The US multi-family housing sector, as the private rented sector is known stateside, is valued at $1.9tn (£1.2tn), and has more than 170,000 homes under management, according to the National Multi-Family Housing Council. It is often cited as the model the UK build-to-rent sector should emulate, with policymakers keen for institutional investors to provide thousands of high quality rental homes for the UK populace.
As a result, an increasing number of UK players are casting their gaze across the Atlantic to see what they can learn.
The key lesson from the US, delegates at MIPIM UK were told at EG’s Lessons from America: Making UK investors at home with build-to-rent, debate at MIPIM UK last week, was that there must be a far heavier focus on service and amenities.
“It’s about service. It’s about adaptability,” said Alex Notay, policy director at the Urban Land Institute.
Citing the example of a recently redeveloped block in the US that was functionally obsolescent because the storage had not been done correctly. She said: ”They are always looking to be right on the ball about what customer service is.”
Some UK operators are already starting to develop this kind of amenity-based service. Fizzy Living employ “Bobs”, or concierges, in each block to deal with renters’ needs, while Essential Living is planning various types of amenity space, from communal lounges to gyms.
The objective of these is to improve tenant retention and drive returns – which is why the UK institutions funding the UK PRS are paying such close attention.
Allan Collet, senior consultant M&G Real Estate, said: “We are an income investor, we look at the amenities to see what they will add to our net operating income. Customer service is all about improving their experience so we can improve our returns to investors.”
But such spaces can be expensive – both to develop and maintain – and while the service offering is important, the UK market should take small steps as it develops, according to John German, director of residential investment at Invesco Real Estate.
“The key point we need to remember is that in the US it has been a 25 to 35-year evolution. It is a fully established market with a clear idea of what customers want. From my perspective, start with a base level that people will buy into and ramp it up,” he said.
But Wayne Vandenburg, chairman and chief executive of US-based TVO Group, was more optimistic about the UK. He said the sector could easily reach the scale seen in the US, but warned investors to “research the product to fit your market”.
“You do not want to have a flower in the weed patch,” he said. “The UK can gain an awful lot of traction by studying the type of product in the US. You do not have to convince anyone about the product – its housing.”
