By Lee Richards, director of market services at Mainstay, part of the FirstPort group
The pandemic has had a fundamental impact on the way we live, shop and work. This, combined with a decline in private landlords over the last few years and the high street’s need to adapt to a move towards online shopping (catalysed by the pandemic), means the rental market is evolving and with this, Build to Rent (BTR) is fast gaining traction in the UK.
BTR, or ‘multi-family living’, already has a strong presence in the US and is now experiencing a boost into the UK mainstream. Lockdown has been a catalyst for rapid change within the market, with an increase in residents seeking the flexibility and lifestyle BTR can offer.
Sadly, we’ve all seen how detrimental the pandemic has been for our already struggling high streets, with the likes of Arcadia and Debenhams closures leaving roughly 200 full size football pitches of large-scale retail space now vacant, according to Altus Group. Sites left by department store closures in particular are notoriously hard to fill with new retail, due to their sprawling spaces, but this does provide an opportunity for BTR to plug the gaps by converting retail premises into residential sites. This would also drive footfall back into town centres, creating opportunities for those retailers who have so far weathered the covid storm.
The rental sector has doubled in size in the past 20 years, with an estimated 19 per cent of households (11 million people) now renting privately, according to the English Housing Survey. With that in mind, and the knowledge that those looking for a home are seeking an adaptable quality of life in a vibrant area with nearby amenities, there is clear scope for the BTR market to continue to grow, breathing life back into the high street.
Online and localised shopping
Living through numerous lockdowns has changed the way we live our lives, including having a profound impact on the way we shop. Restrictions have caused our shopping habits to change with people opting for smaller local grocery stores as well as online retailers. More than nine in 10 of people who have shopped locally during lockdown say they will continue to do so, according to Barclaycard, and shoppers have received an extra two deliveries a month from online retailers since March 2020 on top of an average of five before the pandemic.
The ease by which people can order online means the trend is unlikely to diminish along with the lifting of restrictions, so rather than allowing retail space to sit empty due to lack of demand, it makes sense to increase footfall to high streets and support local shopping behaviour for the remaining outlets.
The BTR market offers the opportunity to amalgamate these shopping habits with our new way of living, where local services are on offer in central locations. For example, Mainstay managed Wembley offers retail and hospitality sites and units built into the community with easy to access local facilities such as Boxpark.
Lockdown restrictions easing, rental demand growing
As the lockdown restrictions begin to ease across the UK, the demand for rental properties in cities is growing, and likely to increase further as more businesses reopen and professionals need to be able to access their workplaces again – even if this is only on a flexible basis. According to Rightmove, enquiries for city centre rentals increased by 126 per cent in comparison to this time last year, with city centres in the north of England and London seeing a strong rise
With the prospect of a return to normality on the horizon, a wave of people are now looking to rent in cities. Having been able to re-evaluate their living-space priorities over the past year, renters are likely to choose their next home carefully. The flexibility of BTR means a renter’s needs can be addressed on site, from easy access to co-working spaces, cinema rooms and furniture rental, to on-site salons, tenant discounts and access to local retail.
Retail on the front foot
We have already seen big retailers making the move to offer up previous retail property for residential sites. John Lewis’s Chairman, Dame Sharon White, unveiled the most radical proposals in the chain’s history last year, announcing that the retailer is likely to be a mostly online store in the future with 60 per cent of goods sold over the internet and for empty stores to become mixed-use affordable housing with John Lewis as landlord.
At Mainstay, we have already seen new investors in the BTR market include retailers, smaller funds and family enterprises, all with the motive of creating ‘multi-family’ living spaces offering a community led way of living. BTR has proven a stable market in the face of the pandemic and continues to appeal to investors seeking long-term, reliable returns, whether that be from property moguls or retailers looking to overhaul the way they operate. Over a third (35 per cent) of investments were new to BTR, according to Savills recent research.
BTR has progressed at pace over the last few years. It is set to evolve even further as the world gradually adjusts to the new ‘normal’ and I expect new demands, trends and challenges will continue to emerge.
Despite the terrible impact the pandemic has had on our retail spaces, it is promising to see how these long-standing retailers are trying to adapt to the changing needs of consumers, even by making headway in new spaces, such as BTR.
As the lockdown restrictions ease, the demand for greater flexibility and the restructuring of how we live, work and shop will ultimately drive the demand for high-quality, professionally manged rental homes that offer localised services. The post Covid-19 world provides a huge opportunity for BTR to continue to grow and move with the ever-changing market, delivering on its commitment to change the rental market, keeping consumer needs and desires at its core and breathing new life into abandoned retail spaces.
