pooling are proving worthwhile investments. Effective management and good staff are crucial for delivering these services well and optimising tenant satisfaction.

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That’s not to say that communal amenities such as gyms, pools and co-working spaces are not important – they are, but the focus should be on providing flexible spaces that support physical and mental well-being, as well as social interaction, to foster a sense of community. And, critically, proper management of these spaces is vital, as poorly managed communal areas can detract from a building’s appeal and the developer’s reputation.

The ‘amenity race’ is particularly relevant in Australia owing to the climate and the appeal of outdoor spaces. This is a key differentiator to the UK. In Australia, people gravitate towards outdoor spaces and they’re a big part of the overall offer for residents. The learning from the UK is to make these spaces as flexible as possible and ensure they are easily maintained in the long term, to keep their value and avoid escalating costs.

Flexibility and lifestyle benefits

Building flexibility into apartment designs and communal spaces allows asset owners to be responsive to residents’ needs and an evolving market.

Communal space that can be reconfigured to support multiple uses, with adequate storage to support them, will help ensure it is well-used and worth the investment. For example, one of our Australian roundtable attendees found that communal kitchens proved popular with residents and was able to reconfigure the adaptable space to create more shared cooking facilities.

The UK BTR market has expanded from servicing the highly mobile young professionals it was initially targeted towards to also cater to alternative, more stable households. Families, empty nesters and older individuals have greater potential to become long-term tenants. Developers need to be flexible in designing for different needs – especially from the perspective of long-term operational business model. Diversity is key to meeting people’s changing lifestyles.

This means offering flexible apartment layouts. In the UK, our demographic research identified over 20 different household configurations with varied needs for space and privacy. In response, our design team developed a ‘tool kit’ of adaptable apartment designs that have proven successful. The variety of floorplans allows tenants to rent only what they need and supports their evolving needs over time.

For example, in London, young ‘first generation’ renters moved into larger apartments in the same building as they started families.

In an Australian example, a couple who frequently worked from home preferred their building’s ground-floor co-working space over working in their second bedroom. The co-working space provided connection to other people and to street-level activity. As a result, the couple downsized to a one-bed apartment – a saving for them and a brand-builder for the operator.

This adaptability is essential for a development’s longevity and brand loyalty. Maximising choice and variety increases market share.

Fostering a sense of community

The emerging lesson from BTR developments worldwide is that fostering a sense of community is essential. Developers should aim to create places that bring people together and connect them with the wider communities in their neighbourhoods.

Whilst building community takes a lot of work on the part of the manager or building owner, and  takes time to deliver a financial benefit, all build-to-rent projects need to understand how important community is to rental loyalty.

The Australian BTR market can draw valuable insights from the UK’s experience, adapting lessons learned to suit local conditions. Community, flexible amenities and services, and catering to diverse resident needs, combine to secure ‘sticky’, long-term tenants and, in turn, create a successful BTR development.

Make Architects
makearchitects.com

Photography
Courtesy of Make Architects, Ed Bishop

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