Paul Belfield, Director at Rund, discusses the prospects for the Build to Rent market in 2022, as seen in Property Week.
The Build to Rent (BTR) landscape has benefited from exponential growth over the last few years, making 2022 an exciting time for all involved, from investors to residents. Many would say, the sector has become synonymous with delivering the highest standards of service, exacting quality to ensure homes are finished to a supreme level.
The fast expansion has meant that there is still a lot to explore, and with demand in this asset class remaining at a consistent high, investors and developers have already begun looking to take BTR to the next step. Land opportunities in more suburban areas seems to be the next hot ticket, with investors and housebuilders looking to take a chance on BTR in the form of single-family homes (SFHs).
There are several key growth drivers in play, which make the idea of SFH schemes viable. One of the main drivers has been the prominence of remote working policies following the global health crisis. Reduction in office working lessens the need for commuting and allows individuals the opportunity to choose a home based on a wider criterion, which they may have otherwise been restricted on: more space, flexibility of configuration and a reduction in cost that non-urban living brings.
Homes in suburban locations benefit from larger floorplates at better value for money, and while there are occupiers still seeking urban living, families – who are one of the fastest-growing renter demographics – are looking for greener, quieter and bigger places to live. From an investor perspective, there is typically less demand pressure on rural and suburban sites compared with city centre sites, meaning a surplus in supply of larger plot sizes, which allows cost advantages to be achieved more easily.
These so-called ‘secondary locations’ could in time become primary destinations – growing in popularity for convenience of family living and the community feel. However, not all families can afford to buy a home. Supporting this is the changing attitudes towards renting. Once seen as being a necessity of difficult circumstances, renting is now regarded in the same respect as property ownership and, for many young families, their preferred option. Across the UK, home ownership is in decline, but the private rental market is at an all-time high, making diversifying the traditional urban BTR scheme into other areas a smart move, to suit a wider target market such as young families and downsizers taking up residence alongside adult children.
The SFH also presents an opportunity for developers to meet the increasing need for homes built with social values in mind. This is an asset class that naturally lends itself to driving ESG issues forward, key for developers to prioritise. This along with the persistent issue of a lack of high-quality rental housing in the UK makes SFH a key opening for renters of all ages to benefit from professionally managed property, developed to a high and sustainable standard.
Interestingly, this lends itself to a conversation around modern methods of construction (MMC), which can definitely support the delivery of single-family BTR schemes, while delivering on homes with reduced carbon output, and ensuring homes benefit from the speed and accuracy of asset standardisation. This is definitely an exciting prospect that I hope to see developers exploring within the SFH sector, especially as the country moves to employ more carbon-friendly methodologies.
SFHs in the BTR category certainly offer investors a compelling and complementary investment sector to that of multi-family homes. Diversifying these schemes will allow investors to take advantage of the strong (and growing) demand for rental housing in new areas to meet differing needs and improve the housing circumstances of many. And although the characteristics and fabric of what BTR stands for remains the same in both markets, the potential for upside return for developers and investors and long-term growth prospects appears to be robust for those looking to strike and take on the challenge of entering into the SFH market.