Private Rented Sector (PRS) & Build to Rent (BTR) may have gained coverage in the UK’s business press, but public awareness about it remains low even though the first units are already occupied.
Nevertheless, once the sector establishes a foothold in the UK and takes market share, a revolution will begin for many of the country’s 4.3 million private renters.
It’s a shift that’s already taken place in the US and consequently many Americans arriving in the UK are shocked by the UK’s rental market where single-property private investors, managed by letting agents, are still the norm. Properties are too often of poor quality, expensive (particularly in London), and managed in an inconsistent and haphazard way.
It’s a situation that investors with experience of the US and European Build to Rent or ‘multi-family’ sector see as an opportunity. These include Greystar, Atlas Residential, the Canada Pension Plan Investment Board, and LetterOne Treasury Services.
One sub-market BTR / PRS is already a dominant force. According to a recent Cushman & Wakefield report, institutional investment in the UK student accommodation sector increased from £250m in 2005 to an estimated £6bn in 2015.
Purpose Built Student Accommodation (PBSA) is just a component of the overall Build to Rent market. The whole multi-family sector faces a digital challenge if it wants to make progress here. Most rental enquiries begin online and the search market is dominated by two large internet listing services (or “portals” as they are called in the UK), Rightmove and Zoopla. Both platforms do not accommodate or differentiate a multi-family property’s unique selling points, throwing them in with everything else.
So what’s to be done?
The first move is to lobby for a greater balance in the tenants/landlord relationship, because good property management needs to be transparent in order to foster better service.
Although tenants’ rights to fair treatment are protected by law in the UK, the regulations are not policed properly by local councils. Reviews and ratings will correct this imbalance and could be a key differentiator between Build to Rent and the rest of the market.
In a nutshell, the way property is rented and the landlord/renter relationship is managed should in the future follow a model based on platforms such as Airbnb or TripAdvisor, rather than the Rightmove model where agents dominate and service quality is opaque.
The portals have to be convinced that Build to Rent is a different proposition. Tenants are being offered a new and better kind of property management as well as much improved personal and communal amenities in addition to the ability to review and rate property management teams – after all, would you buy a £100 kettle without checking the reviews first?
So can the portals be persuaded to adopt this approach? Maybe so. Rightmove is not against change. It and rival Zoopla have accommodated seismic market shifts without too much fuss in the past. For example, DIY online-only letting agents were allowed in without a revolt.
But if the portals won’t bend, they may need to be persuaded. As Build to Rent gains volume, the sector may have to use its marketing muscle to change the way the property portals operate, as the internet-only agents did. And with 60,000 units in the pipeline (British Property Federation) that point isn’t far off.
Dustin Fjeld, providing US residential property management experience here in the UK, www.fjeldconsulting.com