It’s still fairly niche and small-scale – accounting for around 2% of the whole PRS, at present – but it’s also the fastest-growing part of the market, with some suggesting that it could account for a third of rental homes in the not too distant future. Many see Build to Rent – which sees institutional investors plough money into developments designed specifically for renters, with amenities such as 24-hour concierge, gyms, free WiFi and laundry services on offer – as the future of renting in the UK.
There has certainly been huge investment in the sector, especially in London and other major cities, as firms have realised they can generate good returns on a fairly low-risk asset. Companies such as Grainger plc, Greystar, Legal & General, Atlas Residential and Moda Living have become synonymous with Build to Rent investment, with developments popping up all over the country as a result of collaborations between institutional investors, developers, residential landlords and property management firms.
At present, according to the BPF Build to Rent map of the UK, there are 148,046 units either completed or planned across the UK, with 34,840 completed, 35,760 under construction and a further 77,446 with planning permission. In London, there are a total of 75,747 units; outside of the capital, meanwhile, there are 72,299 units.
With its rapid recent growth, and new developments seemingly launching every week, there seems no doubt that Build to Rent will continue to feature heavily in the 2020s.
Purpose-built student accommodation (PBSA)
Aside from Build to Rent, PBSA has been responsible for the greatest number of development stories we’ve covered on PIT, with new schemes everywhere from Norwich, Colchester and Cambridge to Leeds, Birmingham, Liverpool and locations across Scotland and Wales.
In December 2018, Knight Frank predicted that the UK’s PBSA sector would reach a total combined value of over £53 billion by the end of this year, up from £30.9 billion in 2014.
In May this year, meanwhile, separate research from Knight Frank revealed that global investment into PBSA reached a record $16.3 billion in 2018, surpassing the previous high of $15.9 billion invested in 2017.
Most recently, JLL revealed that the outlook for UK PBSA is positive, with strong occupier demand boosted by a rising student population and robust investor interest.
JLL’s research showed that, for the first time, university-owned beds now account for less than half of the PBSA market supply in the UK – growing by just 6% since the 2014/15 academic year.
Of the 331,000 privately-owned beds, just under 91,000 are leased to universities or have a nomination agreement in place, whilst 241,000 are direct let.
While there are challenges in the form of falling construction levels and rent affordability, James Kingdom from JLL says that ‘PBSA and the broader student living economy remains one of the most attractive prospects in the living sector and we hope to see universities continue to work in partnership with private developers and investors to deliver new student accommodation across the UK’.
While still very niche, there are signs that co-living – which shares similarities with both Build to Rent and PBSA – is an emerging trend which could start to gain more traction in the decade ahead.
Recent research from JLL found that growing institutional investment and increased demand for flexible, alternative living is helping to a create a bright future for Europe’s co-living market. There are currently over 23,150 co-living beds either built or in development across Europe, but JLL said policymaker support is still required to help the sector reach its full potential.
The research found that some 53% of current operating assets are over 100 beds, but this is set to rise to 79% once those in the planning stage take form. Meanwhile, the average size of a development is expected to increase to over 250 beds.
In the UK, The Collective – arguably the best-known co-living brand – opened its second development in Canary Wharf this year (the largest co-living building in the world), while it has plans for a third site on Borough High Street. There are also developments from other brands – planned or already built - in places like York, Manchester and Brighton.
The nascent market also received a boost in November when it was revealed that Crosslane Property Group would be entering the co-living sector with two prime sites in Walthamstow, East London and Deansgate in Manchester, set to deliver 366 co-living units over the next two years.
This is the first part of a £355 million development pipeline of co-living developments being brought forward by Crosslane Co-Living, with three more sites in the offing set to deliver a further 1,420 units.
Overall, 85% of the UK’s co-living assets are still in the pipeline, which could further boost the sector’s growth,
Like Build to Rent, it’s aimed mostly at millennials seeking shared experiences and community-centred living in city centre environments. Residents usually rent a small private space and benefit from shared amenities and community events, as well as cleaning services, superfast broadband, gym membership, 24/7 concierge, all-inclusive bills, co-working spaces and on-site shopping facilities.
In truth, it has failed to catch on as much as expected and is only responsible for 24,000 beds either built or in development across the whole of Europe – making it a very small part of the marketplace.
But as more people rent and rent for longer, the appeal of co-living to young professionals seeking a different kind of renting may become much greater.
There can be little doubt that 2019 will be remembered as the year when environmental concerns entered the mainstream. Whether through Greta Thunberg’s passionate climate change activism, which has seen her take world leaders to task and sail across the Atlantic to attend climate conferences in New York City and Chile, David Attenborough’s spectacular documentaries, the protests by Extinction Rebellion, or the gains made by Greens in recent elections, the environment is on the news agenda like never before.
Polls suggests that climate change and global warming are now some of the biggest concerns of people from across the world, while the fight against plastic, fossil fuels and waste has ramped up in recent years as the damage they cause has become clear.
Renewable energy has started to boom and sustainability has become a popular buzzword. Inevitably, this demand for sustainability and green solutions has spread to property, too – and this year, in particular, we have covered various stories about green homes, eco-villages, pioneering developments and self-sustaining neighbourhoods as people’s awareness of, and action against, climate change has increased.
Housebuilders, construction firms and development companies now proudly promote their environmental credentials, while from April 1 2020 minimum energy efficiency standards will extend to all residential privately rented property which require an EPC. There is talk that the standard could be raised further to a D rating by 2025 and a C rating by 2030.
While the Tories didn’t go as far as other parties in their manifesto, the government is committed to net-zero carbon emissions by 2050 as well as eco-friendly homes with low energy bills in line with its environmental targets and the protection and enhancement of the Green Belt.
With the demand for green homes likely to grow in the coming decade, expect the number of properties and developments built with sustainability in mind to rise too.
An emerging trend as the UK tries to battle with the twin challenges of an ageing population and an adult social care crisis, retirement living – also known as senior living or later living – is currently small-scale in the UK, with only 4.8% of the UK’s 80-plus population residing in this type of community.
But it’s huge in the US and Japan, albeit with very different funding models, and growing in France and other parts of Europe.
Billed by some as Build to Rent for the senior market, it's effectively a more bespoke and luxury care home – shaking off the clinical, spartan and stark image of care homes to offer something more tailored and attractive to older people.
As Alex Short, portfolio manager at AEW UK, told us earlier this year: “It can offer a rich community with the provision of leisure facilities and activities, communal dining and care, while giving certainty on cost of care, and avoiding costs such as SDLT and event fees that are incurred when purchasing a senior living property.”
The idea of a rental model for older people might struggle to catch on in a country wedded to home ownership, but there are some developers – including Birchgrove – who are trying to change hearts and minds.
While affordability, possible reputational damage and operational issues are all potential downsides, it’s certainly a market that has received increased exposure in recent months and may be one to keep a close eye on in the 2020s as solutions to the social care crisis are more desperately sought than ever.
Fractional ownership via cryptocurrency, the increasing use of PropTech and AI in investments and a rise in modular homes and developments are other possible trends investors may wish to look out for in the next decade. But, as with anything, the major trends will only become clearer with time.