Build to Rent Market Review: Rebuilding After Lockdown | Autumn/Winter 2020
Build to Rent Market Review | Autumn/Winter 2020
"The Covid-19 pandemic and lockdown restrictions have shown the benefits of professionally managed purposed built rental housing. As the office and retail sectors enter a period of readjustment in wake of changing behavioural patterns, BTR is well positioned to both meet housing demand as well as absorb City Centre space.”
Gillian McLees, Director of BTR, Rettie & Co.
- The Covid-19 pandemic has shown the advantages of BTR in providing professional management and communication
- Rettie & Co. has seen rent collection and occupancy remain high during lockdown at over 95%
- Rettie & Co. sent over 4,000 communications to BTR residents during lockdown to keep residents informed and safe
- BTR is well positioned to absorb City Centre space and development opportunity from changing demand in retail and office sectors
Read Full Report:
Time for BTR
As 2020 draws to a close, we may look back at this year as being the turning point for BTR in Scotland, and to some extent the wider UK. Long established as Multi Family Housing in the likes of America and Australia, BTR has slowly been rippling out from the South East of England, first to Manchester and Liverpool, and more recently North of The Border. However, unlike the pandemic, this spread has been slow and largely geographically contained. Covid-19 may act as a catalyst to change this, but it may not all be straightforward.
During the pandemic, the advantages of BTR have become increasingly apparent for residents and investor alike. For residents the centralised management, community, and quality of the living space has set BTR apart from traditional Private Rental Sector stock. The key driver for the sector has been the relative performance of the sector for investors when contrasted with other real estate sectors, such as office and retail, and the longer-term outlook in a post Covid-19 world. Since the lockdown, major BTR players such as MODA and Grainger have both reported rent collection rates of 95% or above. At Rettie & Co. our rent collection rates during lockdown dipped only 1% to 97% in May at the height of restrictions, before returning to 98% in June and July. When compared to reported collection rates of c.70% for office or 60% for retail, or worse, the granular and robust nature of BTR has a strong pull for investors.
The counter-cyclical nature of Purpose-Built Student Accommodation has long been attractive to investors, and the similarities and blurring of boundaries with BTR in terms of building, operation and services has not been lost on the operators and investors alike. The comparative strength of BTR against the office and retail sectors also offers potential changes in the space use on beleaguered high streets and town centres that may see sustained weakening of demand in the accelerated digital displacement and diaspora. This is a fact not lost on retail giant John Lewis, which have identified 20 sites across the UK where there is potential for them to enter the BTR sector by repurposing elements of their stores for residential use, in the process creating instant demand for furnishing and food delivery.
However, there are still many unknowns regarding what shape BTR may take as we move into the future. The rise of home working will likely be a persistent driver for demand of high-speed broadband, flexible workspaces, and meeting rooms. However, the decline of the office and suburban flight, whilst on the rise may not be as significant as some are suggesting. Community and social connections are also likely to be an increased consideration as and when social distancing restrictions ease. Indeed, community has been one of the major advantages that BTR has offered during the lockdown. Useable outside space, be it balconies or roof gardens, will also likely be prioritised by residents. Accommodating these factors will likely require an approach which provides flexibility, both in the building design but also management as the market matures and refines.
While these questions remain, and despite the challenges being faced during the pandemic, Build to Rent may look to the future with optimism.
If you have any questions on BTR, please don't hesitate to contact our team.
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