Built-to-rent is already a well-known typology in the United Kingdom, the United States, and Europe.
The growing interest in Australia has already resulted in global property funds establishing a claim here, as well as an expanding number of significant local real estate investment funds.
But build-to-rent (BTR) isn’t your typical real estate investment. It needs to last and enjoy long-term returns. So how do you do that?
Cundall, a leading global engineering advisory and design consultancy, has released a practical BTR guidance to help Australian property developers future-proof their assets. The guidance reacts to global financial signals as capital prefers all-electric, highly efficient, and net zero-ready developments with flawless ESG credentials.
Reimagining The Future of Home: A Best Practice Guide for Build-to-Rent presents a practical roadmap to attaining consistent long-term investor returns while providing high-quality assets. The guide discusses the megatrends that developers and investors must address, as well as cost-effective and feasible methods of delivering competitive, high-value, and low-risk BTR assets.
The Future of Home, written by a team of Cundall specialists led by sustainability associate Hannah Morton (pictured above), articulates the key to long-term genuine value and operational success in BTR is not building down to a budget, but rather building up to a standard.
The report argues that while some developers in the sector are focused on the experience or advocating for simplification of state government apartment design guidelines, future-proofing BTR means putting environmental sustainability and social value at the core of design, delivery, and operations.
According to the report, a BTR product that begins now may not be completed until 2025 or later, and if the asset is scheduled to be active for 30 years, it must be net zero in its lifespan.
“The net zero milestone of the Paris Accord is not negotiable and is less than 30 years away – that means any BTR project being designed and delivered now needs to be net-zero ready from the outset,” explains lead author Hannah Morton, Cundall Associate, Sustainability.
“Developers and project teams also need to address the major megatrends of circular economy, eliminating hazardous toxins in materials and protecting biodiversity.
“BTR is an opportunity address the triple challenge of supply, affordability and sustainability for rentals. It also has the potential to demonstrate a level of excellence in design, delivery and operations that delivers tangible wins for all stakeholders, including those who will call BTR developments home.”
While it is completely viable to retrofit enhancements to existing buildings in order to increase performance and transfer them to net zero, defining the initial scope, design, and delivery for new assets as net zero-ready must become the new standard, the report argues.
Morton said implementing these initiatives from the get go is more affordable than retrofitting the building later down the track.
She said the longevity of a BTR product sets it apart from typical residential developments where she said long term operational costs are not considered vital as they are “building down to a budget”.
“BTR is more of an ongoing relationship during operation, so it matters more to the developer how much these things cost to run and how comfortable they will be for occupants,” she said.
“Operating cost savings can be quite significant if you build something well. If you are building up to a standard that is a better standard than minimum compliance, you will have operational savings if you do it sensibly.”
Cundall Director, David Collins said the recent announcement to up the minimum energy ratings of new homes in Australia from 6 to 7 stars is a signal that the industry needs to aim high for quality and performance.
“In coming years, as the wider economy progresses further towards full decarbonisation, we can expect further uplifts to minimum performance standards,” he said.
“What this means for BTR projects is they need to aim for better than code minimum, or owners and investors may find their assets are stranded within 10 years or even sooner.
“If BTR aims to provide a long-term and reliable income stream for operators and their stakeholders, the prospect of needing major retrofits in the near future should raise some major risk flags.”
Morton said investment risk is a also big consideration, as clients and investors look to more sustainable assets.