As in so many other sectors of the real estate market, Covid had profound, far-reaching effects on the Build to Rent sector in 2020.
On reflection, though, not all of the effects were negative and, indeed, some can be said to have strengthened the awareness of and supported the growth trajectory of BtR as a serious sub-set of the real estate industry.
Overview
With restrictions of movement and lockdowns imposed by the government in place during the latter half of 2020 and into 2021, people were forced to spend more time than ever in their homes. As a result, homes became inextricably linked to a person’s well-being. Many people found a greater sense of physical and mental security simply by being at home.
As the pandemic raged, not surprisingly, the BtR sector was initially hit by reduced demand as people lost jobs and were forced to relocate to cheaper properties or live with friends or relatives. Yet, after this initial blip, demand in the sector steadied and recovered as the year wore on.
Even though community facilities such as swimming pools and gyms within BtR development were required to close it was generally accepted that this was a necessity for safety and did not necessarily cause a loss of tenants. Indeed, many residents were quoted in the press as extolling the virtues of BtR living.
Benefits of occupying BtR units
Apart from the obvious attractions of BtR properties, namely modern apartment designs, generally better-quality product, better community and recreational facilities and up-to-date technological features, the appeal of such properties to many was enhanced during Covid.
Some key reasons for this include:
- with job uncertainties or the prospect of having to work reduced hours, a number of would-be buyer postponed plans to acquire property, seeing renting in a BtR project as a safer option, at least in the medium to short term—and despite the relatively low costs of financing;
- BtR leases offer flexibility in case there is a need to relocate either within or outside of a city due to job or personal reasons. This potential mobility is a big plus to especially the younger echelons of the workforce who make up a high percentage of BtR tenants;
- the operators of BtR developments regularly reinforce the concept of a community in their marketing and services provided. This appeals to many, especially in times of collective hardship such as during Covid. Of course, the pandemic and its effects could not have been foreseen by BtR operators, but in some ways BtR development were in “the right place at the right time” in terms of establishing the sense that “collective living” can overcome problems easier when there is a good management team on site. It also helped to have neighbours in a similar situation.
Summary of findings of Homeviews’ survey
In 2020, Homeviews undertook a survey comparing how residents perceived the BtR and BtS markets and the respective developments, the key results are as follows:
- star ratings for both BtR and BtS developments increased in 2020 compared with 2019;
- BtR residents consistently ranked their locations higher than BtS residents and this was especially true when socialising and travel were restricted in May and November;
- even when communal areas and gyms were closed, tenants still rated BtR developments highly, generally accepting that the closure were unforeseen and due to circumstances outside of the control of the development’s management ;
- some, but not all, BtR developments offered rent reductions or agreed not to increase rents for the period when certain facilities were closed or full services were not available. This was well received by tenants.
Contractually, the operators were not obliged to do this and, as you might expect, there were some complaints where they chose not to do so;
- the value rating of BtR and BtS was similar in the early part of the year, with BtS developments ratings creeping ahead slightly by the beginning of the fourth quarter—possibly due to the aforesaid issues of facilities closures;
- ratings for the management teams in BtR developments generally dropped in early 2020 but recovered in mid-year and remained stable thereafter. The unforeseen and unexpected imposition of Covid no doubt causing management teams to scramble for (sometimes fairly unpalatable) solutions to deal with the crisis;
- between March and October, residents of BtR developments ranked their facilities higher than BtS residents, especially the communal areas which provided space to move around and socialise;
- overall residents of BtR schemes were happy with the processes and protocols put in place during the lockdowns;
- design ratings remained consistent throughout 2020 with BtR developments ranking higher than BtS most of the time. The relative spaciousness of BtR apartments clearly being a big plus.
Final thoughts
The unprecedented global pandemic which swept the world in 2020 coincided to a certain extent with far greater awareness and acceptance of BtR as a major subset of the real estate sector.
Sure, BtR developments have been around for some years but the media attention and growth in the sector was truly coming to the fore in 2019 and 2020.
All things considered, given what the property market in the UK has been through in the last 12-18 months, the BtR has come out of it well positioned for further growth and is better established as an alternative living style and rental situation for many!
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