What is/are the biggest challenges facing the UK PRS sector at the moment?
At the present time the biggest challenges facing the UK PRS sector is threefold and broadly falls into management, development and relevance. Management is key to make sure the UK can offer a truly customer focus delivery in scale and this should raise standards across the board although from current examples the impact of a PRS building can raise rents in the surrounding area as people move to the PRS building. If the market delivery is of a low quality service then it could have negative impact on the investors and their aspirations as well as leaving the renters with more to complain about.
Development because it is essential the amenities and quality of the build is meeting the needs of the renters and the area and commensurate with delivery. This is ultimately a matter for the investors and developers but it would be a great shame if the early PRS buildings produced are not fit for the renters nor are differentiated to the existing rental market.
Relevance because there are over 4 million rental properties in the market currently and with the current development pipeline, the institutional stock will account for around 5%. We have to make sure that the institutional stock lifts the market generally to improve rental experience across the board. The institutional stock will create its own demand and from current examples we can already see rental in the surrounding areas rising. It is therefore vital that the management and delivery avoids bad experiences for the renter to give relevance and allow the asset class to flourish and grow.
In a letter to Property Week last year Roger wrote: “Can we benefit from following the American model? Do we need controls? Do we need everyone to work together? The answer to all these questions is yes.” How can we benefit from the American model, why do we need controls and why do people need to work together?
We can benefit from the American models because we can learn from the mistakes they have made over the last two decades avoiding the pitfalls and errors and increasing our returns and delivery in a more effective way. One simple example is maximisation of rent. This has been twenty years in growing in the USA and when I first encountered it in 2012 in the USA it was an obvious game changer. Chainbow have effectively utilised this technique on buildings and delivered exceptional rental returns. Now the companies behind the analytical tools and systems developed in the USA are coming over to the UK and bringing their systems to enable better financial returns.
We need controls because I its simplest the market is the Wild West. There are still letting agents operating with exorbitant letting fees, no redress scheme, ignoring tenant deposit protection, etc. We have to make sure the renters know the good guys from the bad guys; the renters have to know what service to expect and we have to improve the professionalisation of the rental sector. This will take controls, some of which exist and some of which will come because the market place will not tolerate poor service, poor quality flats and poor agents. Of course this is a long game but a key element in differentiating the institutional PRS delivery.
We need to work together because the more good experiences we can highlight, the more good examples we can showcase, the more we can share our learned experiences the quicker the market will grow and develop and the quicker we will create a critical mass that meets the investment demand. Generally a market place is more effective if it shares information and builds together than all learning and tripping up along the way. Why would you reinvent the wheel!
How can the sector improve and raise its standards of customer service?
This will be achieved by highlighting in the most public ways what renters should expect from their rental, the agent, the management. It will be achieved when managers and owners talk in terms of hours for repairs and not days and weeks. It will be achieved when we look at spending money on management as an investment and not a cost.
The American managers understand this and see it as key to performance. On a recent trip over the NAA were aghast at low staffing levels for sites in UK and even more shocked at the repair and service timescales.
When is the UKAA launching in the UK and why? How do people join up? What are the benefits to members? Who is the association targeted at (large funds or individual investors)? How does/will the relationship with the NAA work?
We will be launching in March and people can join by contacting Roger Southam at Chainbow. The benefits are having access to all study information, research and analyses in the USA NAA and their educational programmes. It will give a forum for sharing information and learnings to improve returns and service. It will facilitate study tours for members and access to the USA members of NAA. Most excitingly of all is the international ambitions of NAA and the UKAA will be the link to an International grouping encompassing other countries with active PRS markets. We are ahead of the curve and leading the international grouping with Canada and Holland close behind.
In addition there will be a supplier forum that will give for the first time in the UK a platform for suppliers to work together to show who are capable and competent and removing those who are not, giving access and sharing with the owners and operators to improve standards and service.
We have taken RICS, ARMA and ARLA along with us and UKAA is there as an umbrella working with those organisations not replacing. IRPM is on board with educational standards which will be promoted and delivered and will harness the NAA educational learnings.
The UKAA is targeted at all owners and operators in institutional PRS sector that want to be seen at the forefront of the market and service delivery.
The NAA are seed funding the UKAA to facilitate launch and running. It will give a recognised service and platform for the American organisations coming over as well as help the UK market grow and develop.
4th January 2016