Will Build to Rent ever be entirely automated and tech-led?
According to Gains, the human face in a building, particularly the front desk staff, is an evolving but hugely crucial role, and one that needs to be empowered. “It’s so critical to the personality and service experience in the building,” he said.
“I’m reminded of a multifamily tower in the Midwest in America that I visited a few months ago, which ran on tech, without staff, and claimed fantastic response times for maintenance issues. But it was very impersonal because there was nobody in the building.”
“You could access it with fingerprints and do everything online. It lacked warmth, it lacked personality, it lacked a sense of security. The human touch is a fundamental role which the industry needs to build up and support with excellent tech.”
Darbyshire thinks it depends on the sector, with a faceless approach potentially working in residential but a no-go for commercial. “Nobody wants their landlord kicking around their flat all the time,” he said. “In a residential building I can totally see the benefit of eliminating the need to have people there, but in the commercial space there’s no way you can use automation in place of humans.”
“It’s down to what a certain demographic might want,” Mullens added. “Some want to walk in without any interaction; others want that hand-holding assistance in their home - some people actually pay for that. It’s a balance, I’m sure we’ll see more of what Jonathan saw in the Midwest– tech-led, fingerprint access, all that sort of stuff.”
Gains: “It’s fine when it works. A lot of the role of front desk staff is in resolutions and issues when they arise. That’s when people want that friendly face you can approach that has access and inter-connected technology to resolve your issue. That feels like a good experience.”
How big will Build to Rent get and will PropTech grow with it?
Gains believes that, with the number of approved developments and the way our cityscapes are changing, there is very clear evidence that Build to Rent is going to grow strongly in the coming years. The recent changes to buy-to-let means landlords are leaving the market, but at the same time demand for rental homes is going up – as a result, Gains argues, BTR will inevitably represent one way of filling this void.
Ultimately, Gains adds, Build to Rent developments trade as businesses. “They have to operate to the bottom line, have to generate a strong return. In any business in 2020, the only way of driving greater efficiency, better customer experience and better income is technology. There is a straight line between the growth of Build to Rent and the importance of technology to run those businesses.”
“We’re at market value of £10 billion today – projections say it could reach about £540 billion, I think, which is a third of the PRS at its maturity,” Mullens explains. “This is being driven by buy-to-let investors exiting the market and driven by lifestyle, too. People on the continent don’t mind renting, but will Britain be the same? Will people still want to own a property for their pension?”
The tech thing is also important, Mullens says. “The way we rent at the moment is still quite clunky. Wouldn’t it be great if we somehow got to something close to an Uber-style renting? Airbnb have basically got it but doesn’t quite work for our regulated lettings market here in the UK, on a longer-term basis.”
But what does BTR mean for agency? “Who will look after these properties?” Darbyshire asks. “Are developers going to have their own internal agencies? Will they partner with one big firm? What happens to the agencies thriving on buy-to-let?”
Mullens: “I don’t believe agents will ever be redundant – they still have a great purpose in the market, people still want to rent from a person.”
But, he asks, how much do we let people step into the background and allow technology to take over? That is the question all of us might have to answer in the future.
As for PropTech itself, Darbyshire insists it’s nowhere near hitting a ceiling yet – despite talk of a PropTech bubble and oversaturation in the market.
“With tech, I don’t think it’s scratched the service yet. Conservatively, it’s ten years old, the industry. I think it’ll get bigger and bigger. There will be less companies. But in terms of its influence, it’s barely started.”
Will Build to Rent break into China?
While the panel admitted their knowledge of the Chinese market is limited, the fundamentals appear to be in place for it to thrive: lots of large cities, plenty of movement of people between these cities, affordability issues caused by rising capital values. These could all mean renting is the longer-term solution for those seeking flexibility and more affordable options, and in turn lead to an emerging BTR market.
