New Zealand Build To Rent sector bucking trends as it grows in scale, popularity, and demand

A new report providing data on New Zealand’s growing Build To Rent (BTR) sector has revealed that it is performing far better in many areas than expected.

The first-ever operational data and learnings shared from the first five years of projects in New Zealand reveal that BTR apartments are appealing to wider age groups than once expected, and project yields are proving competitive. The sector is also growing quickly in New Zealand, with more demand than supply as projects are being filled quickly. 

CBRE New Zealand has just released its first Learnings From Operational Build To Rent Report. The report covers the results of a detailed qualitative survey of operational build to rent owners, developers, and managers in New Zealand undertaken in Q2 2023. Data was collected from nine projects that have been operational for a year or more across Auckland, Wellington, and Queenstown, totalling 287 units or 17% of the total market. Current stock totals 1,700 units in 43 projects across New Zealand. 

The report reveals that:

• Although the majority of residents are 18-40 years old, we have noticed a growing proportion of older residents that are 40-65 years old compared to our earlier assessments of BTR resident age profiles. This has occurred as projects also come on stream that appeal to family households. 

• Low vacancy shows a current excess of demand over supply, with evidence that BTR projects are being let up quickly. Two thirds of projects are fully occupied in under one month after the completion of construction. 8 of the 9 projects surveyed had 0% vacancy, and the remaining project had five units available. The average days vacant between tenancies is 4.5 days. Some projects are yet to experience any vacant periods, being relatively new with decent resident retention to date. Most of the BTR owners surveyed have a mailing list of interested parties that they contact when units become available, with a typical waitlist of up to 110 people and an average of 28 people per project. 

• Stronger yields contradict market perception. Our survey indicates that yields are broadly in the 3.5% to 6.5% range at present. The common assertion outside of the sector is that BTR yields relative to other asset classes are too low to be attractive contradicts the reality of a growing BTR sector locally. 

• BTR projects command higher rents. Most of the nine schemes are at the top end of market rents for the areas in which they are located, with take-up results proving demand exists for the right product. The most common lease term for BTR property in NZ is 12 months, usually followed by rolling onto periodic leases. 

Tamba Carleton, Associate Director of Research at CBRE, says: “The New Zealand Build To Rent sector burst on to the scene five years ago and has been rapidly evolving and growing since then. People have been asking us so many questions about it, and we now have enough projects out there to gather  the data to build a detailed picture that explains what is happening.”

“Our research is showing that there is a growing market for this type of product in New Zealand, as is being shown by the impressive let-up statistics. What stands out for me was that all of the BTR developers and owners I interviewed said they will create more projects. That tells me is that it is worth doing. It is also clearly a high quality renting experience, enabling people to use and share amenities they would not be able to access otherwise.”

Natasha Sarkar, BTR specialist and CBRE Director of Structured Transactions and Advisory, adds that the project pipeline is active. “The current Auckland BTR pipeline is 1,000 units across ten projects that either have building consent or are under construction. 2023 has seen projects progress that includes the continued construction of a 295-unit building at Sylvia Park for owner Kiwi Property; a site acquisition for a 358-unit project in Takapuna by McConnell Property and Cedar Pacific, notification of resource consent for a 191-unit project in Epsom by Dilworth Trust Board, and the addition of two new builds to the Simplicity Living portfolio. Behind this active pipeline is a significant imminent pipeline of planned or consented projects, which demonstrates confidence in the sector from some of New Zealand's most astute investors.”