Build-to-rent - an analysis of latest costs in the Dublin region

BTR has played a fundamental role in the residential market in Ireland in recent years, and continues to progress and demonstrate its viability as a more established sector, with investment in Dublin's BTR market expected to have reached €2bn in 2019. In our 2018 report, ‘The Build-to-Rent Sector in Ireland’, we explored the socioeconomic indicators that drive the sector, the town planning perspective, provided some detail on cost and the factors that affect cost, and detailed the results of our primary research exercise with key sector stakeholders. 

Since then, the sector has continued to grow and establish itself as an attractive asset class. In this article, we provide an update on the cost aspect.

The data

We are currently providing cost consultancy services on over 12,000 units across 35 BTR projects in the Greater Dublin Area, on which this cost data is based. Figure 1 summarises this. 

Residential average construction costs

In order to give context to the BTR sector, we have compiled data on the average construction costs for residential living projects in a range of locations and unit sizes in the Dublin Metropolitan area. The uses include build-to-sell (BTS), BTR and shared living, excluding basement parking and site works. The purpose of excluding parking and site works from the cost/sq.m. metric is that BTR projects may not require parking, and therefore should be analysed without it. Figure 2 below summarises these costs.  

BTR average construction costs

Figure 3 and 4 reflect just the BTR sector, again accounting for a range of locations and unit sizes, excluding basement parking and site works.

Figure 5 includes an indicative cost summary of two BTR projects and a shared-living project in both urban and suburban locations. This identifies façade and internal completions as the main drivers of cost difference between the locations.

Figure 6 is an indicative analysis of BTR project costs, compared to private residential projects on a cost per square metre basis. The analysis incorporates potential increased costs associated with specific BTR projects, whilst also including opportunities to decrease costs for elements that are required only for private residential.

The graph demonstrates that reduced requirements offer opportunities to mitigate the additional costs associated with the BTR Design Guidelines. 

From a cost perspective, Linesight’s experience identifies that BTR units can be constructed at a comparable cost to BTS units.  

However, the cost of adding flexibility for future conversion of BTR apartments to BTS will result in a premium cost.

Key BTR considerations

• Successful BTR schemes are designed and built with the tenant in mind, as well as focusing on scale development and institutional owners
• Alternative design and construction methods require consideration, to alleviate the impact of the shortage of skilled trades and improve fast-tracked delivery
• Quality must be maintained within the constraints of a tight budget and strict programme deadlines
• The recent apartment design guideline amendments have improved the viability of BTR
• In particular, the removal of restrictions on unit mix and the relaxation of parking
• requirements (subject to conditions) is significant
• Exit strategy should be carefully considered
• BTR developments designed under the Design Guidelines must be held under the ownership and operation of the entity for not less than 15 years, with no individual units being sold or rented separately by legal agreement
• Compliance with planning guidelines to avoid delays in planning permissions is crucial
• A number of key design considerations should be accounted for, with emphasis on design layouts, efficiency, unit mix, amenity space and resident support services, and parking, amongst other factors that are outlined above
• Commercial tender prices rose by approximately 6.5% on average during 2019, with Linesight predicting that they will rise by 5-6% in 2020
• Residential tender price rises are at a lower level than commercial (circa. 4% to 5%) – attributable to residential projects being less reliant on the specialist packages associated with commercial projects (i.e. M&E, facades etc.) and the potential to utilise a different pool of contractors.

Operator-led key design considerations 

• Engineered timber floor finishes to living rooms and carpet to bedrooms Robust kitchen unit design and materials with integrated class A+ appliances Robust white bathroom suites with shower tray or bath with clear glass screens
• Tiling to selected walls and selected heights  
• Keyless door entry access control systems
• Video access control  
• Integrated WiFi systems
• Smart metering of power and heating use linked to BMS
• Roof activation
• Potential for 14 units per core Juliet balconies to north facing units in lieu of inset or projecting balconies 
• Stacking of risers with access doors from corridors
• Amenity hubs - economic design amenity space with basic finishes and mechanical assisted ventilation to allow for increased occupancy, including resident lounges, entertainment suites and dry gyms
• Dedicated concierge facilities, including parcel collection areas, kitchenette, w/c, laundry facilities with tiled floor and wall finishes to 1100mm high
• Effective waste management systems at convenient locations