Below is a re-post of the extremely informative and insightful article published by Colliers International’s Mike Butler on the power of branding in Build to Rent.
Brands are a powerful marketing tool, which companies obsess over.
According to Interbrand’s 2018 rankings, the most valuable brands in the world are Apple (valued at $214m) , Google ($156m), Amazon ($100m), Microsoft ($93m) and Coca Cola ($66m). Other than the fact that tech conglomerates are utterly dominant in this space, what is surprising is just how valuable each respective logo is.
Such value helps explain why after any kind of scandal, be it for an individual (such as cyclist Lance Armstrong) or an event (the FIFA World Cup), sponsors such as these immediately terminate their relationships to ensure their brand, in itself, is in no way embroiled in any scandal.
In the housing world, the need for a brand is less obvious, but is still essential. The traditional house-builders are naturally all well fronted. But where does a brand belong in the Build to Rent (BTR) sector?
Our Rental Insights’ research demonstrates that the market is currently split. Of the 78 income schemes which Colliers analysed in London for our 2019 report, 31 were branded (40%). Our rental analysis suggests that of these, the branded schemes commanded a blended premium of 10.4% over local comparable buy-to-let stock, while the unbranded schemes were at a 7.8% premium.
For the avoidance of doubt, we do not define a brand by the management company who operates and fronts a BTR block. More, by whether the investor has renamed the block tactfully and fronted it with some form of bespoke logo. Examples would be Quintain’s pushing of the Tipi brand and Realstar’s UNCLE.
Evidently, branding is allowing for an operator to command a higher rent—but is it worth it?
The upside of a well branded BTR block is customer loyalty, market credibility and a wider association with quality, which if pushed across an entire portfolio, can add significant value.
The downsides, beyond cost, are the increased risks of negative publicity; if a brand is being distributed and pushed aggressively across multiple buildings, it is inherently more vulnerable to negative press, which would then drag down the other branded buildings with it. That is perhaps a more pertinent issue in an age of the keyboard warrior and the online review, where it has never been easier to publicly criticise something to such a wide audience.
But overall, branding is probably most essential where there is scale. For one off schemes that do not sit within a portfolio, there is inherently less upside to realise.
And while at this point the UK’s BTR market remains fundamentally infantile, we will, soon, witness whole tenanted portfolios trade hands, and this is where branding could really play its part. There could be a significant margin to be gained if a marketed portfolio is anchored by a strong brand that demonstrably commands a market leading reputation in the sector that upholds robust tenant retention.
Until we reach that point though, it will be interesting to see how the market further embraces branding as the UK’s BTR sector continues to evolve.
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