North West Build-to-Rent | Photos and summary
The build-to-rent industry’s rise was the focus of Place North West‘s latest conference in Manchester. It looked at the market’s popularity in the city, as well as areas such as Warrington, Preston, Stockport and Wirral, and examined how Liverpool is playing catch up on its big northern neighbour.
The event, which took place at the Science and Industry Museum, was sponsored by CampbellReith, ClearFibre, DAC Beachcroft, Oppidan, Placefirst and Turley. It was chaired by Dan Whelan, senior reporter at Place North West, who asked how BTR had gone from a “nascent subsector to an asset class of its own”.
Scroll down to see photos from the event
Presentation – The Martin Property Group
The first presentation came from Ian Scott, former head of BTR at Lambert Smith Hampton and current managing director of The Martin Property Group’s living division. Using industry data he painted a largely positive picture of the market, and described Manchester as the build-to-rent capital of the UK.
“The general appetite in the commercial real estate investment market across the board is strong, and real estate is still seen as quite a safe asset class,” he said.
“Office demand obviously is quite subdued, not occupationally, but investment-wise. There was a minimal volume of hotel deals in 2020. That picked up in 2021 and even more so in 2022. So there’s some value in hotels, and there’s now an uptick in shopping centres. There’s a big regeneration story in people wanting to partner with local authorities.”
Scott looked at various build-to-rent case studies – the main one of which was Kampus in Manchester. He talked about its “extraordinary lease-up rates” adding: “We believe that there are high levels of demand like this across the whole of the UK for the right product.”
He also spoke about operating costs for BTR projects which were shaping the amenities developers were including: “Maintenance of spas and swimming pools is more expensive than co-working space and a roof terrace. Big schemes need to provide an incentive for people to stay in the building.”
He also gave a warning: “In the pandemic, we saw the big schemes really start to struggle with churn. You’ve got to manage that occupancy.
“The really difficult thing in this market is that it’s primarily forward funding and they are hard yards in terms of getting these deals over the line, ticking all of the institutional boxes whilst entertaining the workings of developers.”
He also addressed the subject of single-family homes in the BTR market: “The significant savings are the operating costs. You don’t have a lift. You don’t have huge water tanks to maintain, you’ve probably got less staff, etc. So there are big savings to be made.”
In terms of challenges, he said build costs were the obvious one, while inflation is also a big issue. Ending on a positive note, he added: “The market is desperate for good quality products.”
Panel One – State of the Market
- Ian Scott, living division managing director, The Martin Property Group
- Giles Beswick, director, Vita Group
- Andrew Bickerdike, director, Turley
- Kate Howell, general manager, Vox
The panel began by referencing Ian’s presentation.
Giles Beswick said: “I would definitely agree that the challenges are on the supply side and that there seems to be no abatement of demand for a good quality product in a good location.”
Andrew Bickerdike added: “There’s an increasing lack of infill oven-ready opportunities. The Manchester build to rent market has been so successful that those opportunities are exhausted and the city centre is pushing outwards. That comes with significant challenges in terms of land ownership, and passing up areas of effectively former industrial land and bringing them to the market. That’s not easily done.”
Kate Howell discussed the demographics and said: “We do have families, not very many in Manchester – our average age is 26. We tend to get younger families starting off, just one child, and then they’ll move on to a house with a garden. We’ve got really good outdoor space like a rooftop running track and a little boy that gets in his little car and drives around that. You won’t get that in a house!”
Ian Scott added: “It’s natural for people to graduate, have a great time in a vibrant city, meet a partner, and then grow a family and, when they have a family, graduate to suburban housing.
“But I think what you’ll then see is a two-tier market – young people and older people. I like the 55 to 60-plus kind of vibe where you want to go to the theatre and everything’s in town. I think you’ll see more of that as we see an ageing population and people releasing equity in their big family homes.”
The merits of amenities in developments created much debate.
Beswick said there has already been a blurring of the boundaries in spaces where people live, work and socialise and warned: “It would be a mistake to over-design something, especially right now when people are very focused on coming out of the pandemic. Ways that people are living their life right now could change again in the next three, five, 10 years.”
Howell described the value of flexible spaces, where a ‘Zoom room’ enabled people to really work from home, and how a studio and event space could also be transformed for a movie night or spin class.
Everyone agreed that design was key.
Beswick added: “We’ve all been in beautifully-designed, immaculate-looking residential buildings that are a bit soulless. That’s not what we see as being core to the build to rent proposition.”
Asked how an undersupply of student accommodation affects the BTR market, Bickerdike replied: “This issue is really coming to a head now. There are build to rent schemes that are upwards of 40% council tax-exempt because they’re occupied by students.
“It’s a bit of a contentious subject to suggest students should not be occupying development that is clearly designed for a different market, and there’s also an argument that students’ needs are better met by being housed within purpose-built products.”
