20
insights
Section from an infographic produced by Geraghty Taylor Architects showing how Build to Rent and Professional Rental Sector are now over- shadowing Buy to Let
‘For architects, it’s a huge opportunity to
look at standardising the building’ Brendan Geraghty
value depending on their wider environment. What sort of start has BTR made? So far, 6,000 units have
been built, with 12,000 under construction and 20,000 in the pipeline. Renters tend to make more use of public transport and BTR developments are often therefore delivered close to transport and other infrastructure, with a focus on brownfield development and supporting activity in town and city centres. Last January, Legal & General Capital launched a BTR
partnership with a Dutch pension fund manager to invest £600m in providing 3,000 homes for rent in the UK. The sector's investment is also bringing new constructors into UK housebuilding – for example Bouygues, one of France’s largest companies. Meanwhile, several local authority pension schemes are investing in BTR, or are contemplating doing so, because it is delivering affordable homes for key workers and other important groups that are critical to their local economies. Some of the biggest and best housing associations are also
Management provides all services in generally looking after the overall asset. The building’s staff comes from both the housing and the hospitality sector, in recognition that it is a service industry. Brendan Geraghty, director of Geraghty Taylor Architects,
has put together a BTR model. Among its key features is the idea of an integrated business model. This is made up of business objectives, customer service, operational management, design, facilities management and revenue targets. In turn, all these are aimed at building a brand. In terms of revenue, BTR offers a rental model with income
from rent and service. PRS, on the other hand, has a rental model sometimes including service revenue, and, crucially, with an option to sell. In addition, BTR has a bespoke design based on its business model, while the look of PRS buildings reflect the fact that they will ultimately be sold. Finally, the occupier experience. Geraghty sees BTR catering
for a ‘demand’ market, having a relationship culture and where the occupants are viewed as customers. In contrast, PRS has a ‘supply’ market bias, centred on transactions and where occupants are tenants.
‘As long-term investors, BTR providers’ only interest is in creating places that thrive’
Who is investing?
Ultimately, many investors are seeking to invest at scale and offer consistent standards across different locations so that they can develop into brands that their customers trust and stick with. As long-term investors, BTR providers’ only interest is in creating places that ‘thrive’. Their investments will gain or lose
delivering and managing BTR, working with UK and overseas institutional investors. There are various motivations for them. For some, their market-rented homes are helping to cross-subsidise the delivery of more social housing.
What is the future for BTR?
Demand for housing it seems will only grow with generations of people forced to rent. Some estimates see BTR being worth £50bn by 2020 and potentially accounting for 20 per cent of residential design. It appears that demand for rental housing is not only being
driven by an inability to buy, but also by the fact that Millennials are more attuned than previous generations to the idea of owning fewer things. With BTR properties let faster than homes are usually sold,
architects will have to design in larger phases allowing building to take place more quickly. Other design considerations include how to look after the envelope of the building, make the internal specification more robust, and put greater focus on the facilities provided, which can include business centres, concierge services and integrated cafes. Overall, though, the attraction of BTR for architects
is working for people who have a long-term view of residential design. Despite uncertainties in the UK economy and the challenges it presents, Brendan Geraghty remains optimistic about BTR. “It’s early days in the UK and we are searching for our own version. We have some way to go before it reaches the maturity of the US market.” He continues, “For architects, it’s a huge opportunity to look
at standardising the building. For clients, it’s a huge opportunity to save money and take control of the supply chain. For renters, the flexibility of BTR is one of its core strengths, which will appeal especially to Millennials.”
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