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Four megatrends that can make – or break – build to rent

Sustainability By Hannah Morton, Associate Director, Sustainability – 10 June 2022

Arkadia - DHA Alexandria

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Hannah wearing suit standing in front of a plant

Hannah Morton

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Australia’s property sector is going into overdrive on new built to rent (BTR) proposals, seeing a clear opportunity to address the dire shortfall of rental dwellings in many of our cities and regions. But while some developers are advocating for less discerning design and performance standards and an easing of planning requirements around public space and greening, this approach may be setting a stranded asset trajectory for the developments.

There are four major megatrends shaping our urban realm and the buildings we design and deliver - embracing these is crucial if we want today’s buildings to be relevant in 2030 and beyond.

The first major megatrend is climate action - not in the political sense, but in the practical, engineering sense. I believe buildings should be designed to last 100 years or more, but even if a BTR developer is looking only at a 25-year timeframe for the tenanted, standing investment, the design needs to be fit for a changed future. The fact is any proposal moving into DA stage now is likely to be an occupied asset in 2050 - the year Australia and most other countries have pledged to attain net zero for carbon emissions.

Therefore, it makes good economic sense to design BTR projects now as a net zero carbon developments. If this doesn't happen, developers face expensive net zero retrofits later or purchasing large amounts of offsets as the regulations around emissions becomes stricter heading towards 2050. Neither option is palatable from an investor perspective.

There are a few key steps to achieving net zero carbon:

First, optimising design and passive performance to reduce operational energy demand, including orientation, form, and fabric, to address heat transfer, air tightness, daylight, natural ventilation, and thermal comfort. Then, the most energy efficient mechanical and other building services are specified, right sized, and fine-tuned for optimal operation.

A combination of on-site solar Photovoltaics (PV) and Power Purchase Agreements for renewable electricity supply all energy – no gas using plant or equipment is specified or installed.

Then, any remaining emissions that could not be engineered out (such as transport-related or residual embodied emissions) must be offset through the purchase of high quality, third-party verified carbon offsets.

A bonus of embracing this megatrend and planning for net zero carbon now is that it delivers a clear marketing edge for attracting and retaining quality tenants, while also benefitting a developer’s reputation with stakeholders and investors.

The second major megatrend is the move to a circular economy.

Non-renewable resource depletion and waste are attracting increased attention, and single-use products or products that involve extraction of raw materials in an environmentally damaging way represent a clear reputational risk.

A circular economy approach has three key principles:

1. Keeping products and materials at their highest use for as long as possible

2. Designing out waste and converting products that have reached the end of their useful life into new manufacturing inputs, and

3. Regenerating natural systems.

This kind of thinking starts to drive accountability and transparency in the supply chain around the contents of our products and the conditions under which they were made.

Specifying products that have third-party certifications such as GECA Certification, Environmental / Health Product Declarations, Declare Certification, or other recognised schemes, can also help projects address risks (and ESG opportunities) related to Modern Slavery, climate, and their Social License to Operate.

There is also a design aspect to circular economy in terms of the places we create. Successful communities make spaces that encourage people to connect and share, whether that is a vegetable garden or a bike repair workshop. There might be a small community library, or a kitchen for shared meals, tool sharing cupboard or space for storing give-away items like furniture or sporting equipment. When we see developments not as just the building but as an inclusive community, we can start make circular economy thinking a more obvious choice.

The third megatrend is health and wellbeing.

It has been known for many years that minimising or eradicating volatile organic compounds (VOCs) in schools, hospitals and offices is important for cognitive function, recovery, and general occupant wellbeing. The same is true for homes, and the list of toxins we need to be avoiding is much longer that just VOCs.

Halogenated Flame Retardants, cadmium, mercury, lead, and phthalates are just some of the toxic ingredients commonly still appearing in our building material supply chain today. BTR occupants are likely to include people who are home for prolonged periods of time including pregnant women, infants, people who work from home, and people with compromised immune systems (such as the ill and the elderly). Minimising toxins in the indoor environment is crucial for healthy homes as well as the health of those manufacturing our products.

Natural light, fresh air and thermal comfort are also fundamental for human wellbeing. Other features that can be designed into BTR projects to support wellness are biophilic design principles, common green spaces, productive gardens, active travel infrastructure (such as well-designed cycle paths and pedestrian zones), and spaces for active recreation, quiet reflection, and social interaction.

This leads naturally to the fourth megatrend – ensuring we protect and restore biodiversity.

The web of life that supports human civilisation including our air quality, fresh water, arable land, and countless other vital functions relies on the interconnected ecosystem of animals, birds, insects, and aquatic life that shares this planet with us.

Protecting biodiversity can be achieved in many ways that also benefit humans in a place. For example, incorporating diverse, climate-adapted vegetation plantings for local cooling benefits also creates amenity and a unique sense of place and identity for residents. Adding communal productive gardens with herbs, fruit and medicinal plants supports our essential pollinators and human health as well as the informal sharing economy of community. Transitioning to a zero carbon and circular economy which also regenerates biodiversity will help us to protect the environment and all the living things that rely on it.

It is no coincidence that these four megatrends are interconnected and have multiple benefits for both a BTR residential community and for the reputation and balance sheet of the developer and asset owner. Taking a long term, future-focused approach is essential for ensuring the time, capital, and resources we invest in BTR delivers lasting value in every respect.