In the UK, there has been a fundamental shift in home tenure from owner occupancy to rental. To accommodate this demand, institutional investors are building apartment blocks and housing to rent in the private rental sector. Effective property management and high-quality customer service is essential for success.
‘Build to Rent’ is here to stay. The Private Rented Sector (PRS) has grown substantially in recent years, more than doubling between 1980 and 2014, and many believe that in 15 or 20 years’ time there will be more renters than owner-occupiers in the UK. At present 64% own their own home against 71% in 2004. In the context of this growth, and a national shortage of housing stock, successive Governments have increasingly looked to Build to Rent to provide more new build housing, supported by the recent Housing White Paper.
Currently though, the UK rental market is too fragmented and unprofessional for this aim, with recent research demonstrating that some 62% of landlords own only a single rented property, with the average size of a buy-to-let portfolio being 2.7 properties. This often results in a low-quality home with limited security of tenure. However, in light of current uncertainty in the wider property market, institutional investors are increasingly attracted to Build to Rent as a long-term investment vehicle. The potential here is huge; Knight Frank’s June 2017 Multihousing research estimated build-to-rent investment reaching £70 billion by 2022. In order to fulfil this potential, effective property management is crucial.
Some of the early key players in this space who are seeing their vision realised in actual ‘bricks and mortar’ include Grainger Plc, Essential Living and TiPi (part of Quintain/Lonestar). The amenities included in such schemes vary from gyms to full leisure/spa facilities, 24 hr concierge, cinemas and even dog walking services.
Whilst millennials are characterised as nomadic, with a commitment to a property only rivalled by their attention span, a far wider demographic is being enticed into the rental market than just the well-heeled millennial. PRS is increasingly a place where families settle down with their children and build a home, with more than double the share of families living in a rental product today than in 1992. This demographic however could provide a real benefit to landlords, as families with security of tenure and a receptive management are more likely to maintain the property to a higher standard and renew their rental, thereby reducing churn and potential voids.
But how do you convince fleeting millennials without families to stay? Although millennials do have slightly different priorities, are they really that unique? They want a space that is good value, with a responsive manager, and the latest in building amenities. If they don’t like a space, they’re going to vote with their feet. Ideally, they move within the Build to Rent brand and move up the PRS ladder to a larger property over time. Retention of residents under ‘your’ brand is one of the keys to success.
The biggest difference between millennials and older generations is the result of changing times, not changing values (as the persistent aspiration to home ownership suggests), and it is the expectation that rental properties should have advanced technology and sustainability features, unsurprisingly from a generation that has grown up surrounded by the media and technology, and with climate change a constant issue.
These twin ideals of technology and sustainability are here to stay, and property managers shouldn’t fight this tide but accept and implement these as standard. Furthermore, these ideals are mutually beneficial; improved technology will help property managers to streamline their operations and improve their engagement with tenants, whilst sustainability features will help to cut back on energy costs, increase attractiveness to tenants and minimise the environmental impact, thereby delivering cost effective service.
It is also particularly important to meet the millennial generation’s expectations in communication, through building strong relationships with tenants to create easy communication channels, thereby providing high-quality customer service. For millennials who have grown up with instant communication and who prize having their voice heard, this is fundamental. The more innovative and responsive property managers are, the better relationships they’ll have with their tenants. If their demands are promptly satisfied, the result is happy, long-term customers and a secure source of income for investors. More interaction between the managing agents and all the residents will lead to a stronger sense of place and further reduce churn.
An important role the property manager also has to play is in building management, in order to protect the long-term value of a development, in addition to satisfying tenants through well-maintained communal and service spaces. Maintaining the quality of a development is especially important for institutional investors who are looking for income over long periods, and makes cost-effective property management invaluable.
Property managers are the link between tenants and investors, and through mutually beneficial, cost-effective service can satisfy both. With effective and responsive management, property managers are the hinge that will allow the PRS to fulfil its enormous potential.