By Kylie Newcombe | 1 Feb 2019

Momentum is building in the build to rent sector but there’s been little talk of the customer – the renter. Kylie Newcombe, Associate Director Property Economics and Research, gives us five principles for a customer-centric approach.

Though the concept of build to rent is not new, the sector has recently received renewed interest. Developers, government and the wider property industry are tuning into the opportunities and challenges the sector presents.

Among all the chatter, there’s been little focus on the customer, the ultimate resident in build to rent projects. But if developers want to build the reputation as a desired and trusted landlord, there are five considerations worth factoring into their future customer strategy.

Seek a market assessment for every location being investigated and get advice on forecast demand and supply. It’s critical to understanding the outlook for future demand. Ask for analysis that includes demographic profile in terms of household size, current tenure, income and place of birth – all are relevant for an informed assessment of the site opportunity. 

Be sure to complete fundamental economic groundwork by considering the rental growth, vacancy rates, yields and capacity to rent for any given location. It’s important to understand the extent of rent elasticity, especially in untested markets, early in the project investigation.  

Tune into how your future customer feels about build to rent. There are a lot of firsts that come with the territory of living in a building under single ownership. Will they enjoy having neighbours who will always be renters? How might they feel having a corporate landlord?

It’s important to consider what your renters might value. Will they want to be a name, not a number? There are positives and negatives to all of these questions but as a developer, you’ll need to leverage the positives and mitigate the negatives to attract the right tenants.

You’ll likely need to define your value proposition around a premium rent – after all, there’s pressure to achieve required yields to support feasibility. Before you invest in amenities, make sure you understand what your target customer values and is willing to pay for. This also applies to testing their willingness and ability to pay for a superior service model, which is not the norm in Australia.

If your organisation is one of the first movers to market, others – competitors, potential customers, community, government or the broader industry – will be watching. How you execute the customer experience may influence the model’s credibility.

Future developers may tap into the goodwill created by first movers, and similarly, if the feedback is poor this may have negative implications for interest and reputation. Be clear and considered each step of the way.

Developers have always focussed on their customers, the buyer. Though the relationship dynamic is typically transactional – centred on a marketing journey that concludes with a final sale.

The build to rent sector, however, presents developers with the opportunity of establishing long-term customer relationships – ones that are based on ongoing service. As such, there may be a case for developers to establish a separate brand specific to the build-to-rent business.

You’ll need to think differently about your renters and define a customer proposition tuned to that dynamic. Location, complex amenities, apartment attributes – all are as relevant to renters as buyers, however the importance of each will vary.

Developers who undertake market research and develop propositions grounded on these insights will be better equipped to deliver a desired product.

Build-to-rent has been positioned in the media as a solution for addressing housing affordability in Australia. While some projects may have a component of Government subsidised ‘affordable housing’, apartment rents will largely be in line with market rates, or even higher.  Nonetheless, the increase in supply of rental apartments will still help to deliver much needed housing supply during a cool down in the for-sale market.  

It is important that developers are transparent about what they are offering through build-to-rent projects. This will ensure the broader community is informed and prevent undue criticism for not ‘fixing’ the issue of affordability.