Howell added: “We do not have many [students]. We tend to cap it because we’re trying to build a community around people that want to be there. I used to run student accommodation and it is very different and, like you say, the universities support their students in those buildings.”
In conclusion, Beswick said: “I think I think Manchester is a perfect market as it’s got everything that underpins the case for build to rent – and that’s why it makes sense to bring forward volume and prove your product.”
Presentation – Chapman Taylor
The second presentation was by architect Catalina Ionita, of Chapman Taylor.
She said: “I’m also a PhD candidate researching placemaking and I see that as a vital component of any BTR scheme. Placemaking is a big driver for high occupancy or higher rents for investors. Build-to-rent is about creating this sense of community that is both physical and digital, but it’s also providing this culture of service that is core to creating a valuable and interesting customer experience.”
“If we dig deeper from a design perspective, what I think build-to-rent is doing really well is readdressing the often unbalanced relationship between the tenant and the landlord, and acknowledging that we have a learning to take from hospitality sectors – how we create a sense of approach, the promenade and the engagement. This results ultimately in higher occupancy and also higher rents.”
She also talked about the strengths of brand identity and used Kampus as a successful example: “The branding is so incredibly well done, and it also benefits from the excellent location. I don’t know if you know, Kampus achieved the highest rents in the country outside of London.”
She also talked about the importance of pet-friendly environments, particularly post lockdown, and said some tenants even desired this if they didn’t have a pet right now.
Flexible space and amenities were also big considerations; what to do with the second bedroom, and whether amenity space would be transformed into something else – even a penthouse – if the market asked for it.
She also touched on suburban BTR and how it should never be disregarded: “As we see more people seeking to have this access to open space, starting a family, or working from, they don’t necessarily need to be based in the city centre, so they will look for a location somewhere near big cities where they can easily access those spaces.”
She ended with: “As BTR grows, it is clear that this product is incredibly unique and it deserves special attention. It has to be celebrated because it has something to offer.”
Panel – The Evolution of BTR
- Steve Hollands, senior investment manager, Pension Insurance Corporation
- Mark Bousfield, strategic director for development, Liverpool City Council
- Victoria Russell, group project director of strategy, culture & partnerships, Property Alliance Group
- Darran Lawless, development director, Placefirst
- Catalina Ionita, architect, Chapman Taylor
Darran Lawless talked about the importance of making a place desirable – whether that’s with gardens or event spaces, repurposing former terraces, putting in planting they’re responsible for and remembering residents are customers.
He said: “It’s making people feel safe and secure, and giving them the opportunity to put their own mark on the environment. People make a conscious choice to rent, and there’s no reason why they can’t have a very good product in a good location that’s appropriate, managed to a very, very high standard.”
Mark Bousfield was the first to admit Liverpool had had issues in the last few years, amid turmoil at the city council, but he said things were on the up again, naming ambitious projects like Liverpool Waters: “The other side of that [the political issue] is the opportunity it presents. We have not enjoyed the kind of dense re-urbanisation that modern knowledge-intensive cities need. So we’ve had an opportunity to think again about how the city works, what it’s for, what our vision is, and we’ve been able to come back relatively strongly.
“We’ve just put two million pounds more into the planning service to offer a really proactive, positive facilitating service to help us achieve that,” Bousfield continued. ” The second is we’ve had to go back and recast some of the basic housing strategy, the local plan, and a tall building strategy. So some of the basics that will help you navigate the city, understand the city and get a clear set of characteristics from it.”
Victoria Russell was asked about BTR versus building and selling on. She said: “This is all about jobs, people being employed in proximity to our site, who are going to be ultimately the tenants in our building. That’s what’s driving everything in terms of our investment.”
Modular developments were another interesting topic. Catalina Ionita said: “There are opportunities to explore, especially from a sustainability agenda. Using off-site construction can massively reduce waste. It can speed up construction as well. That traditional and modular are levelled up, which didn’t used to be as traditional was much cheaper. So if from a cost perspective, they are very similar, there are more reasons to go ahead with a modular option.”
Place North West’s Dan Whelan asked about the balance of amenities and accommodation. Steve Hollands replied: “People don’t have to use those spaces so we have to make sure those spaces can adapt.”
The panel ended with a look at lessons learned. Lawless said: “It’s really important that you have a clear idea of what the demographic and what the demand is, and hopefully see an opportunity that others have missed because it’s a very, very competitive world out there.”
Hollands concluded: “Building regulations shouldn’t be the minimum line. If I don’t foresee what’s coming, it’s going to impact our assets’ performance in the future when we have to retrofit.”
The presentation slides can be accessed below:
The next Place North West event is Industrial + Logistics, which is being held tomorrow, 12 May. Further out, Place is also hosting a free conference about digital inclusivity: Futureproofing Connectivity Across the Liverpool City Region. That event will be held on 16 June at Innside Liverpool. Tickets for both in-person events are currently available.
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Story by Suzanne Elsworth for Place North West.