Emerging Build to Rent (BTR) Sector Will Require Some Market Adjustment

Last weekend the Irish Times reported that Irish Life had acquired the entire Fernbank development in Churchtown (on the site of the old Notre Dame school). As more than 1,000 hopeful buyers had registered their interest in the 262 apartments, much of the media coverage focused on the disappointment of buyers – rather than on the positive impact 262 new rental units in that area will have on the marketplace.

Given the proximity of this development to the Luas, it will go a long way towards easing the rental crisis in South Dublin as the moment, however, the backlash really highlights how unfamiliar the market is with Build to Rent. Of course, it didn’t help that this report came hot on the heels of a survey by Daft.ie and thejournal.ie showing over half of available rental properties in Dublin are aimed at tourists for short-term stays.

We know that a number of smaller home builders have had entire schemes of, perhaps, fewer than 10 homes acquired by institutional investors for the rental market. These were not specifically designed for the BTR sector yet ended up fulfilling that function.

The reason for increased interest from institutional investors in the BTR sector is quite straightforward; the residential rental market is more robust and less vulnerable to economical cycles than traditional office and retail.  After a decade and a half of volatility, investors are seeking the most certain asset class in an innately uncertain marketplace. When we think of the BTR market in Ireland, we tend to think of the Reits; is this necessarily true, does it need to be at such scale?

Globally, BTR is associated with purpose-built residential rental accommodation that is professionally owned and managed by an institutional landlord. It has, for decades, formed the basis of the US non-owned housing stock and the concept is gaining traction in the UK and Irish market over recent years. The current state of construction catch-up that we find ourselves in, coupled with the severe shortage of compliant rental accommodation in Dublin and other urban centres, makes Ireland prime for growth in this area. It is important to point out the differentiator between planned BTR and long-term rental as an afterthought, that is, planned BTR units are designed to meet the particular needs of longer-term tenants. In the past, the Irish market really only provided rental accommodation for students, young professionals saving for their mortgages and for people either side of social housing arrangements. We didn’t cater for lifetime renters because that didn’t exist in Ireland – until now. Home-ownership levels are decreasing year on year.

Residents in BTR homes tend to pay a premium rental, in exchange, they expect much higher quality design and locations, with access to great facilities and communal areas. Top notch management is a must.  It certainly opens up new opportunities for private landlords to consider.

Ian Lawlor
086 3625482

Director / Business Development
Lotus Investment Group