Build to Rent: What’s All The Fuss About?
Hysteria: an exaggerated or uncontrollable emotion or excitement. Originally coined in medical Latin as an abstract noun from Greek ‘Hystera’. So, have we all been caught up in a kind of madness without foundation?
It’s true that since 2012, following the Montague Report, Institutions re-engaged with the residential investment market. Of course, a number of them were already well engaged: Residential Land in London, along with Dorrington, and Grainger and William Pears Group have long histories of investing in homes. But these were not specifically built for rent.
The notion of building for rent has its roots in the ‘multi-family’ market in the United States. Here they’ve been at it for nearly 50 years and, over time, they have developed a standard that works well for them. Where the Americans are light years ahead of us is how they treat the customer. Their form of management is slick, efficient and customer focussed. To date, in the UK, anyone choosing to rent has been merely a tenant.
So is Build to Rent really a big deal? And if it is, why? Well, it’s a big deal because there’s big money in it. Potentially £50billion is ready and waiting to invest nationally in the sector from a variety of UK based and international institutions. (Take a look at my colleague, Paul Belson’s early piece on Build to Rent) It’s a big deal because a great deal of thought is going into the design of the apartments and houses to make them appealing to rent and much easier to manage and maintain. CAST Consultants are doing a great job in this field as are Assael Architects. But it’s a bigger deal because of the way the sector is approaching the management. A quick look at the websites of Fizzy Living, Essential Living, Be Here or Tipi will show you why. No longer will you be a tenant, you will be a customer and you will be treated as a valuable asset. You will have a suite of options (rather like a BMW) Wifi will be included. You’ll have a concierge, a place to pick up all those Amazon parcels and you may even have a bar, a communal room, a cinema and a gym.
If the above sounds like a Millenial or Gen’ Z ideal, it probably is. But, what are the competition going to do? Well the competition comprises the aforementioned residential investors and we can see that a number of them are raising their management game as well as beginning to invest in Build to Rent. Then there’s the 1.75 million BTL investors who between them own 4 million properties. These guys are tough and resilient and have not been deterred, as we thought they might be, by the attacks from the Treasury. They’re also agile, quick to react to competition and make up nearly 9/10’s of the whole PRS market! That really puts it into perspective. Despite the massive investment by the institutions into Built to Rent and the PRS, they’re still a small part of the overall rental market.
Rightly, Build to Rent comes with a fanfare. It heralds a whole new way of living and moving and it’s creating a big fuss in the industry.But does size matter? In this case no, because the real story is how Build to Rent is changing lives for people renting. There’s no turning back now. The accommodation will be a quantum leap over the norm, attention to detail with the ‘customer’ at heart will be obvious and the management experience will be light years ahead of what any of Gen’ X ever experienced. In creating this new rental standard there will be a new management paradigm and one which all of the PRS will have to reach.