Regeneration Leaders Network

Build to Rent, London, 15 April 2014On 15th April, the Regeneration Leaders Network held its first event of 2014 in London to speak about the growing and evolving market for “Build to rent” within the private rented sector (PRS). Speakers included some of the leaders and drivers involved with PRS which gave attendees a wealth of insight into this relatively untested market. Presentations from Max James, Chief Executive at Quintain, Brian Ham, Enterprise and Development Director of Home Group, Roger Southam, Chairman and Chief Executive at Chainbow and Joanna Embling, a member of the PRS Taskforce provided multiple perspectives and revved great discussion about the benefits, issues and challenges involved with building specifically for the rental market.

Max James, Chief Executive at Quintain, kicked off the evening with a presentation focused on the Wembley Park development, specifically its residential phase which will include a mixture of rental and sale properties. He explained that in under ten years, Quintain has successfully transformed the area from a redundant industrial space to a globally recognised brand. This massive project has been carried out in four phases starting with the creation of Wembley Park Boulevard and ending with the development of 4.52m square feet of residential space. In fact, this last phase equates to 53% of the Wembley Master Plan.

“The real value of Wembley is to deliver residential, and to deliver it properly.” – Max James

Max described the residential development that will take place south of the stadium. Quintain will build seven towers of housing units around small areas of green space. Part of the towers will be for sale and part will be for rent. Quintain is fully aware that there is a huge demand for private rented properties and they are prepared to make this commitment, which will form a new business channel for them. He explained that they will simply be supplying for an unsupplied market. The challenge now will be to create a happy blend of the large scale entertainment and leisure facilities with the more ‘liveable’ components that give residents a feeling of privacy and hominess.

Next to present was Roger Southam, Chairman and Chief Executive at Chainbow. He spoke about the importance of an effective management structure that should be determined even before the first brick of a building is put in place. The building’s design and the services offered must be cohesive in a private rented property. Within the residential sector, there is a new desire to provide quality service which makes PR developments similar to that of a long term hotel. By consistently offering the best possible price and quality customer service, occupancy rates will be maximised as will the financial return.

“Effective management begins with a building’s design.” – Roger Southam

Roger explained that the great thing about build to rent from a management perspective is that if the property is designed and run correctly, running costs will be reduced. Examples of compatible design features for rental property include the ratio of lifts to units, wide halls that can fit a sofa, sound insulation between apartments, and community space such as lounges or a rooftop terrace. The objective is to create a welcoming and liveable environment that builds a sense of community.

Brian Ham, Enterprise and Development Director at Home Group offered valuable lessons for developers in the private rented sector. The exemplar used as both a good and bad model was Dolphin Square, built in the 1930’s as the first PRS. Its rental model was very different than other blocks being built at the time. With its young life being quite successful, it was then destroyed by the rent out market after WWII. Home Group made a more recent attempt to bring Dolphin Square back as PRS for the sake of being bold and innovative. Unfortunately, it was not the right fit for the area in Hartlepool and the project ended unsuccessfully.

“Don’t just chase anything that’s going. Know the market and respond accordingly.” – Brian Ham

However, Home Group has not been deterred from PRS as they now have a ten year model which includes private rent. They see this market as an important component of future development plans. Brian explained that private rentals allow the owners to be flexible with their prices and adapt with the market. If PRS goes flat, prices can be change for the affordable side and if the market is high, you can go the other way around. It ‘de-risks’ the cycle in the housing market. The lesson here is to think creatively.

Last but not least was an insightful presentation from Joanna Embling, a member of PRS Taskforce at the Department for Communities and Local Government. She focused on what the government has been doing for the private rented sector. Thus far, the government has recognised that rental housing does exists and actually 25% of England currently lives in a private rented home. The planning policy has been re-examined as a result. The Build to Rent Fund, now closed, offered up to £1billion of commercial development finance. Also the PRS Debt Guarantee Scheme allows long terms owners to borrow at lower rates.

“A better term for PRS is ‘Build to Rent’ because this is different than what has been done in the past for private rent. It’s a new market.” – Joanna Embling

The purpose of the PRS Taskforce is to link supply with demand. They help organisations make deals with each other and they work to improve the standards of professionalism within the market. Joanna stressed how diverse PRS is and that there is a range of different players involved. The viability of development types needs to be taken into account in terms of the government’s planning policy.

The evening concluded with a group discussion. Questions were raised about the advantages for tenants to rent, housing benefits for landlords, main drivers of PRS and also what this market means for the regeneration of communities. It was emphasised that within this sector, there are certain advantages for the right people and that part of the mental shift required was to separate investment from where people live – many people still see their home as their main investment. A drive from communities to build to rent is evident but this new market will require further exploration from all involved as it continues to develop.