Simon Vardon, Global Head of Real Assets at Sanne, takes a look at residential real estate and the rise of the build-to-rent sector. He sat down with Greystar’s Bella Peacock, Managing Director – Investment Management & Operations, Europe, for her expert commentary on the success of ‘purpose-designed’ build-to-rent for students, young professionals and multifamily housing, which concludes the article.
The Build-to-Rent (BTR) sector is a relatively young sector, but has gained momentum across the globe and continues to evolve.
In the UK for many years the main supplier of housing was the Local Authorities. Widespread development was stimulated in the post war years through legislation like the Housing Act 1946, New Towns Act 1946 and Town & Country Planning Act 1947 which all encouraged publicly funded housebuilding. During the 1960’s and 1970’s much of this development took the form of high-rise blocks. At the start of the 1980’s there was a shift in policy to reduce government funding to Local Authorities significantly reducing their supply of stock. Despite housebuilding by Housing Associations increasing in the last two decades, it still represents less than 20% of completions. The supply of UK houses today is therefore hugely reliant upon the private sector.
In the USA, much like the UK, housing development was encouraged through post war legislation, such as the Housing Act of 1949. Public housing development focused on delivering rental housing for lower-income families and the more vulnerable within the community such as the disabled and elderly. Development was widespread and ranged from single-family houses to high-rise blocks.
As with the UK, repositioning and recycling older public housing stock is now an important part of the residential market. Alongside this effort, the private sector is driving a new product which caters for a more affluent audience. The BTR opportunity first delivered the urban multifamily developments principally aimed at the young professional demographic. The multifamily product has recently been joined by the singlefamily BTR developments.
For the end-user residents the new BTR product has strong appeal owing to the following characteristics:
The pandemic has made many people reassess the way they live. Remote working options have afforded greater flexibility on work/home proximity, there has been a greater awareness of the importance of access to green space and wellness facilities, and a general increasing desire for suburban living.
The BTR product successfully crossed the Atlantic from the USA to the UK.
In the US the rapid rise of multifamily developments, often focused within city-centre areas, has now expanded to include the single-family living developments in suburban locations. With capital flowing into the BTR market, the number of developments is growing across the continent, including secondary city locations. Ownership is increasingly institutional, including large real estate investors and REITs. Demand is still expected to be greater than supply as the quality of product and its accessibility are attractive to a broad age demographic.
Greystar Real Estate Partners, LLC (Greystar) a global leader in the rental housing industry has developed multifamily products both sides of the Atlantic and beyond and recently launched a single-family venture in the US. Below, Greystar’s Bella Peacock, Managing Director – Investment Management & Operations, Europe, answers questions posed by Sanne’s Simon Vardon:
It hasn’t surprised me. There is huge demand for high-quality rental housing and multifamily operators are well positioned to help meet this demand at scale and speed. We have seen a bit of a snowball effect with the positive impact of the first schemes and investors helping to lead the way for more people to enter the sector. Hopefully with the growing recognition of what multifamily can provide, this helps all parts of the delivery chain continue to evolve and refine to deliver better homes. While multifamily is now a lot more recognised, there is still work to do in the planning approach and operational platforms, for example, to ensure that the product is understood and well serviced by the market.
I think they can happily co-exist – multifamily rental and single-family rental meet the needs of different consumer groups for high-quality homes – thinking one will diminish the other assumes both that people all want to live in the same type of accommodation, and that there is enough supply. Having both options mean that people who rent out of choice or necessity can now pick homes that better meet their needs at that time.
Ultimately the products will excel where they are meeting an identified demand, at a price point attractive to that consumer group.
Sustainability is critical both in terms of delivering assets that are built to deliver value into the future, as well as assets that meet the expectations of our investors and residents alike. Increasingly, being able to demonstrate genuine, authentic ESG policies is important across all stages of a project and in running a business. Our people, partners and residents increasingly understand how their choices ‒ whether who they work for, where they live or what they do in their leisure time ‒ impact the community around them.
There has been an increasing shift towards renting away from home ownership. While I think the desire for home ownership will endure, particularly in markets such as the UK, we are seeing structural shifts in family formation, working and career patterns and accommodation choices that mean more people are choosing to live in rental accommodation for longer. With this movement, they are now looking for different things from their homes beyond just the bricks and mortar. Increasingly people are seeking service, convenience, community, amenities and flexibility, as well as knowing they have security in their choice of home.
If you would like to know more, please contact us: