Introduction
There are many predictions for the future of Build to Rent. These predictions are based on research and data collected by the UK Build to Rent team, which was founded in 2019. This article looks at three major changes that we expect to see happen in 2022.
1) A demand increase for more energy-efficient developments by the tenants.
2) An increase of investors entering the space.
3) The average length of stay by tenants will be longer than it has been historically.
More energy efficiency
In the UK, there has been a rise in the demand for buildings to become more energy efficient. This is largely due to the increase of awareness among tenants about the importance of sustainability. In addition, many tenants are willing to pay more for rent if they know that the building is environmentally friendly.
This trend is expected to continue in 2022. We expect that developers will increasingly create more energy-efficient buildings as investors now see being green as a necessity rather than a nice to see. As a result, we anticipate a reduction of utility costs to the tenants will be an increasing expectation and minimum requirements for tier one BtR developments.
Increase in investors in 2022
Investors are continuing to shift their investment allocations towards operational real estate sectors such as data centres, medical facilities, build-to-rent, seniors housing, and student accommodation. The share of these alternative sectors has accelerated markedly since the onset of the pandemic, representing 35% of investment volume globally in 2021, up by nine percentage points compared to the average over the five years to 2019. With limited established stock, the rotation is largely occurring through build-to-core strategies, led by build-to-rent. Multiple large-scale developments are now underway, and plans continue to take shape for a sustained pipeline of activity across the country.
Tenancy and Brand loyalty
The average length of stay by tenants in a build-to-rent development is typically two to three years. However, we predict that this average will increase to around five years in 2022. This is because investors are now starting to see the long-term potential of the build-to-rent market and are committing more capital towards tenant retention as well as tenant acquisition. In addition, tenants are becoming more comfortable with the idea of renting for a longer period of time and are willing to pay a premium for this type of accommodation. As we move into 2022 the tier one BtR brand names (Quintain, Greystar, Realstar, Vertus etc) will start to separate themselves in the eye of the tenants as we start to actualise further brand loyalty within the sector.
Final words
The Build to Rent sector is set to have another very positive year for growth, specifically for sustainability and sector awareness in 2022. This blog post has provided three predictions on what we can expect the future of BtR developments looks like. More energy-efficient buildings by tenants who want their homes to be environmentally friendly; an increase in investors entering this space as they start seeing it as a necessity rather than just something nice to do; and longer tenancies with more brand loyalty among tenants. These are just some examples of how things will go well for developers within the next few years if they follow these trends that are already starting now. Let us know which one you think will continue into 2022!