By Will Scarlett, Founder and Director, Scarlett Land and Development
The Covid crisis may well present a boost in demand for community led Build to Rent schemes. In a period of economic uncertainty, a mortgage market in flux and a weaker sales market, Build to Rent has the potential to step into the supply side. However, Build to Rent cannot be taken for granted and the sector still faces challenges in Scotland due to build costs, planning policy, and a potential rise in Affordable Housing requirements (Edinburgh).
Build to Rent supply in Scotland is moving upwards but still lags other UK regions. Glasgow has over 4,800 Build to Rent and Mid-Market-Rent (MMR) units consented or in pre-planning, while Edinburgh has over 6,000 units if c.2,800 non-grant funded MMR units are included.
Statistics of Scotland’s Build to Rent/MMR
|Build to Rent||MMR||Total||Total inc pre-planning|
Positive key messages and trends
- The appeal of Build to Rent (and coliving), post Covid, is likely to be enhanced in the face of economic uncertainty and a weaker sales market. Build to Rent can step into the supply side of the market.
- The proven ability of Build to Rent (and coliving) to enhance communities through a professionally managed rental offering (for living and working) will only increase the consumer appeal of the sector post Covid.
- Non-grant funded MMR units are now making a serious contribution to key worker unit numbers – over 3,000 across Scotland to date.
- The Build to Rent pipeline in Scotland has capacity to grow. Of 82,620 regional Build to Rent units (source: BPF) complete, under construction or in planning, approx. 10,000 are in Scotland.
- Post Covid, planning policy will need to be flexible in order to encourage economic resilience; this should be positive towards new formats of Build to Rent.
- Coliving schemes, which can provide cost effective homes for key workers in central locations, will need planning departments in Scotland to be open minded in terms of current policy.
- Build to Rent is likely to spread to suburban locations in the form of low-rise flatted developments and houses; where the majority of economically active people live.
- Increasing the Affordable Housing % in Edinburgh may have the opposite of the intended effect; if Build to Rent schemes in the city become less viable, investors may simply direct their capital to other regional cities.
- Professionally run Build to Rent communities result in happy tenants which in turn reduces void rates and ensures a resilient income stream. That outcome should attract further investment from Institutional investors.
- Key workers, by definition are the most resilient of tenants during a period of economic uncertainty. Build to Rent schemes targeted at this demographic could command tighter yields than premium high value schemes.
- As an asset class, Residential (specifically Build to Rent) is moving up the agenda of institutional investors in terms of their real estate asset allocation. In Scotland we need to ensure that we capture that investment.
The future of Build to Rent (and MMR) should be bright post-Covid due to the positive attributes of the sector – proving to be resilient in terms of community building and stable of income. In Scotland policy makers have come a long way in the last 18 months; there remains a need to continue to work with developers and institutional investors to ensure we capture the potential wave of institutional investment rather than lose it to other, hungrier and more flexible regional cities.