Top trends: Benefits for tenants when institutions invest
Category News
As remote working and online shopping continue to take their toll on office and retail property returns, institutional investors in SA are expected to start paying much more attention to multifamily residential rental properties - a move that could potentially be very positive for tenants.
Multifamily rental properties generally include whole apartment buildings and townhouse complexes where the units are only available to rent and not for sale, and worldwide, they are often owned by institutional rather than private investors.
The newly-formed South African Multifamily Residential Rental Association (SAMRRA) says that although the multifamily rental sector is still quite new in South Africa, this type of property is expected to be increasingly favoured by local institutional investors as it is already in countries such as the US, where it has grown from 9% to 26% of the asset value in US REITS since 1990.
The reason for this is that multifamily rental property has performed consistently in the global market and has a superior risk-to-return profile. It is a "good bet" investment because it generates relatively stable incomes that are less susceptible to the effects of adverse (or positive) events such as the COVID-19 pandemic.
In SA, investment in multifamily rentals is also made more attractive by the country's massive housing backlog and huge demand for affordable rental units, and it could spell multiple advantages for tenants if it does take hold as expected.
For a start, institutional owners of multifamily rental properties usually have them managed by professional and specialist residential property operators, which usually means better maintenance, faster response times to repair requests and overall higher quality management services for tenants.
In addition, institutional investors tend to take a long-term view of their holdings, which means that tenants are likely to experience greater stability, knowing that their rental property is less likely to be sold or undergo significant changes in ownership, which could disrupt their living situation.
Institutional investors are typically also held to higher standards of transparency, compliance and accountability than private investors and this could help to make tenants less vulnerable to unfair letting practices.
To attract and more importantly, retain tenants, institutional investors will often also invest in extra amenities and services like in-house business centres, gyms, laundries and coffee shops as well as swimming pools and tennis courts.
Institutional investors are often more inclined to invest in technology to improve the tenant experience. This might include online rent payment systems, maintenance request portals, or smart home features all of which can make renting more convenient for tenants.
More good news is that institutional investors often have the resources to achieve economies of scale in property management and maintenance. This can result in more efficient operations and potentially lower costs, which could be passed on to tenants in the form of lower rents or improved amenities.
Institutional investors generally also have access to significant capital to facilitate new construction or renovation projects - or the redevelopment of office blocks into apartments. This means more opportunities for tenants to access modern, well-maintained housing options.
Finally, more institutional investment will mean the development of more multifamily rental developments, giving tenants with different preferences, budgets and lifestyles a greater variety of housing options to choose from.
Author: Chas Everitt