Is suburban Build to Rent the future of our homes?
Adding pressure to an existing national housing shortage, Covid has shifted the priorities we have for our homes; with easy access to green space and comfortable working from home facilities now sitting far higher on the wish list. The result? Huge strain on the UK rental market. Could suburban Build to Rent homes be the answer?
The strain on the rental market
The UK’s national housing shortage is one of the biggest challenges the country faces. And during the last few years, our homes have become even more central to our lives with Covid sparking a shift in how we view and use them. We’ve found ourselves at home more than ever before, so unsurprisingly households are seeking greater space both inside and out. Access to working from home facilities and substantial green space has become increasingly important, yet affordability remains sparse. Particularly in urban areas.
This is transforming the rental market – what was once a market for young professionals has seen a demographic shift to include those aged 35-44 with a need for a mixture of tenures.
The cost associated with buying a home means renting can be a more realistic option for many families. And for investors, this provides the ideal climate to tap into the family rental market.
This is where the suburban Build to Rent model comes in. Ticking a lot of boxes for home seekers, it offers high-quality neighbourhoods, with green space and infrastructure to support commuting distances.
What is suburban Build to Rent?
Suburban Build to Rent (SBTR) schemes are purpose-built homes for rent located in residential communities that sit in the outskirts of a town or city, often within commuter territory. These developments are less densely populated than urban schemes, offering different tenures and amenities to seek a broader and usually more family-focused demographic.
In contrast to urban Build to Rent schemes, suburban schemes typically consist of houses instead of apartments, often prioritising road infrastructure and proximity to schools. Community amenities are centred around families, including playgrounds, community centres and home working facilities.
There are currently over 5,000 completed SBTR homes in the UK, making up 10% of all completed Build to Rent homes.*
For investors, suburban BTR schemes appeal for their affordability, low turnover, and low operational costs. And with the rise in suburban BTR schemes across the UK, investors have the opportunity to extend their reach beyond the typical audience of young working professionals and tap into the family market. It’s possible we’ll see these family housing models gain traction in the next few years.
How are other countries approaching the suburban and family rental sector?
With this growing appetite for suburban living, developers can look to America’s track record in the family rental sector. The US equivalent of Build to Rent is known as ‘multi-family’ and is already a firmly established segment of American real estate. Some US developers focus on regions to develop their investment portfolios and obtain regional hubs to manage them - a model that has excelled in the US for many years.
As more individuals are prioritising the sustainability of their homes, the US approach to the rental market is promising; with emphasis on retrofitting existing housing stock to reduce the embodied carbon emitted during the construction process.
Single-family rental homes have also seen success in Germany, with growth year upon year. 60% of the German population are renting and just under half of those are managed by institutions with financial investors.
There is a high demand for single-family homes in the UK. One reason SBTR is on the rise is due to the hybrid working model many families are facing today. So properties that provide adequate workspace and smart technology are sought after. Knight Frank reported that developers are now more likely to provide home offices in future homes as 67% of people require a dedicated space to work.
So far in the UK, we’ve seen businesses invest in single-family rental homes, with investment manager Apache Capital creating a new business division dedicated to developing, owning and operating these homes. Apache plan on initially delivering over 3,000 smart homes in southern suburban locations around the Oxford-Cambridge Arc.
What’s the future of Build to Rent?
A recent report from Savills suggests the Build to Rent sector has remained resilient through adverse market conditions, sparking increased interest from investors. As there’s more investor backing for suburban Build to Rent assets, the market is expected to expand in the future. This is to meet both the demand for affordable rental housing and cater for the lifestyle trend adjustments caused by the pandemic. As an investment market that is forecast to grow to in excess of £200bn, many developers with suburban arms will look to utilise modern methods of construction to increase speed to market.
For example, Legal and General will be utilising their modular construction methods to develop 1000 new homes. Placefirst has been granted planning permission to create an £11 million SBTR scheme and Moda’s new division, Casa, is looking to develop 5000 new one-to-four bed family homes by 2025. What’s noticeable is that the suburban BTR market is now benefiting from equivalent levels of institutional investment as the urban BTR sector traditionally has done in the past, but at an accelerated rate.
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Private Rented Sector: Build to Rent
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