The Private Rental Sector (PRS) has been officially named as the second largest housing tenure in England, according to the most recent Government paper on the issue ‘Building the New Private Rented Sector: Issues and prospects’. With the majority of PRS homes in the country supplied to market by buy-to-let landlords, Tower Eight explores the significant cost issues around the Build to Rent model and how landlords can mitigate them.
- Building Fabric & Balconies
The architectural aspect, planning element and greater consideration around durability of materials, their replacement and cleaning need to be balanced. The operational considerations should be also reviewed to include greater provision for cleaning and maintenance. However, the ability to facilitate the ongoing maintenance of the building will inevitably be much more of a consideration than on scheme with units for sale.
- Modular Components
As the BTR model expands, there will be growth in the supply chain that services this element of the market and with this will come more specialisation of components. In turn, this will reduce build time and cost as the sector matures.
- Apartment Fit Out
BTR schemes will generate a significant body of work around the life cycle costing of wall and floor finishes against the refresh period of units. A key element of this assessment will be the use of durable products that can be easily replaced due to high usage and different occupiers over the lifecycle of the scheme. This will also involve the substitution of high end fixtures for those that offer more durability, much as we see a balance between practicality and quality in the hotel model.
- Amenity Spaces & Offering
PRS planners need to work hard to generate a sense of place and introduce elements that encourage long-term occupancy, while also developing a sense of longer term brand loyalty. In recognition of the need to adapt to tenant demand, amenity areas should be kept flexible as use may change depending on demand and demographic of tenant base – this should be incorporated in design so that the cost of change is kept minimal.
- Communal Areas
Proper consideration of the design facets of communal areas will extend the tenants’ demise. If it retains customers for the long-term and improves a sense of “brand” then it will need to be in the costs. This will also lead to other considerations such as the introduction of natural lighting in communal areas and furnishing requirements.
- Unit Sizes & Mix
Both the mixture of units on the scheme and their sizes will have to be led by higher density schemes to ensure the fundamental business case stacks up. In a market where land values are as high as they are, the higher unit density will increase the revenue generated per sq. ft. and, ultimately, make these schemes competitive with the residential sales model. The schemes will have to be designed for functionality and be highly efficient with unit sizes closely aligned to rental value and price points that have been scrupulously researched.
- Mechanical Electrical and Public Health Systems
The careful adoption of the right technology will ensure that elements of these schemes do not become quickly obsolete as that would obviously impact on their ability to provide a long term solution for tenants. And, it will also affect ongoing rental value and drive up the cost of refurbishments so they must be future proofed from the outset.
To gain significant competitive advantage and deliver on the necessary housing numbers, developers need to be thinking about seven or eight schemes at a time and benefit from the ensuing economies of scale. This will facilitate programme wide procurement and service level agreements, all of which we contribute to scalability and a lower cost model.
As the operator of the space, the developer will fall liable for the upkeep of these goods – that is the way many PRS schemes are now going – and ensuring sufficient warranties will minimise that risk but increase costs in the short-term. Latent defects insurance will also come into play too by which to recover the costs of replacing, strengthening or repairing the site if an inherent defect is discovered.
Responsibility will sit with the operator of PRS schemes to maintain its standards, so the ability to replace fixtures and fittings, and the durability of these items must be factored in. Similarly the longevity of the building itself must be maintained as these schemes are a long-term play and any signs of fatigue will impact on the long-term rent-ability of the scheme. All of these elements will play a key role in developing and maintaining the brand of the schemes and the operators responsible for them.