Tag Archives: Private Rented Sector

Build to Rent; a new generation of homes.

Over the last couple of years the term “Private Rented Sector” (or PRS) within the Residential sector has become a buzz phrase in the property industry. In fact PRS is a wide-ranging term; it covers any residential dwelling, new or old, which is landlord owned and tenant occupied.  The new hot topic or sub-sector which is emerging is actually called “Build to Rent”; this is about building specifically for the rental market on scale and operating properly managed developments long-term.

From recent experiences, it seems clear to me that there is still a lot of uncertainty/ confusion about what Build to Rent is really all about within the industry. Furthermore it’s important for the wider public/ occupier market to understand what this is and how its different.

Build to Rent is a totally different offering within the residential sector; it’s set to grow exponentially in the coming years and will potentially disrupt other existing rental models in the sector.

What is Build to Rent? The traditional rental market is predicated on a landlord and tenant basis. Generally each dwelling is owned by an individual and rented by another individual. Often a third party management company will remotely deal with rent payment and any maintenance issues. This could be in the context of a typical suburban house or an apartment within a larger urban block. The rental cost is owner driven and tenants gamble with what the quality of the environment is like, how well they are dealt with in terms of any problems with the property and who the neighbours are; these could be owner occupiers or other renters.

Build to Rent is based on a single ownership of an entire low density housing community, or at the other end of spectrum, an entire large scale urban apartment block. It is a branded and fully managed development with a range of communal internal and external facilities which allow residents to engage/ socialise. The buildings are designed specifically for the rental market and considered fully from a long-term lifecycle perspective in terms of planned, reactive and preventative maintenance.

This approach to residential property is something quite new and unique in the UK, whereas this model exists and is both successful and popular in America and other parts of Europe. Whilst the Government are now trying to promote long-term home ownership, the demand statistics and lifestyles of our population suggest a different trend. Home ownership has reduced by over 5% in the last 15 years, whereas rental occupation has increased by 10% in the same period. A lot of this is centred around affordability, flexibility and choice. (Figures source: Savills, Census 2011). People can’t afford a mortgage until later and want to be more mobile, especially younger occupiers.

Who are the renters? In England and Wales rental properties are occupied by the following groups;

  • 18% families
  • 17% Sharers (including Students)
  • 17% DINKY’s (Dual income, no kids yet)
  • 33% Singles
  • 15% Other

(Figures source: Savills, Census 2011).

Interestingly from my perspective, this new generation of housing is something that has already been tried, tested and is hugely successful in the UK. This is privately built/ operated student living developments. Student Living has evolved substantially and become recognised as an independent asset class now. The quality of new student living developments is generally very good. The same principles and lessons learnt in this sector have very close synergies with the growing Built to Rent sector. Build to Rent isn’t a brave new world, its proven in the UK with Student Living and its proven in other global residential markets on mass scale. The UK mainstream residential market is simply catching up.

So what will these developments look like? The first generation of Build to Rent developments we are seeing are good quality; they need to be for a number of reasons. These homes need to stand the test of time to be financially viable. This is no longer the developer model of ‘build it cheap and sell it fast’, the success of these developments is defined by the quality of the buildings, the environments they create and the way they are operated and managed. People will have a choice and, as with Student Living developments, occupancy levels of whole buildings will be really important to ensure the assets maintain their value and generate a profitable return.

Who will own these housing developments? Traditional development is based on an equity and bank debt funding model in the main, with sales of all dwellings on completion. In a rental context this means larger urban developments have fragmented ownership and can lead to many complex problems, especially when the buildings get older and more maintenance is required.

Build to Rent is based on a similar upfront funding model, and/ or complete institutional funding by private business funds or pension funds. The long term ownership will reside with a single fund; one source of ownership and accountability, with a dedicated branded management platform to control and protect the asset – and residents of course.

The shared amenity facilities within developments can be wide ranging; think of a hotel type offer with laundry services, leisure facilities, communal gardens/ open spaces, lounges, games rooms, cinema rooms, food and beverage offers, workspaces and more. What is included will be dependent on location, existing services in the locale and viability. However the driver is to create a customer led experience where people will want to live.

Community Area

This format of development arguably offers the greatest potential to create and achieve successful placemaking strategies; to form a strong sense of character, identity and community for residents. Build to Rent within high density urban locations will be an opportunity to create proper city communities; this is something I don’t think exists now.

So that’s a brief summary of Build to Rent. It’s here, it’s happening now and I think we will see much more of it in the near future.

Our business is involved in a wide range of Build to Rent schemes at present, mostlof which are urban high density developments. One which is attracting a lot of interest is with The Collective at Old Oak. This project is a niche ‘co-living’ development which is targeted at young professionals. More to follow shortly on Old Oak; it’s an unheard of location in London which is set to change substantially.

Side Front View

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The Property Revolution; Buildings, Spaces + People.

The fundamental purpose of most buildings is to accommodate people. But are buildings really focused on people or value?

