What are the biggest challenges facing the UK’s Build-to-Rent sector?

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The Build to Rent (BTR) sector, a sub-sector of the UK’s Private Rented Sector (PRS), has come a long way in the last six years with new Government-backed measures, an increasing number of local authorities placing it high on the agenda and evidence of an appetite for large-scale investment into the sector.

Savills research also suggests that rental demand will expand by 200,000 households a year, as an increasing number of people are priced out of homeownership but do not qualify for social housing. With the rapid rate of expansion there are unsurprising challenges on how the UK PRS sector expands to meet this demand. In terms of BTR, these broadly fall under three headings: management, development and knowledge.

Management is key in ensuring the UK can offer a truly customer-focused delivery of scale, with consistency across the sector. Without the correct management and regulation in place, it is all too easy for there to be disparity in the quality of the offer and one bad experience could negatively impact the overall reputation of the emerging BTR sector. Therefore it’s imperative we iron out any loopholes where there is an opportunity for landlords to offer a substandard service. These changes need to be made now rather than further down the line when a reputation may already be tarnished.

There are over four million rental properties in the UK’s BTR market currently and, with the development pipeline, institutional stock will account for just 5 per cent by 2020. We have to make sure that this institutional stock is developed to a quality that lifts the market generally to improve rental experience across the board. The institutional stock will create its own demand, attracting tenants who want a high standard of amenities and the lifestyle that goes with them. We can already see rents in areas surrounding new BTR builds rising as a direct result and it is therefore vital that the management and delivery of such schemes is carried out thoroughly and successfully to avoid bad experiences for the renter (and the investor) and allow the asset class to flourish and grow.

Investors and developers need to communicate with property managers to understand what renters want and guarantee that the end product meets demand.

As featured on Savills blog.

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