Build to Rent is a customer business and very much about selling the experience rather than just letting a building. Part of the experience is about amenity space and provision, such as a residents lounge/games room/club room, roof garden, roof residents room, private dining, dry leisure (gym and fitness facilities) and enhanced main entrance lobby areas. In my article in December last year titled ‘The cost of Amenity Provision within mid-market Build to Rent’ I focused on highlighting the percentage range costs for the different amenity types and also how developers look to build smaller apartments and thereby more efficient buildings to help offset some of these costs. With no use class being specifically introduced on land for Build to Rent it’s really important for developers to reduce their out-turn build costs and build as efficiently as possible for these schemes to happen, as they are more often than not competing with developers delivering a private sale product. Ultimately if use class is introduced to designate land to be developed purely for Build to Rent this would drive away opportunities for alternative investment on the sites, and obviously impact on the land’s value should the desire to develop Build to Rent change in the future.
The term Build to Rent ?
Many people who are currently renting in the private sector haven’t heard of the term Build to Rent, or the organisations that are investing in it. Conductor, who are a strategic marketing consultancy, have completed surveys in the Build to Rent market. 95% of the people they surveyed said they would prefer to rent from the landlord directly rather than through an agent. Perhaps if it was more customer focused then it would potentially be more attractive to people renting properties through private investors.
Do customers want amenity space ?
The survey results also proved that there was generally a willingness to pay an extra 10% rent for amenities such as an on-site gym and resident areas where they can mix with other residents, and that having flexibility in tenancy agreements is a must.
There is also a consistent message from Build to Rent operators that amenity space can facilitate creating neighbourhoods again by helping people interact with one another in these spaces, but as we all know people will not interact and make friends with one another purely because they are living in the same building or development.
It’s a customer business
People are all different and want different things from their Build to Rent schemes. The reasons for wanting to rent are diverse, so as a developer you have to be flexible to retain your tenants (customers). It’s quite common for customers to sign up to either a 1 year or 3 year lease, but at the moment it appears 1 year ones are most popular. Having an established community will help lengthen the lease periods, so this should come in time. The schemes need to be attractive to different age groups, and people with different jobs and careers to make them work. Build to Rent operators need to be responsive to undertaking maintenance in order to look after their customers, and having flexibility in tenancy agreements is important.
Technology is also starting to play a part in keeping customers happy who are living in Build to Rent schemes as it allows them to communicate which in turn creates communities. The happier the operators keep their customers the more likely their customers will remain loyal, and rental levels will become less of a priority.
Ultimately the message is that Build to Rent is very much a customer business rather than a Real Estate one, and we are seeing that operators are focusing on selling the experience rather than purely letting the building.