Whilst still considered a growing residential asset class, Build to Rent (known in the US as ‘Multifamily’) has firmly found its feet in the UK and over the past year alone, the sector has grown by 15%*. However, Build to Rent (BtR) in the UK is navigating its own set of challenges and opportunities different to its US counterparts. BtR is thriving in UK cities such as London, Manchester, Birmingham, Liverpool and Leeds, where the leasing market is strong, and particularly in areas with good connections and cities with a polycentric masterplan.
The management of a BtR portfolio works most efficiently when delivered at scale and that scale requires significant financial support from the design, construction, marketing and lease up as well as operational management. Where the more traditional sales market relies on quick returns through early deposit receipts and sales at or shortly after practical completion, the BtR market works best as a long-term investment. However, lenders are often cautious of new and emerging sectors.
Due to the sector’s relative infancy there is little market data for lenders, making it hard to understand how the sector performs in the investment market and how its success measures against other commercial real estate sectors. There is still a lack of transparent data around the operating costs of managing Build to Rent investment portfolios, as the UK is yet to have evidence at scale. The income and risk profile of the sector appeals to insurance and pension fund capital, where growth in operating cashflows is naturally aligned to inflation. The value-add for investors is around driving the best cash yield for their investment, and investing through a platform that has the brand, processes and infrastructure to deliver efficiency in a sustained fashion over a long-term period.
As such, it is vital that BtR developers design and build to maximise income. The success of the investment relies on the renter’s long-term interest, which in turn relies on the product’s capacity for enduring appeal. More emphasis is therefore placed on choosing durable, premium materials and great value is seen in delivering an attractive place to live, beyond the four walls of the apartment. At Wembley Park, Quintain takes exceptional care in developing the 85-acre estate to suit the needs of both residents and visitors. A curated, culturally rich events programme is delivered, the retail offering is strategically planned and placemaking is at the heart of the development strategy.
It is for these reasons that Quintain is fortunate in having the single largest site of Build to Rent in the UK. Wembley Park’s location presents Quintain with a significant opportunity to help alleviate the pressures of London’s housing crisis. We have political support, an expanse of land in a world-famous location, and London’s customer-service hungry renters readily available.
The shift in mindset from dealing with a private landlord hasn’t come easily though. Quintain Living staff often note that residents are wary of leases, expecting to find a catch in the ‘deposit free, all inclusive’ offering. The typical London renter’s previous experience with a landlord is often memorably negative, it comes as a surprise to them to find a good quality home with a customer service offering entirely tailored to their needs and a lease length on their terms, from 6 months up to 3 years. There lies the opportunity for BtR developers and operators – to recognise the fact that the full-service BtR offering is a relatively new concept in the UK. The customer focus is a refreshing experience and highly valued when compared to a traditional private rental offering.
This is an opportunity not shared with our US counterparts. Not because Multifamily renters are fully accustomed to a corporate landlord, but because the focus there is generally on the quality of the apartment’s finishes and features, as opposed to the full customer service offering that we are developing in the UK, complete with the right amenity spaces to foster a community.
As the market emerges here, it remains energised and not too far developed to lose its ability to be agile, responding to what renters want rather than what developers think they want. Quintain Living’s learnings have included wider corridors, a greater emphasis on pet-friendly amenities and considering repurposing spaces earmarked for car parks after finding an expected decline in car ownership.
With rapid growth and a focus on remaining agile comes a need for efficient infrastructure to support the leasing process. It’s proving to be a challenge in the UK, which doesn’t benefit from the experience of the US market and the associated tools for efficiency. Whilst we get underway, staff headcount will be higher to make allowances for our lack of BtR focussed technology such as the US’s ability to turn a referencing procedure around almost immediately. Finding and recruiting the right staff needs to support the pace of this developing industry. This can require thinking ‘outside the box’ in terms of where to look. The vast majority of Quintain Living’s leasing and resident support staff comes from high-end retail and hospitality sectors, where customer service is fundamental to a business’s success.
As growth in the BtR sector remains strong and the UK rental market calibrates, it will be interesting to see how these challenges are navigated and opportunities seized. At Wembley Park, 8,400 homes will be delivered by 2027 including 30% as affordable, 'pepper potted' throughout buildings to ensure they are tenure blind. The scale and profile of the Wembley Park project presents Quintain with a fantastic opportunity to continue leading the way as a developer creating places and homes where people love to live.
*UK Build to Rent Market Update, Savills, January 2020