Look back ten years and the world of UK property was, by and large, pretty mundane in terms of buildings being delivered I think. A very commercial, corporate and profit driven approach was applied to a lot of new buildings in the residential and office sectors particularly. Houses and apartments were fairly uninspiring places both internally and externally. Offices were largely run of the mill with grey carpets, suspended ceilings and open plan spaces, to accommodate rows and rows of identical desks. In the wider city context, buildings sat next to each other, but the spaces between them were sterile and lacked genuine use and interaction by people; they were just the spaces to move around.

The following five years witnessed one of the deepest recessions in history and a major compression in development activity, especially outside of London. The ‘other side’ of the recession has seen new thinking and new demand, with fundamental need for new and different supply.

Today, thankfully the built environment in the UK is changing. I actually think we’re seeing somewhat of a revolution in the built environment. Design is back and People are the focus.

Last night I attended an event in Manchester and heard Tim Heatley from Capital and Centric deliver a compelling talk about designing “awesome” buildings, focused on people and how they use spaces inside and out, rather than bland boxes which offer some degree of diversity, but don’t create a culture, vibe or an energy. A lot of what his company are doing is based on reinventing existing buildings and giving places life, character and identity.

05_canal-st-raisedKAMPUS in Manchester by Capital & Centric + Mecanno.

Society has changed hugely in the last ten years, especially with our need for connectivity in all we do. The way we work, learn, socialise and interact has evolved and the environment we use is starting to reflect this now.

The rapid rise of PRS (private rented sector) Living promotes a new world of housing. One which, thankfully, isn’t wholly focussed on build it cheap and sell it fast. This institutionally funded approach to delivering rental living provides a lifestyle and quality which must last. This in turn provides a better quality of environment within which people can live, work, socialise etc. Interestingly a sector I’m close to, student living, is well ahead of the curve in this approach. There are many built examples of how this works and the PRS offer is very similar.

On a different level I’ve heard Tom Bloxham of Urban Splash talk a lot in recent months about a brand led approach to property. His vision is a focus on space, choice and diversity, not just the number of beds in a home. He rightly argues that homes should not be valued and sold on the number of bedrooms, but the actual floor space a house has. His latest HoUSe offer blends contemporary design-led homes, which are innovative in their construction, and offer a new car style ‘options’ approach to making your home suit your needs and aspirations. Customer choice and flexibility is the central focus.

Urban Splash_HoUSeThe Urban Splash HoUSe concept.

The office world, or “workplace” as it’s now referred to, sees a strong resistance by many companies from the bland, grey corporate environment. Leaders like Google and Facebook have offices which are uber cool, creative and collaborative environments, underpinned by a primary focus on people interacting, sharing ideas and working together, rather than sitting at a desk and working in relative isolation or using corporate meeting rooms to interact. “Collaboration” is what it’s all about and the industry leaders in this new approach are influencing the full spectrum of business now.

Google Workplace3Google Campus Dublin.

The use of buildings and spaces are now about creating character and identity, by making them diverse and flexible in their offer and giving people a strong reason to be there.

So what’s the big deal? The seismic shift in how the property industry is approaching new buildings is that the focus is firmly on creating ‘buildings for people’ and places with ‘character and identity’, this isn’t just talk now, it’s real. It’s an obvious thing to say, but actually I think ten years ago that focus was really lost. Buildings were more about money than people.

Now there is a distinct connection between people and the environment creating long-term sustainable buildings which in turn creates value.

Student Living Design in 2015

Next week I will be speaking again at a national student housing conference in London, hosted by LD Events. My talk is focused on Student Living Design and I’ll be exploring the changing learning and living dynamics for ‘Generation Y’ in University life.

There is no doubt that technology has a huge influence today, in a social context and also in how people learn/ study/ work. The formality of how we use physical spaces has changed significantly as the boundaries between our day-to-day activities have blurred. One of my most productive workplaces is actually on the train to London.

So what’s new in Student Living? The sector has continued to evolve as the competition has increased between existing and lots of new operators in the market place. I suspect a lot of people will still associate student living with basic halls which lacked any real design or identity. The reality is very different now.

Modern student living developments are seeing more architectural quality externally, and much better quality and design focus internally. Generally most new developments seek to align with student aspirations and expectations in their look and operation. The major focus is now on creating an outstanding ‘student experience’.

Living formats range from premium studios, twodios (2 beds with a shared compact kitchen), twin rooms, townhouses and of course the traditional cluster apartment/ bedrooms. The latter is where the demand remains, as this makes up more than 80% of the market, and is generally the most affordable.

A standard bedroom will now typically include; a larger bathroom pod with a defined shower enclosure (no more wet rooms or shower curtains), more storage space, linear desks, a 3/4 sized bed and larger windows. The finishes and colours are much more modern too. Whilst there has been a push for smaller compact room formats, we are also seeing larger rooms emerge as well.

Student Room conceptResistance is growing to address the visual impact of the long institutional corridors which enviably exist in these buildings. They can often be a monotony of identical doors! The use of feature finishes/ colours, recessed doorways, daylighting (where possible), signage and lighting all improve these spaces dramatically. There is also a growing trend towards forming small break-out spaces within the general circulation areas to allow residents to meet, relax and dwell.

