Feb

Construction of build-to-rent properties rises over past 12 months

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New data provided by the National House Building Council (NHBC) reveals that the build-to-rent (BTR) sector in the UK is expanding rapidly, with the construction rate of BTR flats increasing by 57 per cent over the past 12 months.

The recent data shows a big difference from previous years.
In 2015, when the figures were first recorded, only 1257 BTR apartments were built,
and this number dropped the following year. NHBC’s new figures show that just
under 4800 units were developed in 2019, the biggest increase in BTR
construction yet.

The NHBC report can be read in full here.

Some believe that this could be indicative of a significant
change to renting in the UK. But what does it mean for landlords?

Does the rise of BTR
present a risk to private landlords?

The increasing popularity of BTR has brought some changes to
expectations within the rental sector. For example, many BTR developments offer
additional services, modern furnishings and appliances, long-term leases, and
shared on-site facilities such as gyms, laundry rooms, and even restaurants.
These types of services and facilities are very appealing to renters who may be
renting long-term.

Since it is difficult, or even impossible, for private
landlords to provide these types of services, does BTR pose a serious threat to
private landlords?

Not necessarily. A potential drawback for BTR is that it is
often considerably more expensive for tenants than other rental options. A
study by real estate services company, JLL, found that BTR flats were, on
average, 11
per cent more expensive than other types of rental properties in
their respective areas. Another
study found that BTR properties were 10 per cent more expensive than
similar private rental properties.

What type of tenant
does BTR target?

It is often thought that BTR properties target young and
single professionals. But this is not necessarily the case: 35-49 year olds
make up the majority of the UK rental market, and BTR developers are tailoring
their properties and services to accommodate young families, as well as young
professionals. For example, some complexes offer three and four bedroom
apartments with long-term contracts.

Eddie Hooker, CEO of Hamilton Fraser, commented: “I expect development schemes will start to evolve to
include lower income tenants. The student market for example has shown that
‘lifestyle’ blocks are becoming more attractive even for the lower income
students.”

“Larger blocks or schemes
can include a range of units that will be attractive to differing income tenants
but retaining the benefits of shared services and lifestyle options. The market
is evolving.”

Hamilton Fraser’s guide, ‘What
does build to rent mean for buy to let?’, explores the possibilities
of BTR and the effects it is having on the industry.

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