Built to Rent is growing, but is it selling itself short?

In the UK, the ‘Build to Rent’ (BTR) sector is witnessing unprecedented growth, marked by frequent announcements of new developments and deals. Despite this burgeoning interest, the sector faces challenges in how properties are marketed and priced, which are crucial for BTR to secure a stronger foothold in terms of popularity and market share.

Traditionally, the UK’s private rented sector has been dominated by private landlords, often with small portfolios, leading to a market that doesn’t fully appreciate the unique advantages of BTR developments. Typically, tenants expect rental listings on internet sites like Rightmove to cover merely the living space and perhaps some appliances. The responsibility for utilities and services like broadband or satellite TV traditionally falls on tenants, with landlords rarely involved in the provision.

This is where ‘built to rent homes’ stand out, offering inclusive services such as broadband and furniture within the rental package. However, the challenge lies in communicating this value effectively. Too often, these added benefits are not adequately understood by potential tenants, leading to BTR properties being overlooked or undervalued in their search for the ideal home within their budget.

To address this, BTR operators should consider pricing strategies that position their offerings competitively, perhaps in line or slightly above traditional properties. This approach can draw prospects and introduce them to the concept of ‘management service’ excellence and additional services like broadband, phone, satellite TV, and utilities. These services, when bulk-purchased, can contribute significantly to ancillary income, ranging between 10-20%.

Centralised purchasing is another strategy that ‘build to rent developments’ should leverage, utilising their scale and buying power to outcompete smaller, traditional properties. However, it’s vital that BTR operators avoid obscuring the unique benefits of their offerings. If these services are not highlighted effectively or are perceived as ‘hidden costs’, the distinct advantage of BTR could be diminished, leading to a loss in the value proposition.

While BTR homes must stand the ‘apples to apples’ comparison in the minds of tenants, they should not strive to be identical to traditional offerings. Instead, the focus should be on superior service quality, an area where many landlords and letting agencies in the traditional sector fall short. This approach mirrors the evolution of the market in the US during the 1990s, where multifamily rental properties began to offer service guarantees, such as 48-hour problem resolution or rent waivers until issues are fixed.

In enhancing the BTR value proposition, consider offering bundled services like high-speed internet at discounted rates, personalised furniture packages, discounted utilities, renter’s insurance, home cleaning services, and a consistently supportive customer service.

By positioning BTR as a superior alternative to the traditional model – not through increased expenses or diluted rent, but through unparalleled service and convenience – the sector can redefine residential renting in the UK.

Dustin Fjeld, Fjeld Consulting, creating value for PRS/BTR through process improvements, additional income streams, and the expense savings afforded to large unit concentrations. Contact us to discuss your needs.