London’s build-to-rent market has exploded in recent years, with the first wave of schemes now coming on stream. A flurry of others are not far behind in the construction phase and even more are on the drawing board, with seasoned renters now opening their eyes to a whole new offer and product.
With Fizzy, Essential, Hub and others with sites now in operation and generating income, SAY Property Consulting says evidence of what’s now in the market suggests that build-to-rent providers are hoping to achieve rents of between £1,650 and £2,100 for a typical two-bed flat.
Using GLA data, EG has mapped the postcodes where these prices are being achieved in the secondary buy-to-let market. Overlaid are more than 100 build-to-rent schemes, showing a clear location dichotomy. The question remains, who are those with the wherewithal to afford build-to-rent prices? And how do you entice them to make the step into the professionalised sector?
Many build-to-rent players who were first out of the blocks typically aimed for the upper end of the market, with some questioning how it can be the answer to the housing crisis.
For a professionalised rental sector to really flourish, affordability is key.
Due to land values, build to rent developers typically need to break ground in emerging locations, offering a product which is more expensive than the surrounding area. Therefore, connectivity and amenities are of utmost importance in attracting customers.
As Sandra Jones, director at consultancy Dataloft, says: “These are a new kind of landlord with a new kind of rental proposition – they are pioneers in most of the areas in which they are building, so it is not very surprising that the evidence for the rent levels they propose is sparse.
“These providers will expect to attract tenants on the strength of their offer, from other parts of London. The question then becomes where are tenants paying at these rental levels, how deep is the market, who are they, how likely are they to move and what will it take to draw them to new schemes in new areas?”
Many of the build-to-rent hotspots, where pricing of buy-to-let properties matches those sought by rental operators are predictable. Locations such as Clapham, Putney, Chiswick, Kilburn and Highgate.
Understanding who these people are will be vital in trying to entice them to off-key locations, with an aspirational rental offer.
Luckily, consultancy Dataloft has done exactly that, revealing tenant profiles for those paying between £1,650 and £2,100 for typical two-bedroom flats across the areas mapped in red.
BTR hot spots
As the map illustrates, many of the emerging build-to-rent hotspots are centred around locations with good accessibility in to central London. Examples such as Stratford, Croydon, Barking and Wembley.
Bringing an inner London feel to these outer London locations will be key. Quintain’s deal with Boxpark to open a pop-up container city, offering street food to Wembley residents, is an illustration of the amenity rich offer needed to seduce new renters to locations they otherwise might not have given thought to.
Just last week, Quintain hired former South Bank marketing chief Claudio Giambrone as part of its plan to make Wembley Park “a new creative neighbourhood for London”.
As previously noted, renters in the secondary market already paying build-to-rent prices are located in places like Putney, Fulham, Clapham, Greenwich, Whitechapel and Kilburn. All of these have an identity and a “sense of place”.
Place-making, and what goes in on the ground floor and the surrounding area will therefore be crucial for build-to-rent operators entering new markets.
Dataloft director Sandra Jones says: “These renters have probably already factored in accessibility to work, friends, family and social life when they chose an area to live.
“There would need to be a significant attraction to persuade them to relocate across London and that attraction might be price, amenities or a combination of both.”
Ashley Perry, build to rent consultancy director at LIV Consult adds: “Two bed pricing in the purpose-built build-to-rent market is starting to inform emerging markets, two key points have arisen – the large proportion of sharers and the focus on affordability.
“In line with our development consultancy approach, developers are encouraged to focus on what is locally affordable whilst demonstrating to potential residents of exactly what makes their build-to-rent offer worth more than the local market comparables.
“Broadly speaking, the brand of each development needs to create spaces that are inclusive of the whole development or neighbourhood. A key tenet of the build-to-rent ethos is placing an emphasis on renting the whole space as opposed to just the single unit.
“Wembley Park and East Village are both great examples of this. There are new and exciting brands coming soon that will introduce a fashionable style to emerging and regenerated areas of London and even further afield. Not only will a unique and revitalised aesthetic make sure that new build-to-rent developments stand up to social media, it will also make people passionate about their home.”
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