Two big areas of operational progress in the sector, which directly impact upon design, is branding and a more hospitality led approach to student living.

Operational reputation is so critical now. It heavily influences investment for new development and is a big decision factor for universities and students alike in the hugely competitive marketplace. Reputation is measured by performance, satisfaction and occupation/ retention levels. All are equally important. If a student takes to Twitter to vent their frustrations about something, the operators have to respond instantly.

Operators now (finally) recognise how important brands are to young people. A number of existing operators have dropped their corporate look to promote a fresher impression which is focussed around lifestyle. Within the buildings, the operational focus is much more aligned to hotels now. The intention is for residents to be treated as customers and communal facilities to promote social interaction and a range of activities.

In some early student living developments I have designed, we would provide common rooms. These would typically include pool tables, vending facilities and seating, but they were rarely used. Why? Because there wasn’t a desire or need to be in that space.

Student HubVITA Student leading by example : Hub space

Now common rooms (now referred to as ‘Hubs’) have large reception spaces, coffee lounges, games/ media rooms, TV/ Cinema lounges, Group study spaces/ private rooms, Private Dining facilities, gym facilities and more. These spaces are aspirational and lifestyle focused. They are there to promote and create a social community.

receptionVITA Student leading by example : Reception

So what else is affecting student living? The boundaries between private residential apartments and purpose built student living continue to blur, especially with the surge in Permitted Development rights for Office to Residential conversions, and also the rapid rise in the Private Rented Sector/ Built to Rent. The latter also focussing heavily on well branded, aspirational, lifestyle managed living for young people. In part PRS is very much about continuing that standard set by Student Living for the next step in life; ‘Graduate Living’. I can see the potential for this emerging as a specific branded offer.

Another influence which is growing is sustainable design. This is led by statutory legislation in the main, but the bar keeps rising and therefore the need for the sector to embrace sustainability is becoming critical and increasingly expensive for developers. It surprises me that nobody seems to have seen the opportunity to create a point of difference here, a bit like M&S and their PlanA initiative.

So the conclusion here is that student living is very much about excellent quality design in 2015 and beyond, both in terms of the architecture and the internal environments. The skill however is in being able to balance design with commercial reality in terms of development/ financial viability. This is where sector experience, in both the design and delivery of student living, becomes so important when selecting an architect.

We  have a dedicated Student Living team at WCEC, with years of experience and thousands of beds delivered. We are currently working on over 2500 beds across numerous projects, both on and off-campus, all over the UK.

If you want balanced, pragmatic and informed advice on the very latest Student Living design concepts, please don’t hesitate to get in touch. We love talking about Student Living!

steve_jobs_quote

The UK Construction funnel problem

Earlier this year I attended a conference in London where Mark Farmer of EC Harris articulated some serious concern about the volume of construction activity in the pipeline and the likely ‘blockage’ that would occur with Main Contractors and Sub-Contractors, specifically in relation to their ability to respond to market demands. The issue being a lack of resources – and materials in some cases (brick availability being a big problem).

It seems that investors and developers have funds and are pushing projects forward at pace now – some of which are large, especially in the Residential sector. However the anticipated delivery/ supply chain blockage is now being realised…

UK Construction Funnel

At present we are engaged in the development of circa 3500+ Residential dwellings in London on numerous sites. In addition, following recent instructions, we have a fairly similar figure again in the UK regions – Manchester being a particular hotspot. Our Residential team is continuing to grow with our group team nearing 130 staff in recent weeks.

Our work winning success seems to be as a result of our focused/ efficient operating model, the scale and diversity of our team experience, and our extensive use of BIM. A big strategic focus for the group is on diversification and this is working very well for us. We’ve recently been appointed on Student Living, Education, Industrial and Healthcare related projects, in addition to our existing ever growing port-folio of Residential, Retail and Leisure work.

One thing that’s fueling the surge of major projects in construction is the significant interest and activity in the emerging ‘built to rent’ or ‘private rented sector’ (PRS), to deliver large Residential products, these are funded by institutional and international funds. This is something we’re involved with at present.

Our London projects are perhaps proving the most challenging at present, in terms of Tender dialogue, as Main Contractors are needing to be very selective about what they can physically handle. Furthermore sub-contractors are struggling to respond to pre-construction programme demands in terms of finalising designs and cost plans.

So the wider impact of all this could be significant, with cost plans rising and construction programme’s becoming protracted in some cases. It’s been reported in the press over the last week or so that brick layers are earning £1000 a week now. There’s a sense of the tail waging the dog here!

This issue won’t resolve itself quickly. There is now a clear skills and resources shortage in the Construction industry which simply can’t handle the current demands of the Property and Investment sector.

There’s a real irony here of course; The Construction sector has been the worst affected by the recession, by some margin. Now the recovery has recently occurred so quickly that the sector simply can’t cope with demand. It will be interesting to see how this unfolds in the 12 months as developers and contractors race to complete projects on site.

So whilst we as architects are incredibly busy bringing new developments to market, the challenge will remain for sometime yet in terms of building these on site effectively.