While most of the real estate market continues to tread carefully into 2022, Build to Rent shows no sign of slowing down. In fact, Build to Rent is gearing up for a phenomenal 2022 if preliminary data from global real estate advisor, CBRE is anything to go by. According to their recent data the UK Build to Rent sector recorded a total of £2.1bn of investment in Q4 2021, taking the full year total to a record high of £4.1bn! and with a further £1.95bn currently under offer.
Combined with the growth of the single-family housing market and the emerging senior living market, the “living” sector is expecting significant growth year on year.
The latest Zoopla figures also show that demand for rental homes in the UK is around 43% above the five year average. Private rental values are also at a 13-year high as the number of properties available continues to fall short of the needs of renters. Indeed, most rental forecasts for the next few years range between 2%-2.5% and for the UK, it feels as though the underlying market dynamics remain steady.
Up until now, the bulk of Build to Rent investment has gone into the traditional model of city centre apartment blocks in urban areas which target the young professional market. Analysis published recently by the British Property Federation (BPF) reveals that the Build to Rent sector pipeline grew by 8% in 2021, with construction in regional cities significantly outpacing London. Already the signs are that 2022 will see a rapid increase in the suburban Build to Rent market and as a result we are likely to see the volume of deals being undertaken in suburban towns and secondary cities increase as investors diversify portfolios and competition increases for land.
2021 was a landmark year for Build to Rent, especially with the pandemic forcing the sector to react and adapt to the changing needs of renters. We began to see the beginnings of a shift in tenant needs and, in some ways, Covid-19 has accelerated the attraction of the market – with a focus on the desire for a strong sense of community and flexibility being offered. Flexibility in design – both in terms of individual units (e.g., scope to utilise a second bedroom as a home office for example) and wider scheme considerations – amenity space with flexibility built in – extra workspace for professional sharers, co working space, which can function as social/dining space too for example. Another example of flexibility is ‘flexible leases’. Tenants, especially workers in central city developments are now looking for a lot more flexibility when it comes to their tenancy agreements and operators will need to ensure they build flexible lease terms into their offering.
The “15-minute neighbourhood”, where everything you need is available within a 15-minute walk is another response to ‘lessons learned’ from the pandemic. Quintain’s Wembley Park is a great working example of this, with everything from supermarkets, restaurants, coffee shops, independent bakeries, and Delis all within a 15-minute walk of the site.
Another interesting trend during the pandemic was people buying pets in response to social isolation caused by the lockdowns and social distancing measures. According to the Pet Food Manufacturers’ Association (PFMA), 3.2 million households in the UK have acquired a pet since the start of the pandemic, meaning the country now has a massive 17 million pet-owning homes! This boom in pet ownership was largely driven by Gen Z and Millennials, with two thirds (59%) of new owners aged between 16-34 and 56% of new pet owners having children at home. Therefore, pet friendly design no doubt remains a feature we may see more of in 2022.
For 2022 we also expect to see a real focus on innovative design both in terms of the materials used and cutting-edge interior design, particularly with a focus on the ESG agenda. This will be the number one priority for the property industry. Regulation will underpin this movement, be it net zero carbon targets, the new Heat and Buildings Strategy or Sustainability Disclosure Requirements. Could we also begin to see the start of “green premiums” for buildings, with penalties for those which do not meet current standards? It will certainly come under much greater scrutiny.
The Build to Rent sector has proven its resilience in the last few years and will continue to go from strength to strength. If I could sum up my thoughts for 2022 in 6 words, these would be Resilience, Investment, Sustainability, Flexibility, Community and Pets!