By Clint Bartman, Managing Director of Asset Management, Strawberry Star
The Build to Rent sector continues to emerge stronger in the UK property market, an indication of its market expansion. Rental growth in London has delivered steady returns to investors, even in down times, while the number of completed Build to Rent homes increased by 42% in Q1 2020 compared to the same period last year (BPF). However, with the demand for rental housing growing, the supply and demand imbalance will remain long after Covid-19, therefore keeping the Build to Rent sector an attractive prospect for investors. The trend is clear: renters are looking for high-quality, well-managed and operated homes, and investors are seeking steady yields.
Build to Rent investors know that the rental market is likely to continue to grow once relative normalcy returns. Their viewpoint should be to always look at the long term. Therefore, using this current time to carefully research what opportunities are being planned and available is essential. Our Strawberry Star schemes are strategically located in key regeneration areas that see high rental demand, well placed to weather most economic storms. I would advise today’s Build to Rent investors to evaluate each proposition with a similar mindset.
A key component of the equation is to consider the local infrastructure, especially in urban city locations. How does the proposed or existing development make the most of, or build upon, local transport and public services for residents? What placemaking, building amenities, and lifestyle services are to be provided in the scheme? Does the team delivering the project possess the end-to-end experience you need, including operational mobilisation, an active and experienced lettings team and an experiential management platform?
These are all important factors for current and future rentability. Now is the time to build relationships, ask questions, and have discussions to deepen your understanding of the opportunities in the market and make more informed decisions. These relationships should put you in the best possible position to move quickly when the lockdown begins to ease.
If you’re already a Build to Rent owner, make sure your operator is maintaining proper service levels, not only to you as the owner, but also to your customers. Yes, leniency should be granted towards building services that are not essential, but a strict focus on maintaining proper building compliance and keeping a building’s central and safety systems in good working condition is important. This is not a time to defer maintenance of a building’s central mechanical systems. If a central system were to fail, even for a short period of time, it could be catastrophic from multiple perspectives and would be very costly for all involved. In other words, make sure your operator is keeping on top of maintenance.
On a similar note, it’s not the appropriate time for an owner to push and find ancillary revenues through adding services. Also, it’s not an appropriate time to scrutinise costs that pertain to additional cleaning or security staffing. During the lockdown, adding ‘pay for services’ may make a customer feel more captive in their home and have an adverse effect. It also cannot be understated right now, that proper cleaning and visible security is crucial. There is a great need to make customers feel cared for and since this essential work is in demand, you should expect higher costs.
A good indicator of satisfactory performance of the investment during this time is for the operator to provide consistent and quality communication to investors. There are two very important aspects here; consistency and quality. Consistent meaning communication on performance is sent on a weekly, bi-weekly or monthly basis to a customer. Quality meaning the communication not only looks visually appealing but contains vital information that adds value to investors. By giving these consistent, quality focused messages, it will ensure customers remain engaged, pay their rent on time and help mitigate future risks.
In regards to lettings performance, since the first week of lockdown, a good Build to Rent operation platform should have adapted quickly to working remotely with a brief pause in lettings activity as teams adapt. People still need homes to rent and tenancies will continue to expire, so rest assured lettings activity should be stable. At Strawberry Star, our sales and lettings verticals were completely digital within just a few days of lockdown, and our teams were properly briefed to continue our high service levels.
We’re using video conferencing to speak with prospective customers, providing interactive 3D walk-throughs of show homes, digital floor plans and local market insights to keep everyone informed and engaged. We’ve had some hugely positive feedback, especially for the video walkthroughs with live commentary that give prospective customers a realistic, one-to-one approach – just like they would do on normal viewings. Customers are appreciating this level of choice and detail at the moment, and it’s very likely that once we come out of lockdown these practices will not just continue but become the new normal.