“Atlas Residential have a presence in the sector,” McKay says, and he reckons BTR is inevitable in China moving forward. “There’s a growing, affluent middle-class, huge urbanisation. I have a friend who teaches English, living in China’s 11th biggest city, and it’s the size of London. Such a huge market.”
He says it would be absurd for developers in China not to have the Build to Rent model on their radar given its potential benefits.
Is Build to Rent thriving because renters are now being treated like customers?
Gains believes so. “Build to Rent has taken a massively dysfunctional market, where the person who pays for everything is the least important person in the food chain and turned it on its head, where that person genuinely is a customer in a competitive market. Everything needs to be based around customer need.”
In most cases, he says, you must commit to a minimum of six months, but you get a chance to vote with your feet at the end ‘or, indeed, (by) ravaging the proposition on social media’.
He adds: “It beholds us all to get it right. It’s such a fundamental shift in the UK in the way renters are perceived in the value chain.”
Mullens continues: “It’s such a small percentage of the total PRS and only a small percentage have experienced it. People don’t know what they’re missing. Unless you’ve had a very bad experience with a private landlord and you’ve gone looking for something better, could you actually find it? But, once people have had that experience, they think: why have I not been treated like that before?”
He claims people feel valued in BTR developments and think to themselves, “I could stay in this for longer than I wanted to”. Mullens says it gives people the flexibility they wouldn’t have by being tied down to a mortgage.
He also believes tech is very useful in understanding the future needs of BTR residents.
“They’ll tell you with their feet if they’re paying too much. I’ve seen that in a few schemes around London, where there is a high churn rate first couple of years. Excited initially, think it’s for them, but then change their mind, want a couple of extra hundred pounds in their bank account because they don’t use the services or amenities enough.”
“But tech will let us know that. Our fob system in the building – we can feed back and work out how much each space is being used.”
While Build to Rent is only around 2% of the overall PRS at present, it’s the fastest-growing and Darbyshire believes construction and development firms have cottoned on to this and realised they can make huge amounts of money from BTR and extra service provisions, such as partnering with cafes, bars and gyms.
The panel suggest that renting, now more than ever, has become about providing a service, a customer-friendly experience – and it appears this is helping the BTR market to motor.
Build to Rent took a while to come to the UK – is it happening over the world?
Mullens thinks institutional investors will play a bigger role in the PRS moving forward. “As capital values around the world rise, and people stay in the rental market for longer, institutions will step into these markets and say we can take that slack and provide a rental product for the longer term.”
Darbyshire adds: “In America, the market is for nomadic tech workers who work for companies based all over the country. That fuels a lot of the multifamily market. My hunch would suggest it will be a thing in Asia-Pacific region at some point, too.”
“That movement around America drives the multifamily market - moving from brand to brand,” Mullens agrees. But he thinks we’ll struggle to get to that point in the UK because there’s much less movement of people between bigger cities. “Somewhere like China, with so many big cities, could be one for the future where there is a lot of movement of workforce between the major cities and therefore a requirement for Build to Rent.”
Is the role of the property manager different in the US compared to the UK?
“I first lived in a multifamily community in Boston from 2003 to 2005, my first immersive experience of what we call Built to Rent. It was great, I contrasted it with having been a renter in the UK, and it was like chalk and cheese. I felt like a customer,” Gains says. “What was different, and it relates to tech as well, is the onsite management team very much ran that building – all aspects of it, including the leasing. And the platform systems that got developed to support them were built on the model.”
“Where we’ve struggled in the UK is that those platform systems have been imported as if the UK and US are the same, when it’s very different. The seniority of onsite staff is different, but the concept is the same, and the importance of the brand is the same.”
Mullens concludes: “Customer service in the US is a step above what we have in the UK, but again it depends on the market – some people want that hand-holding, some people want someone there, but others want to just use the app, report things in that way, and not worry. The BTR market has followed the States in the operational model, with people there, for longevity and to decrease that churn.”
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