Summary: The UK's fledgling build to rent market has much to learn from the considerably more mature US Multifamily sector. Andrew Yates reports back from the 2018 National Multifamily Housing Council.
The US Multifamily market has been maturing for 25 years. In this time, a cultural change has taken place – Americans now see renting as a viable lifestyle choice. In this busy market, investors and developers are increasingly looking to high-tech solutions to attract and retain customers. With so much maturity, expertise and innovation on display at the 2018 National Multifamily Housing Council (NMHC) Annual Meeting in Florida, what do Brits need to know about the US experience?
Multifamily: The overarching themes
US consumers are actively choosing to rent - rather than buy
Developers in the US plan to deliver over 100,000 new units per quarter leading up to mid-2018, the highest growth in new supply since the late 1980s. We were told that the strongest growth is at the higher end of the market, with tenants often choosing not to buy, despite having the means to do so. Key draws for tenants are enviable locations, amenities such as gyms, pools and roof terraces, flexibility and no responsibility for maintenance and management of the building.
Tech is at the heart of US Multifamily innovation
Throughout the conference, speakers acknowledged that tech needs to be embraced as a core business planning issue, rather than an add-on left to the IT team. Interestingly, Silicon Valley has also begun to take notice of the sector, with tech companies designing apps and processes to drive greater efficiency. Having a project that is designed, built and managed by a single entity means that operators are incentivised to invest in improved systems for managing and monitoring a building. This could be anything, from automated air conditioning and keyless entry, to innovative building methods and sensors to highlight maintenance issues before they become a problem. Venture capitalists are exploring opportunities in this area. The UK delegation agreed that our nascent Build to Rent industry is really lagging behind the US when it comes to tech innovation, but recognises the need to catch up.
The #MeToo movement is increasing awareness of the need for diversity
Inclusivity was a major theme for the conference. In the wake of the #MeToo campaign – designed to give a voice to women denied opportunities or experiencing discrimination and abuse, we discussed the importance of encouraging a diverse workforce and challenging misogyny and sexism.
New Multifamily buzzwords: ‘amenitization’ and ‘rent arbitrage’
Take note - these were two prime examples of the latest BTR jargon that we should all be using! Amenitization is the provision of better services through systems, such as remotely arranging to restock your fridge (or refrigerator, in the US). Rent arbitrage involves using smart airbnb-style systems to maximise occupancy rates. By analysing market data, rent can be set at levels tailored to meet demand at any time.
UK BTR themes
We had an interesting and lively discussion during ‘The US Multifamily Model Goes Global: An Exploration of International Investment and Activity’ panel. It was moderated by David Woodward of Global Apartment Advisors and CBRE, and I spoke on the panel alongside representatives from Tipi, Quintain’s BTR management company, Knight Frank, and PfP Capital and Australian Group, Mirvac. There were also contributions from the floor from Colliers International. International investment into the UK and Brexit turned out to be the prominent themes…
US market leaders are interested in the UK market
There is a lot of American investor interest in UK BTR; US-based investors are keen to pursue new opportunities across the pond, while drawing on their extensive skills and expertise. Already, Canadian investor Ivanhoé Cambridge has made investments; Greystar and Atlas also have a presence and shortly before the conference we found out that Courtland Partners – one of the biggest players in the US sector – made some well timed acquisitions in the UK.
Asian investors are also paying close attention to BTR
BTR in the UK will be an international sector. In addition to the strong UK contingent at NMHC, it is worth noting that a senior representative from a large Chinese contracting company had travelled especially from Beijing to learn more about opportunities in the US and UK, making much of the fact that they were already active here.
BTR growth is not threatened by Brexit
We were all in firm agreement that, although Brexit is creating uncertainty in many sectors, BTR is likely to be broadly unaffected. In times of uncertainty, people are more hesitant to take on major commitments such as mortgages but the demand for homes will not decrease, so rental is increasingly popular option. US-based investors are also likely to be attracted to UK opportunities due to the lower value of the pound.
Post-Brexit investment in UK regional cities will fuel BTR
I expect that investment in regional UK cities will increase after Brexit. This will bring new opportunities for economic growth in outlying areas, particularly when it comes to property investment hot spots like Manchester and Birmingham.
A final thought from an ex-PM
David Cameron is an impressive ambassador for UK interests…
The audience packed out the conference arena to hear former Prime Minister David Cameron deliver an impressive keynote. Cameron said that the Conservatives recognise the importance of a multi-tenure housing market – and knew exactly how to play to his US audience: thousands cheered when he condemed Labour proposals to introduce rent controls and he even got a standing ovation when he revisited the joint US/UK operation to “take out” the infamous terrorist ‘Jihadi John’.
...But he missed an opportunity to encourage US investors
However, with his continued focus on home ownership, my fellow UK delegates and I felt Cameron could have gone further - and given the US audience an explicit invitation to invest in UK BTR projects. This might have been a missed opportunity to support growth in UK Plc on stage, but America already has a keen, if not active, interest in UK BTR.