How is the Build to Rent market performing and could agents benefit?
Posted by Ellie Dreisenstock on September 2, 2021
The Covid-19 pandemic has caused significant disruption to the rental market over the past year. Social distancing measures introduced new methods of business for agents, and tenant demand increased following a string of consecutive lockdowns.
Although it only accounts for a relatively small part of the private rented sector, Build to Rent (BTR) has been the fastest-growing part of the rental sector since 2016 and growth remains at an all-time high.
In the BTR sector, 95% of rent was collected in the second quarter of 2020, compared with average collection levels of below 80% in the commercial sector, according to Knight Frank’s estimates.
Further studies show that BTR stock now includes 53,750 completed homes with a further 37,000 homes under construction – an indication of the market’s remarkable performance so far.
The private rental market is going through a period of growth, and more developers and investors are looking into the possibility of Build to Rent to grow their portfolio.
Letting agents could benefit from this fast-emerging sub-sector by offering a specialist in-house BTR service or specialist advice to these developers and providers.
How did Build to Rent weather the Covid storm?
National and local lockdowns have had a far-reaching impact on the property market, with a knock-on effect on the private rented sector.
But despite significant headwinds, Build to Rent has seen record levels of investment into the sector, with nearly £3.5 billion deployed in Q3 2020 representing the largest single quarter of activity on record.
BTR development has also skyrocketed. Figures from the British Property Federation show there are currently around 150,000 build-to-rent homes in the UK, with 40,181 complete, 35,415 under construction and 75,4475 in planning.
In London, there are a total of 76,408 units, while outside of the capital there are 75,663, as demonstrated in BPF’s interactive Build to Rent Map.
Separate research reveals the number of BTR homes that started construction in 2020 increased by 30% in London and 24% outside of the capital compared to 2019.
The number of BTR homes currently under construction has grown by 5% over the past 12 months, highlighting sustained developer confidence despite Covid.
Build to Rent trends post-Covid
Although the community elements of BTR were hindered by the pandemic, operators have been able to adapt accordingly.
The closure of amenity spaces, for example, saw operators transition to virtual and video viewings as well as other tools that enabled engagement with residents.
JLL’s analysis of the changes brought on by Covid-19 illustrates the shifting priorities for tenants. Perhaps unsurprisingly, broadband speed rose to the second most important factor for the majority of renters when choosing a new home.
With more and more people looking for remote work, the need for reliable, ultrafast broadband is even more pressing.
In a post-lockdown world, there will also be a move to become more digital from an operational point of view, which means more virtual concierge, more location-based services and, generally, more tech.
This trend has already come to the attention of some operators, with many claiming that video calls have become acceptable and the norm to communicate with residents.
Economic uncertainty and rising levels of unemployment caused by Covid have made homeownership less of an option, leading to a rise in long-term renters.
Therefore, Build to Rent is set to grow at an exponential rate, and technology will continue to play a vital role to support the sector, especially in a more digital post-Covid world.
What opportunities lie ahead for agents?
The private rented sector continues to flourish and Build to Rent is fast becoming a major sub-sector as a result.
In turn, developers, landlords and investors will want to meet this growing demand by providing a home with much greater value than just bricks and mortar.
BTR claims to offer high levels of service, quality furniture, long-term leases and shared facilities such as high-speed internet, on-site gyms, restaurants and more – all of which appeal to modern tenants who may be renting for years to come.
As an agent, it could be greatly beneficial to participate in the BTR phenomenon and use the growth of the sector to your advantage.
Whether that’s offering advice to institutional investors, positioning yourself as a rental market expert, building relationships with developers and management companies or sourcing land and finding tenants, there are various options available.
Ultimately, embracing BTR to provide a specialist, in-house service could present you with more professional opportunities and allow you to come into contact with a higher number of tenants – helping to generate considerable business for the long term.
