We spoke to Santhosh Gowda, Strawberry Star Group’s Chairman about its recently launched Build to Rent brand – Star Living, the company’s predictions for the Build to Rent market in H2 2022, its ESG agenda and immediate plans and priorities for the rest of this year.
Strawberry Star recently launched its BTR arm – Star Living. Can you tell us more about its offer in the market?
Strawberry Star Group was established in 2008 as a UK-based property company specialising in acquisition, asset management, capital, development, homes, lettings and management, and sales of London property for local and international investors. A long-term vision for London’s housing market has guided Strawberry Star ever since.
Over the years, we have built substantial experience offering unique solutions to house-buyers, such as residential-led integrated mixed-use schemes, quality homes at lower capital values for first-time buyers, buy-to-rent homes and owner-occupier homes in London and the growing commuter belt.
As a residential-led developer and operator, Strawberry Star is well placed for growth as a leading player in the UK’s Build to Rent sector. This is key to our next phase. We have a 2,000+ unit pipeline, most of which will be in construction by the end of the year. At the same time, we have a growing portfolio of stabilised operating assets which will surpass £100m in value by the end of the year.
Our new Star Living Build to Rent brand, launched earlier this year, aims to service the significant market need we are seeing for modern and convenient schemes within the London commuter belt. It is no secret that there is a shortage in housing provision, particularly in and around commercial centres like London.
Star Living primarily targets areas close to transport hubs that have very few new-build rental homes on offer. By leveraging our track record to unlock vital networks, expertise and resources, we feel confident in our ability to contribute towards helping resolve the long-term structural housing supply imbalance.
What are Star Living’s plans over the next five years?
Our target for Star Living is to build an income portfolio of over £1bn GDV through our existing projects, and future opportunities, by 2027. The first sites we have announced – that are building towards this outcome – are in Luton, Harlow and Gravesend.
Our flagship scheme, LU2ON in Bedfordshire recently completed 401 homes as part of its first phase. Two blocks exist as Buy to Sell (BTS) whilst one of the three blocks (in this first phase) is dedicated to rental. Over 95% of the 135 rental units available were rented within five months of completion.
We have carved a rental market for LU2ON with a 24-hour concierge, gardens and other amenities giving us the confidence to proceed with launching phase 2 of the development with 564 Build to Rent apartments – an estimated £160m GDV. Luton represents a key growing commuter hub for Strawberry Star, indicative of the future sites Star Living will target.
Star Living will launch its development in Harlow, Essex, with phase one as a dedicated Build to Rent block. Construction is due to commence this year with completion expected in 2024. With a GDV of £45m, the development will include 163 residential units – a mix of studios, one- and two-bedroom apartments with Wi-Fi and furniture included (if requested or required).
This is an offering we will look to mirror and expand on at further sites such as in Gravesend, Kent, where planning permission has now been granted for our Star Living site. The first phase is planned with around 100 Build to Rent units with a GDV of £30m.
How will Star Living distinguish itself from others in the sector?
Star Living is being positioned in the market to provide a modern and convenient rental product within the London commuter belt.
For renters, a key differentiator is community living.
By partnering with best-in-class service providers, construction experts, design and architectural authorities, our Star Living sites prioritise inclusive and immersive lifestyles that galvanise community. Inspired by amenities in surrounding localities to our sites, we continue to look to complement the heritage of these well-connected, bustling, vibrant and economical areas in service of their growth and regeneration.
Additionally, a key differentiator for us is the end-to-end service Strawberry Star has built its reputation on.
A single customer journey from reservations to end of tenancy, including digital concierge, maintenance, parcel storage, flexible co-working and multi-purpose room, shared roof terrace, ancillary services such as laundry, dry cleaning and housekeeping, with pets allowed and flexible contracts on offer.
This offering extends to investors seeking exposure to a resilient asset class poised for growth.
Star Living offers an integrated solution, as a one-stop-shop, which takes care of everything from letting the property to community engagement. We welcome and accommodate a range of investors, from the individual to the institutional, who benefit from our organisational capabilities across the entire spectrum of the value chain including asset management and acquisitions.
How does Star Living respond to the ESG agenda?
Our Star Living developments align well with Strawberry Star Group’s ESG goals.
From the environmental perspective, we are seeing a heightened importance of sustainability and energy efficiency measures for tenants who expect to spend more time at home. Moreover, as a country we are working towards net zero carbon emissions by 2050.
Sustainability is considered in the design, positioning and specifications of our developments. At LU2ON for example, a key challenge we have faced and overcome is noise-proofing the development, due to its proximity to excellent infrastructure including Luton airport. The use of triple-glazed windows has served to both insulate the development from noise, as well as enhance energy efficiency, strengthening LU2ON’s environmental credentials.
From the social perspective, communal living is central to the Strawberry Star experience. This is something we engender through specific means such as placemaking through well connected and pedestrianised infrastructure, as well as sustainable architecture to heighten the health and wellbeing of our residential settings.
With the normalisation of hybrid and remote work, the reception area in the main concierge has an office area and workstations to suit the demands of modern life and to further connect residents. We listen to our customers and communities – collaborating and embracing new ideas to re-imagine, re-animate and build inclusive places where people want to live, visit, work and play.
From a governance perspective, Strawberry Star prides itself in maintaining the highest standards of professionalism, commitment, transparency, and corporate responsibility with accountability built into the company structure, decision-making processes, and corporate policies.
What are Strawberry Star’s predictions for the Build to Rent market during H2 2022?
We know that lifestyles are changing, and rent is no longer ‘plan b’ – it’s a lifestyle choice. Millennials, Generation X, and even Baby Boomers have turned to renting for location flexibility, lifestyle and amenity choices. Many residents like the sense of freedom and additional services that make a busy life more seamless, some enjoy being part of a community, greeting neighbours and developing friendships. Others just like to take part in events and activities or just enjoy the culture and amenities of the location.
2022 is without a doubt the year of Build to Rent, providing an obvious solution to this highly pressurised market. Last year saw a near 80% increase of capital invested into the sector compared to 2020, so it’s not unreasonable to suggest investment could triple as we edge towards 2023, having shown incredibly strong resilience during an unpredictable year for the UK economy.
We forecast that increased market volatility in equity, bond, and currency markets will accelerate investor rotations into reliable real estate assets to hedge against inflation. Build to Rent is attractive to local and international investors on account of its diversification properties, stable income generation potential and growth prospects, as well as inflation hedging qualities. There are also increasingly accommodative structural changes at the institutional and political level as outlined in the Queen’s Speech in May, which laid out several positive reforms.
What are your plans/immediate priorities for 2022?
With a strong pipeline of new Star Living sites due to launch in the next 12 months, Strawberry Star is focusing on a number of construction starts in commuter growth towns with a high proportion of young professionals and a low supply of rental properties. We are aiming to help redress the balance which is causing an upwards pressure on rental values. More choice and better supply will be a huge advantage to those now spending longer at home undertaking hybrid flexible work – a phenomenon that is here to stay. Our expanding Star Living Build to Rent product line is in an excellent position to meet evolving market needs and trends.
