There is no doubt every single sector in real estate has been impacted in some way by coronavirus and the subsequent lockdowns. Yet not all parts of the property world have been hit equally.
While retail, hospitality and leisure have been hurt the most, and office landlords are also feeling some pain, other asset classes are demonstrating resilience or even growth.
Logistics – and particularly last-mile logistics – has benefited from the surge in online shopping as locked down consumers turn to the internet to get their everyday goods. That’s why Meyer Bergman, a pan-European investment manager, recently launched Crossbay, a €2bn platform focused on single tenant distribution centres 30 to 60 minutes from city centres.
The other asset class to have weathered the storm relatively well is purpose-built rental housing. Rental housing – like student accommodation – has long been seen as a defensive investment thanks to its counter-cyclical qualities. Or in other words people are more likely to rent – or attend uni – than go and buy a home during a downturn.
Although the UK build-to-rent market remains relatively small, with only around 45,000 completed BTR homes according to the British Property Federation, the initial signs are encouraging.
Grainger plc, the UK’s largest listed residential landlord, has reported rent collection rates of around 95 percent across its portfolio.
Meanwhile, joint venture partners Apache Capital and Moda Living reported 98 percent rent collection while maintaining rent levels at Angel Gardens, their flagship development in Manchester. The pair even signed a major corporate pre-let during lockdown while continuing to welcome new residents thanks to the Angel Gardens digital-first lettings journey. Grainger too has invested heavily in digitalising its rental journey.
In the US, where BTR – known there as multifamily – has been around for decades, there is also encouraging data. According to the National Multifamily Housing Council, multifamily landlords have seen an average rent collection rate of 80 percent – far higher than many retail and commercial landlords. One study shows owners of premium apartment blocks, called Class A multifamily, have enjoyed rent collection rates of 90 percent or above.
Many BTR schemes pride themselves on the amenities they offer residents, but due to government guidance, many of these spaces have been closed for just over three months. While in most cases access to these areas is free or included in the rent, they are a key part of the consumer offer for many BTR developments over living in a standard buy-to-let property.
Given the social distancing measures in place, BTR operators have had to really think outside the box about how they’ll continue to provide residents with the lifestyle and service they’re accustomed to. Moda Living, which has put personal health and wellbeing at the core of its consumer offer, has arranged virtual wellness exercises for residents.
In a recent webinar hosted by the UK Apartment Association (UKAA), which looked at the future of BTR, David Smith of JMW Solicitors stated that residents would be less likely to be reliant on amenity spaces and that the government would want to see BTR operators take serious risk assessments of these amenity spaces going forward. He predicted that operators would have a much larger focus on including flexible office space in new developments, providing residents with the perfect space to ‘work from home’.
Surveys have shown many employees enjoy remote working and for companies, workspace is often one of their biggest costs.
As the housing market recovers, we can expect greater interest in BTR schemes that boast strong digital connectivity that supports working from home and on-site co-working, as well as spaces to relax and exercise.
Looking forward, we can expect to see new lettings enquiries return to a healthy level as the UK continues to lift lockdown measures.
Many of these potential residents will be people who were renting anyway but are looking for something superior to what’s available in the traditional private rented sector.
However, also expect a growing number of enquiries from lifestyle renters attracted by the prospect of having everything they need under one roof, as well as would-be buyers put off by the uncertainty in the for sale market.