CBRE Ireland has released a new research report which was conducted in conjunction with MD Property, looking specifically at rent collection and occupancy in the mid-tier residential rental market in the first six months of 2020. The joint research shows that both rent collection and occupancy within many residential rental schemes in the Irish capital have performed exceptionally well over recent months despite the economic backdrop. Indeed, according to the property consultants, residential rent collection has been considerably stronger than in some sectors of the commercial property market. According to CBRE, it remains to be seen if this trend continues over the coming months as the Irish economy gradually emerges from lockdown. However, with supply of modern rental accommodation remaining severely constrained and occupier demand strong, their expectation is that this trend will continue.
Source: CBRE Research/MD Property
According to co-authors of this new research, Marie Hunt, Executive Director at CBRE and Mark Dunleavy, CEO of MD Property “In the immediate aftermath of Ireland officially going into lockdown in March 2020, there were legitimate concerns about the potential implications for many sectors of Ireland’s economy. As the rate of unemployment rose from less than 5% in the early months of the year to a high of 28% within a matter of weeks, concerns about the sustainability of Ireland’s residential rental sector began to be aired. However, interestingly, despite the severity of the economic impact of the Covid-19 lockdown, residential rent collection in many schemes has remained largely unchanged in the year-to-date and occupancy in the Dublin market has remained very high. In addition, demand for residential schemes has remained strong”.
In recent weeks, professional investors including Kennedy Wilson and IRES Reit – the largest holders of professionally managed residential portfolios in the Irish market – have reported rent collection rates in excess of 97% and high levels of occupancy in their schemes. Considering that all portfolios need some element of vacancy in order to facilitate churn, this is very impressive and suggests that the Covid-19 pandemic has had limited impact to date on many schemes in the residential rental sector. This is perhaps not surprising when you consider the supply demand imbalance inherent in the Irish housing market and increased demand for rental accommodation over recent years as Dublin’s largely transient workforce compete for a high-quality rental offering in the city.
CBRE Ireland and MD Property considered rent collection and occupancy trends in a 500+ mid-tier residential rental portfolio in Dublin. This is just one sample but provides interesting results, nonetheless. In line with trends witnessed by Kennedy Wilson, IRES Reit and others in the Irish market, MD Property reported a rent collection rate of 97.3% in April 2020 – down only slightly on collection rates of more than 99% earlier in the year before the Covid-19 lockdown. Meanwhile, rent collection rates in this portfolio actually increased as opposed to decreased month-on-month in May with 98.28% of rents collected in the month and rose again to 98.79% in June, possibly supported by some renters returning to employment in recent weeks.
Occupancy meanwhile also remained consistently high in this portfolio since the beginning of the year despite the economic backdrop, ranging from 99% in March 2020 to virtually full occupancy of 99.31% in June 2020. The vast majority of the small number of tenants who sought to defer rent in April or May opted to defer a portion of their rental payment only with an agreement to pay the deferred portion over time. A large proportion of the tenants who deferred payment on a portion of rent in April or May have since paid in full or are on a payment plan for the balance.
It could be argued that Government supports in the form of wage subsidies and a ban on evictions during the Covid-19 lockdown period helped to support this trend of high rent collections and high occupancy in the Dublin residential rental market. However, the scarcity of supply of residential rental accommodation and the strength of underlying tenant demand has also been instrumental. Clearly investors will be interested to see how this trend evolves over the coming months as the economy starts to slowly unwind and Government supports are ultimately eased.
The multifamily sector has been one of the better performing sectors of the investment market throughout lockdown, not just in Ireland but across EMEA during the last couple of months with investors attracted by the sectors defensive characteristics according to CBRE.