Build-to-rent: the key to choosing the right property investment for tenants

Purpose-built rental accommodation is a growing asset class, and new research from Savills has revealed a strong link between co-living and co-working.

As the number of people across the UK living in privately rented properties continues to rise, along with the age of those renters, the industry is largely adapting to the changing dynamics. The most prominent way this is happening is through the rise of build-to-rent, a burgeoning sector which Knight Frank predicted would see a 180% increase in investment over the next six years as a result of the changing needs of the market.

This investment is well underway. At present, there are around 34,840 completed build-to-rent properties across the UK, with 35,760 under construction and 77,446 with planning permission, but the British Property Federation predicts that more than 200,000 build-to-rent sites will be developed over the next two years.

According to the latest report from CBRE, more than £2bn worth of investment went into the build-to-rent sector in the first three quarters of this year, bringing total investment over the past five years to £10.6bn.

Helen Gray, senior director and head of multifamily advisory at CBRE UK, said: “Investors are attracted to the secure, long-term income profile and the diversification play of multifamily housing, all of which is underpinned by the strong supply and demand fundamentals of the UK housing market. The transactions in Q3 illustrate investors are continuing to focus on London and regional cities, which is closely aligned to where the renter demand is.”

Compared to traditional buy-to-let property, homes that are built for the purpose of being rented out place more of a focus on shared spaces such as workzones, communal gardens, gyms and creches as well as event areas. The idea behind build-to-rent is to give tenants the feel of living within a community in higher quality accommodation, encouraging longer tenancies to create the feeling of belonging but without the commitment of ownership.

Targeting your investments to attract tenants

Earlier this year, Savills conducted a survey to find out what today’s European workers want from their workplace, and the results correlate closely with what modern tenants are looking for in their rental homes. Savills believes that by looking at the answers from the 11,000 respondents, the build-to-rent sector will be able to predict what tenants want, enabling developers and investors to target these areas to improve their success.

City centre living: The survey showed that 54% of people would like to spend the majority of their time in a town or city centre, where there are local amenities, good public transport links, businesses and a “buzz factor”. The remainder was split between a suburban location (19%), a rural location (17%) and a business park (10%). When looking at the UK alone, this figure rose to 58%. Tenants are increasingly being drawn to city centre locations because of these factors, and the majority of build-to-rent investments are currently in central locations where demand is the highest.

Short commute: 86% of people said that the length of commute to work was of the highest importance when choosing a workplace, which directly equates to where people want to live. Where living a short commute from work isn’t possible, at least having excellent transport links will be a draw for most people. This can be a major selling point for a residential development that is located close to businesses, amenities and public transport access. The study also states that workers with shorter commutes are less likely to move jobs, and the same can be said for ideally located accommodation.

Strong connectivity: Workers in the survey listed the quality of the WiFi technology in a workplace as the second most important aspect (chosen by 83% of people) after commute length. In today’s world, staying digitally connected is of the utmost importance, particularly as homeworking and flexible working becomes more commonplace, which is why the majority of build-to-rent developments will have provision for its residents to share a workspace within the building.

The Savills report adds: “Building certifications have emerged to help landlords improve their digital infrastructure and promote buildings to tenants, and broadband speeds now regularly appear on residential property listings.”

Other factors that came up in the list of the most important factors for a workplace include a quiet space for focused work (81%), mobile signal, eg 4G (80%), financial cost of the commute to work (79%), access to a number of toilets (75%) and public transport connections (74%). All of these factors can be incorporated into a build-to-rent development and used by investors looking for a project as a way of predicting the popularity of such developments for tenants.

BuyAssociation has a range of property investment opportunities available for all investor types, including those who are interested in the build-to-rent space. Take a look at our investments page and sign up for free for more information.

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