Summary: Findings in BLP’s UK Build to Rent market survey reveal the biggest elephant in the room is ‘making a scheme viable’. However, could the secret to viability be found in completely rethinking how schemes are designed, operated and scaled?…
We asked the UK’s biggest investors, developers, lenders and advisors, ‘What is your biggest elephant (i.e. issue) in the Build to Rent room?’
The results have captured the key issues preventing this promising sector from reaching its full potential. They also reveal some interesting insights on opportunity locations and target demographics for Build to Rent schemes.
3 Key Highlights
1. V for Viability
How to make a Build to Rent scheme viable is the UK industry’s biggest ‘elephant in the room’. At the moment, there is sector-wide confusion around what a realistic percentage loss in gross to net actually is, and how investors should be approaching valuation. To address this viability issue, we’re seeing a number of operators look to achieve multiple efficiencies in the design, management and scale of their schemes. These efficiencies are wide ranging – from how heating and waste systems operate, to how wide corridors need to be in order to facilitate an easy move in / move out process.
2. Renty-Somethings Reign Supreme
A significant 63% of respondents think the much talked about ‘renty-something’ (20s and 30s) market presents the most opportunity for Build to Rent. Retirement living, co-living and family homes trailed behind with 10%, 8% and 8% respectively. This new housing offer certainly appeals to the millennial generation – which has played the biggest role in changing the housing market. However, they are by no means the only demographic set to embrace and benefit from UK Build to Rent. When it comes to target markets, the UK industry can learn a lot from its American counterpart, Multifamily, where the sector caters for a vast number of demographics and family homes are particularly dominant – and lucrative!
3. It’s not just a ‘London thing’
Almost 70% of respondents think large regional cities, smaller cities and large towns present more opportunity for Build to Rent than London. This result certainly reflects the need for affordable living across the UK and the increasing popularity of regional developments outside of the capital, a trend that investors such as LaSalle Investment Management, Atlas Residential and Get Living London are already capitalising on. We are starting to see different developers and investors targeting and differentiating specific products and locations. The trend for looking outside London certainly brings into focus the primary question of viability. This is harder to achieve in the capital.