The Question Over Amenities?

Are amenities always the answer for build-to-rent?

31 May 2017 | By Richard Berridge

 

‘Amenity’ is the sector’s $60,000 question and we’re already seeing developers and operators trying to outdo each other as Jon Sever’s piece ‘Are amenities key to the success of build-to-rent in the UK?’ highlights.

 

Richard Berridge

It cannot be a rational proposition to expect premiums rents for a premium service. Certainly not on the scale that some are banking on.

Renting is an uncomplicated business determined by exactly how much money people have in the pocket at the end of the month.

Renting is not, by and large, a premium business except, perhaps, on a ‘boutique’ scale. But many operators are bringing some very large schemes to the market expecting premium rents and for those rents to continue to be driven upwards by the sophistication of the offer.

It is to be expected that a new building, operated by a substantial institutional landlord will attract a premium of sorts.  Wifi is now de rigueur as are communal spaces, dedicated ‘Amazon’ rooms, cold stores and some form of concierge; virtual or real.

But when the buildings become older and competition becomes more intense in this sector, the novelty will wear off and it will simply be down to value for money and great service. Security of tenure, customer service and rapid response to issues will continue to be worth more than BTL sector can offer. But by how much?

Kampus, Manchester

Kampus in Manchester - a scheme trending strongly on its amenities

To predicate a business plan on the back of a premium of more than 10% at the outset when the scheme is new, and in excess of 5% when the building has stabilised, lost some of its lustre and the competition are nipping at your heels, is a recipe for disaster.

There are schemes in London, launched more than 6 months ago that are still not fully let up, and it’s plain to see why; the premium asked is too high.

Some developers and operators need to reassess their projected returns and take a much more balanced view or it’s all going to become just a bit painful!

 

Reproduced from Property Week 31st May 2017. 

the original article can be seen here: http://www.propertyweek.com/opinion/are-amenities-always-the-answer-for-build-to-rent?/5089528.article#commentsubmitted

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© Richard Berridge