It said investor interest in BTR is growing with developers looking at the sector as an alternative use for sites which had previously been earmarked for other forms of development, such as offices or hotel schemes.
Robert Ditty, Senior Director of Capital Markets at CBRE, said: “The concept of ‘Build to Rent’ is one that is now firmly established and regarded as a mainstream investment sector typically offering superior returns to other more traditional forms of investment. Residential demand, population growth and affordability Issues with first time mortgages Is increasing demand for rental accommodation.
“CBRE research indicates that 73% of the current UK PRS market is controlled by non-professional Buy-to Let-landlords. Around 40% of current stock does not meet decent homes standards and hence a massive market exists for professionally managed resident schemes.
“We believe recent graduates and young professionals will be the key target market for a professional PRS project. Recently qualified graduates will be accustomed to modern, professionally-managed student accommodation and will most likely prefer to move into the ‘step up’ equivalent when they graduate.”
“This demand which Is commonplace across all major cities Is driving development but also fuelling institutional investor demand in the private rented sector. Investors are attracted to a sector that offers stable long-term income potential and is less susceptible to cyclical variations than other traditional real estate sectors.
“BTR schemes are generally of a scale to appeal to institutional investors with blocks often constructed of around 300 units with scope for further phases of development. The tenant profile being granular should result in lower void risks compared to commercial sectors.
Build-to-Rent, a sub sector of the Private Rental Sector (PRS), describes the practice of delivering purpose-built residential rental accommodation that is designed with the sole purpose of being used as long-term rental accommodation and professionally owned and managed by an institutional landlord. BTR schemes are generally of a very high-quality design and with ready access to amenities such as resident lounges, entertainment space, gyms and cinema rooms as well as being located close to good quality public transport.
Amenities are generally provided within the overall development with a high degree of public space provided to facilitate socialising and foster community. Good quality in-house management are on hand to take care of maintenance and provide a high level of support for residents within the development with on-site managers in many schemes.
From a design perspective, the end product is designed with the end user or long-term renter in mind. Most BTR schemes incorporate a high proportion of common space to foster a sense of community, which is so important to the BTR concept.
Another key focus is to incorporate a high degree of flexibility to ensure that common space can be adapted to suit the specific needs of those living within the development and to allow different household types live side by side within a development. Flexibility is required to ensure that the buildings and amenities can be adapted to accommodate how people live, work, socialise and enjoy environments.
Many of the larger apartment blocks which exist in the city today had been built in the past by investors with the intention of selling on a unit-by-unit basis once completed. The idea of building to rent is relatively new, although one which has been gaining in popularity in GB where developers and funders see the opportunity for long-term returns.
In terms of target market, while in other cities this is from a very wide socio grouping, CBRE research for Belfast indicates a growing group of young professional renters – generally graduates who have and will have been accustomed to purpose-built student accommodation – will drive demand for new purpose-built rental properties.
Given the expanding economy in Belfast with a continued reliance for a high percentage of graduates, this demand is expected to grow further.
Robert Ditty said: “Challenges remain to deliver successful BTR schemes in Belfast, including ensuring rents achievable underpin the higher development costs associated with BTR schemes. The impact of rates liabilities which in Northern Ireland is typically paid by landlords is also impacting viability in terms of a larger proportionate discount when comparing gross and net operating rents.
“A key focus for Belfast will be ensuring BTR schemes can achieve and sustain rental values ensuring development viability.”
“The growing interest in build-to-rent is proof Belfast has become a more mature, cosmopolitan city. It not only encourages talent to remain in Northern Ireland and prevents a brain drain but attracts new talent to the city. BTR provides quality accommodation for young professionals and makes a very appealing product for institutional investors.”