The build-to-rent (BTR) sector had been growing significantly before the first pandemic lockdown. In 2018 it represented 7% of overall private housing sector starts. We looked into some of the reasons why BTR will be a particularly interesting part of the real estate industry to watch after lockdowns end. We also considered some of the new ways the sector will need to respond to their growing client base.
First time buyers
The majority of mortgages with deposits of 10% or less were cut during the first UK lockdown. With over 20% unemployment in the UK as of June 2020 and millions on the government’s furlough scheme, lenders’ appetite for risk will be low. First-time buyers are likely to delay until they can gather enough deposit and many will wait to see if house prices come down. The number of renters has increased by over 60% in the last ten years – it’s likely to rise even more sharply now.
Half of UK companies have adapted to the new work environment by going remote. When people can work from anywhere, there will be more who choose to live outside of the city of their company headquarters. They might need to travel for the odd meeting or event, but they’ll need flexibility to stay in cities for a few nights a week rather than live there permanently. Companies may find it cheaper to rent out accommodation than to rely on hotels.
With reports of Europeans leaving the UK after Brexit, companies may need to replace Europeans with international talent from further afield. These people will need more flexibility to stay in the UK for weeks at a time and leave without any fuss. As in the example of British workers visiting from elsewhere in the country, it may be cheaper longer-term to rent accommodation for travelling workers than booking hotels.
From office spaces to retail outlets… the lockdown hit commercial real estate hard. New buildings now may no longer see the high numbers of office workers they were originally built for. It’s possible that a lot of this new commercial real estate will become cheaper, giving the right company a chance to buy it up and transform the space. The process of converting these spaces may not be easy but “convert to rent” could become a more popular speciality within the BTR sector.
How BTR needs to respond to demand
Despite the vaccine, the UK could potentially fluctuate between going in and out of lockdown, or at least in certain locations, for some time. The BTR sector will need to plan sales processes with this in mind. To mitigate the risk of people not being able to see apartments, show homes or agents in person, a lot of their processes are now online.
It’s possible we’ll see more companies diversify into the BTR sector, or even start up from scratch, to compete in this potentially high-growth market. Companies who are able to offer the smoothest service in terms of booking an experience will win against the competition. Customers will be more demanding when there is more supply, looking to find a brand they like and trust. Companies who can diversify their communications to reach customers on their preferred channels will get to them first and simplify the customer experience.
If you’re a BTR developer thinking about how to get ahead of the curve, get in touch with BrightGen. With years of experience in real estate and construction, we understand the specific needs of the industry when it comes to digital transformation.
We held a panel discussion to consider how customer experience is changing in real estate and construction. Access the replay here.