The first build-to-rent boom in the UK arguably started shortly after the 2012 London Olympics, with the conversion of the Athletes’ Village in Stratford. Now, in less than a decade, the proliferation of BTR is having a significant and positive impact on the housing mix in our cities and major towns.
Private developers, typically partnering with housing associations or institutional capital, have played an instrumental role in bringing operational product to market.
In the early days, the pipeline was fuelled with housing stock originally designed for sale. But as the success of the sector with renters has become evident, housebuilders are increasingly partnering with major operators to build product specifically for the rental market. Most recently, the potential acquisition of Telford Homes by CBRE is yet another sign of the evolution and maturation of the BTR sector.
While supply to date has been focused almost exclusively on urban locations in the form of mid-to-high rise apartments, a suburban BTR submarket is on the horizon, driven by demand for a quality rental product offering generous square footage, outdoor space, walkable neighbourhoods and access to good schools. While demand is there, supply is not – and I predict that we are about to see a second BTR boom, this time in suburban and semi-urban locations.
Once again, developers partnering with housebuilders to “convert” schemes originally designed for private sale will be a defining characteristic. However, if we are going to bring BTR to the suburbs, we can’t simply replicate the urban BTR experience and transplant it wholesale. Designing BTR for suburban living is fundamentally different to designing apartments for the urban environment.
New needs
Firstly, renter demand extends across the age pyramid. While millennials are an important generational cohort, data strongly indicates demand for suburban rental homes from other working age groups – including the 40-55-year age group, Generation X. Renters in their 30s and 40s require a product more suited to their lifestyle and can include houses, maisonettes and low-rise garden apartments.
Green environments are also an important feature, and suburban BTR is likely to include children’s playgrounds, social barbecue areas and outdoor spaces for pets. The “customer journey” and the quality of the resident experience will be defined by the suitability of design, specification and service. Suburban renters tend to stay longer than their urban counterparts, so creating communities where people feel they belong is important, and that includes allowing residents to personalise their homes.
A ground floor resident amenity, whether incorporated within a residential building or as a stand-alone town hall, will have the resident experience in mind. It will generally include an on-site manager, club lounge, work space, post/delivery room, wellbeing area including gym and a yoga/pilates studio. Optional extras, depending on the size of the development, could include cold storage for chilled food deliveries, party room, indoor children’s play area and dining area.
Room for growth
While the shortage of good quality suburban rental housing is a UK-wide problem, it is most acute in higher value areas such as the Thames Valley and Cambridge-Oxford corridor. These are major European centres for high tech industries, with a skilled, educated and well-paid workforce. These are also locations where housebuilders have accumulated significant land banks, and where housing delivery can be accelerated through a non-competing tenure.
For all these reasons, the stars are aligning for a second, suburban BTR boom, as investors partner with housebuilders to bring this new type of rental product to market. For investors the appeal is obvious – buying whole developments from housebuilders for conversion into rental communities is an opportunity to secure significant operational product at scale. Housebuilders stand to benefit from forward-funding and development capital, in a cooling for-sale market. BTR 2.0 could be coming to a suburb near you soon.
Henry Morris is managing director at MGT Investment Management
