How the likes of John Lewis are set to shake up suburban Build to Rent

New figures out at the start of April show investment in the Build to Rent (BTR) sector has increased by 50% so far this year, with £1.7bn in deals agreed in the first quarter of 2022.

It follows last year’s record 12 months for the BTR.  Despite the pandemic, investment in the sector continued to rise, with more than £1.4 billion worth of deals sealed in the final three months of 2021, nudging year-end investment volumes to a record £4.3 billion and annual spend up 19% on the previous twelve months.

But perhaps the most interesting trend is the number of new entrants to the market – with the likes of High Street names such as Legal & General, Lloyds Bank and John Lewis – joining established players like investment houses and pension funds.

John Lewis has already identified 20 initial sites and is expected to present its first two planning applications in Greater London shortly.  I predict the customer service expertise of the retail giant will have a huge impact on the progression of the suburban build to rent sector (SBTR) in particular.

To date, BTR has focused primarily on young professionals, with investment going into apartment blocks that include attractive bolt-ons to help lure in this demographic. The likes of The Keel, a former tax office in Liverpool, with its waterfront views, gym, designer communal areas and private terrace, or Wembley Park in London with its unique homeworking spaces such as retro campervans or sheds are prime examples of how BTR has developed into an exciting, amenity-rich model for the young professional market.

The SBTR sub-sector is currently way behind on this front, with standardised builds, basic facilities and a noticeable lack of bolt-ons to appeal to families – especially when compared to the US market, for example, where multi-family residential is a class apart with some developments including lawn care, community gyms and even communal swimming pools.  The UK is light years away from this league of SBTR model.  But the entry to the market of the country’s favourite retailer to the middle-classes could change all that.

The company already says that tenants of a John Lewis-owned home will have the option of renting their property fully furnished with the department store’s products or using their own. Some developments are expected to come with a concierge service and include a Waitrose convenience store as part of the development.  Such benefits will raise the quality of suburban BTR as we currently know it.

If more retailers like John Lewis start to branch into SBTR, their knowledge of what customers want will extend to better home design, too.  For a start, Covid has changed the way our homes are being designed as the hybrid working model becomes ingrained.  But unlike BTR aimed at young professionals with communal work areas, families prefer space in their home, so standalone SBTR homes will offer a much more spacious and comfortable living experience than apartments and contain all the modern tech for hybrid working.

I predict we’ll see the SBTR market develop in other exciting new ways.  I think we’ll see more extensive use of smart home technology covering not just homeworking needs but lighting, security, entertainment and climate.  Sustainability will become more important – solar panels will feature on roofs, with batteries storing the energy for when its needed.  Electric vehicle charging points will come with more homes as standard.  Because of the energy price crisis, SBTR developers are already pushing energy cost savings at the top of the list of advantages of new builds compared to old rental stock, whereas previously location and low maintenance costs were the big tickets.  Multi-family residential plots could include the likes of outdoor gyms or tennis courts exclusively for residents’ use.

SBTR is a massively untapped market.  As Jonathon Ivory, managing director of BTR developer Packaged Living points out, 60% of the country’s renters live in suburban houses, not in city-centre apartments. There is a huge community in the private rented sector that is aged 35-plus – a cohort of people who are getting married, having kids, getting a dog, and leaving rental accommodation – accustomed to being treated well with good customer service and amenities.

The cost of living crisis has also increased the number of people who cannot afford to buy the dwelling they want, but are fed up with rogue landlords and want well-managed homes.  With more families falling into the ‘can’t afford to buy, but can afford to rent well’ bracket, the entry of new players into SBTR can provide the homes these people want.

Peter O’Rourke is Director of Housing and Masterplanning at McBains, a property and construction consultancy

SOURCE: Property Industry Eye | MAY 9, 2022 | PETER OROURKE