Is Build to Rent a threat or opportunity to the rental market?

With a growing build-to-rent sector and an estimated $10Billion pipeline, purpose built rental apartments will change how spaces are designed, developed, owned and how engagement with tenants is managed.

At MRI Ascend APAC, industry experts John Minns, NSW Property Services Commissioner, Nicholas Proud, CEO, Powerhousing Australia and Chris Wiese, CFO, Rental Management Australia joined MRI’s Industry Principal Josh Symons to discuss the challenges and opportunities of Build to Rent (BTR) in Australia.

What is the appeal of Build to Rent?

Facilities offered to tenants in Build to Rent properties are more than a concierge service in a secure building. A BTR apartment complex is likely to include larger gyms, swimming and leisure pools, co-working spaces, BBQ areas, cinemas, and on-site dining options, for example, as well as help with moving, pet-friendly units, flexibility to paint and decorate as well as organised activities for resident like wine tasting, Pilates or art classes.

They are often located in coveted urban areas close to transport and work opportunities which make it attractive for local and state governments to offer incentives for purchase by developers willing to make commitments to affordable housing options for essential workers, for example.

But perhaps the biggest benefit of the BTR housing model is the security of tenure: properties are built only for rental as opposed to those built for sale, meaning tenants can stay for as long as they like by simply renewing the lease.

The human appeal of building a sense of community and belonging over a period of time is also enhanced as most BTR complexes offer a range of studios, one-bed units, two-bed units and a handful of three-bed units. So if a long-term tenant wishes to upsize to a bigger apartment when they start a family, or downsize when they need less space, it’s a very simple transition with much less legislation and paperwork than the private rental market.

How does BTR impact traditional property management?

Josh Symons explained, “In reality a lot of the owners of BTR assets don’t need to operate in the same regulatory frameworks as the private rental sector, for example. They don’t require the same level of compliance, don’t need to collect bonds, and can have a one page contract, because they’re the owners. So much paperwork and admin can be automated now.”

Pioneers like Harry Triguboff have been working on the idea behind BTR for years where you have 5000 disparate properties, each with different landlords, united by technology under the owner developers’ umbrella.

“Hundreds of apartments in high density buildings with tenants who can call the lift from their phone, book a dog walker, go to the gym. It completely turns the traditional property manager/landlord/owner power dynamic on its head. The tenant is calling the shots, empowered with a phone in their hand using the power of the Internet, Artificial Intelligence and custom property technology to do their bidding.

“It’s like once you experience ordering an Uber on a mobile app you’ll never go back to ringing a taxi service and waiting to speak to someone. You change perception and choices.  So once a tenant experiences the different level of autonomy and self-service, it’ll inevitably knock on to the private landlord tenant relationship,” he said.

Taking Customer-centricity to new heights

RMA’s Chris Wiese made a strong argument that the concept of BTR will drive a shift toward more customer centricity, which advantages everyone. 

“BTR tries to hit the premium price point in the market. For private landlords it’ll put the focus on the tenants a little more. The positive knock-on effect will be a more tenant focused business model across the whole property management sector,” he predicts.

“The concept of BTR drives a shift toward more customer centricity. The positive knock-on effect will be a more tenant focused business model across the whole property management sector.”

– Chris Wiese, CFO, Rental Management Australia

“If as a landlord you opt to run the house on the smell of an oily rag, thinking by DIY you’re saving money, for example, you’ll find fixing those taps and pipes yourself is a false economy when the plumbing explodes in a year.

“Companies like MRI have better platforms that focus on the tenant, so are well primed to extend into the BTR space. But the benefits of a happy tenant flows through to the private landlord industry, and importantly for the profession, a customer-centric view provides a better experience for the property manager, too.

“There’s full circle advantage and huge opportunities across the board with a change of focus over to the tenant,” said Mr Wiese.

Rentals are the most important market right now

NSW Property Commissioner John Minns spoke passionately about the rental market being the most important property asset in Australia right now, casting BTR as a top priority by association.

“Market dynamics are pitching owners against tenants on a regular basis. The stress in Australia that’s putting on our property managers is enormous.

“BTR is taking the best of the private rental market and improving it. It’s not competition as such, it’s another option for consumers. We desperately need alternatives to meet the (numbers) shortfall,” Minns said.

RMA’s Chris Wiese agreed. “Different choices for the consumer is only a good thing, and taking pressure off the rental market is a good thing. Innovation falls off the back of BTR too,” he said.

Unlocking efficiencies with the power of technology

Speaking on the human cost of managing 5000 apartments in one building across multiple landlords, RMA’s Chris Wiese points to the power of technology to unlock efficiencies.

“Improving standards is one thing. But traditional human-dependent approaches to handling 5000 units under management are not efficient. Property management at this scale of BTR demands an efficient operating platform and smart technology. BTR is at an embryonic stage of industry for us in Australia but the smarts that’ll be learnt by literally bringing these enormous projects up from the ground will translate into broader implications for the whole property market,” Mr Wiese said.

NSW Property Commissioner Minns agreed, “One of the great things that’ll come out of BTR is the learnings and advancements in technology, and the experience of tenants being centrestage with liberty over the services they access will be transformational,” he said.

To hear more on the panel discussion at MRI Ascend APAC, you can watch the on-demand recording available.