24 March 2019
Successful BTR schemes are designed and built with the tenant in mind, and look to maximize the tenant experience at every opportunity, as well as focusing on scale development and institutional owners. In Linesight’s in-depth research, published in November 2018, some of the key considerations required in the efficient design and delivery of BTR were discussed in detail, as summarized in the below extract.
In March 2018, the DHPLG issued the ‘Sustainable Urban Housing: Design Standards for New Apartments – Guidelines for Planning Authorities’, which included a number of guidelines that positively impact the viability of BTR, some of which are outlined below. Careful consideration should be given to unit mix when planning for the exit strategy. Furthermore, if the building is designed using the new BTR Design Guidelines, the development must remain under the ownership and operation of an institutional entity for a minimum of 15 years, with no individual units being sold or rented separately by legal agreement.
The recent Design Guidelines for BTR provide no restrictions on unit mix, enabling the developer to tailor it as required, in order to maximize return. The scheme must be designed with an efficient net to gross area, with a density and mix at an optimum level for the target market to maximize long-term returns.
The maximum of 12 apartments per stair/lift core per floor does not apply, subject to overall design quality and compliance with building regulations. The approximate cost per core servicing 12 units over six stories is circa €200,000-€250,000, and if reduced can result in significant savings to the project budget. The requirement that the majority of all apartments in a proposed scheme exceed the minimum floor area standards by a minimum of 10% does not apply to BTR schemes. This will have a significant impact on the gross floor area of the building and will result in more efficient design and cost per unit. At least 33% of units should be dual aspect in central and urban locations. In suburban or intermediate locations, there should be a minimum of 50% dual aspect apartments in a scheme.
BTR is a product tailored around lifestyle, with a strong emphasis on brand and the amenities that the building provides. Resident services and facilities are a key component within a BTR scheme, and should be given due consideration.
In accordance with the Design Guidelines, residents must have access to laundry, concierge and management facilities, as well as maintenance services and waste management. Flexibility applies in terms of the private amenities required per unit, on the basis that alternative compensatory amenities (such as gym facilities, shared TV/lounge areas, work/study spaces and multi-purpose function rooms) are available within the development. Facilities must be appropriate to the intended rental market, and evidence must be given at planning stage to support the level of amenities being provided. This is influenced by the physical characteristics of the site, location, price points and rent levels, proximity to local services and other BTR schemes, as well as the demographics of the prospective tenants.
The use of cutting-edge resident portals and mobile apps is also becoming more commonplace. Linesight’s experience indicates that between 5% and 10% of net unit areas are being designated to amenity space, at a cost of approximately €8,000 - €10,000 per unit on a large scheme.
Considerable savings can be achieved by default to minimal or significantly reduced parking. The potential to omit a basement from a scheme is a game changer. Carrying out a cost-benefit analysis of parking options is a key requirement of successful residential and BTR design. Planning regulations have relaxed the requirements for parking numbers on the basis of the BTR development being centrally located and/or close to public transport services.
Surface parking is very economical to provide, but it takes up valuable land space that could be developed for an alternative use or provide open public space to meet planning requirements. Undercroft parking is more economical than basement parking.
Failure to fully understand the ground conditions at the outset is one of the single biggest errors that a developer can make on any project. Overseas disposal of contaminated materials can cost in the region of €100-€150 per ton. Diligent ground investigation reports will provide valuable knowledge and identify risks, if carried out early in the project planning. In addition to this, the ground conditions influence key costs, such as the requirement for piling, the requirement for perimeter support and substructure design.
In summary, the BTR sector in Ireland is an area of significant opportunity for the relevant stakeholders, as a well-established asset class internationally and just at the embryonic stages in Ireland. While there are a number of key considerations to be made, Linesight is confident that the BTR sector will continue to grow and evolve over the coming years. Fundamentally, we are seeing more and more units delivered into the market. Linesight is currently working on over 7,000 BTR units in the Greater Dublin Area alone.