Should letting agents fear or embrace Build to Rent?
Written by Neil Cobbold, COO, PayProp
The fast-changing rental sector presents traditional letting agents with a range of challenges - one of which is Build to Rent (BTR).
Around since 2012, BTR is a government-funded initiative which encourages institutional investors to fund developments providing thousands of purpose-built rental homes for the growing tenant population.
As rental demand from all demographics continues to rise, BTR has the potential to plug the growing gap with a largescale solution to rented housing supply.
According to the English Housing Survey, there’s been a surge of almost one million families renting since 2006/07, with private renting becoming the largest housing tenure in London.
BTR may still only represent a small portion of that market, but it is growing rapidly. Recent figures from the British Property Federation show that there are now almost 125,000 BTR homes complete, under construction or in planning across the UK.
Of those, around 20,000 BTR units have been completed nationwide, with a number of schemes having officially opened their doors to tenants.
Are letting agents doing enough about investigating this growing opportunity?
What could BTR mean for the lettings market?
It's clear that BTR is becoming a serious proposition. Significant financial backing combined with a growing need for rental homes means it's likely to be here for the long-term.
Naturally, this will alter the way tenants rent properties, which could have a huge impact on the private rental sector (PRS) as we know it. One of the biggest changes will be the living style afforded to BTR tenants.
Purpose-built BTR developments will encourage hotel-style living where renters benefit from onsite management and maintenance, high-speed internet, gym facilities and concierge services.
The focus will be on providing high-end accommodation where tenants have everything they need in one place – a model which has proved very popular in the US.
What opportunities could BTR provide for agents?
If tenants increasingly rent directly from institutions, on first inspection you may think there is no need or opportunity for a traditional letting agent to be involved in the process.
However, even though BTR represents a departure from traditional lets, there are still plenty of ways in which agents can play a valuable part in this sector.
As institutional investors look for opportunities in an agent’s local area, the agency can act as a local rental expert, advising them on the local market and tenant demographics.
There'll also be opportunities to build long-term beneficial relationships with developers and management companies. Letting agents may also be in demand when it comes to helping to source land for new developments or finding tenants for existing ones.
The opportunities BTR could provide may not be conventional lettings-focused services, but if approached with a forward-thinking mindset, they could be wide-ranging and profitable.
To embrace is better than to ignore.
To some agents the BTR phenomenon may seem troublesome or even irrelevant, but ignoring it completely could be the wrong path to take.
As with most new sectors, early adopters are more likely to get access to the best opportunities. What's more, if an agency decides to ignore BTR, their competitors could get in there first.
With industry changes, the rental market is becoming more challenging for traditional firms. Increased regulation and changing consumer desires mean there’s no harm in diversifying the range of services traditionally offered by a letting agency.
How will technology influence the letting agent of the future?
All the figures point towards a rental sector that will continue to grow, requiring homes to cater for long-term tenants of all ages.
These tenants are increasingly likely to want a full range of services which extend beyond the initial renting of a property. What's more, they'll want these services to be technologically enabled, saving them time and fitting in with their lifestyle.
The role of traditional letting agents will remain crucial to the functioning of the PRS, but there will be more scope for agents to be involved in all parts of the tenancy, providing a more comprehensive, concierge-style suite of services. In all this, the enabling role of technology will be central.
Written by, Neil Cobbold
Neil Cobbold is chief operating officer of PayProp in the UK