The hype around build-to-rent is a lot of hot air, or at least that’s what some people in the wider property industry think as they ponder a sector that still represents just 1% of the private rented market in the UK.
Developers, letting agents and block management companies are all curious to know whether build-to-rent is their nemesis or merely a new string to the sector’s inventory bow.
So who better to ask than the highest profile player in the market at the moment; developer Quintain and its management company Tipi which operate the largest build-to-rent site in the UK around Wembley stadium.
Quintain is to build 5,000 build-to-rent units at the site by 2024 all within spitting distance of the iconic national sports stadium and its flying white arch.
Helped by a considerable early-entrant advantage, Tipi has been a pioneer in the market and has helped set the standard for what tenants get for their rent. This has included banning tenant fees, allowing pets, offering concierge services as standard, free bike storage, and rents that include all services and utilities.
Tipi admits that the rents it charges for its one, two and three-bedroom apartments are comparable to the monthly cost of a mortgage for a similar property. This makes them pricier than most traditional rented flats in suburban London – but Tipi argues tenants get a lot for their money.
Visit the area, which is now called Wembley Park and, if you haven’t been there since the new stadium was built then you will find a jaw-dropping transformation of a once down-at-heel area.
On sunny days Tipi’s three initial apartment blocks dominate the area, towering portents of how build-to-rent may one day rule the private rental market nationally.
Estimates of the slice of the property pie build-to-rent will take vary from 15% to 50% but Quintain points to other mature real estate markets including the US, Germany and even France where build-to-rent is a significant part of their housing provision.
In the UK, just over 30,400 apartments have been built so far, 36,500 are under way and 72,200 have planning permission, all offering various levels of service and property quality from high end to budget.
Knight Frank claims build-to-rent will have had £50 billion spent on it in total by the end of next year, and that 6.75 million people will inhabit its homes by 2030.
Angus Dodd is CEO of Tipi and has a long track record in the industry (see below). He’s more cautious about build-to-rent growth potential than Knight Frank, but he says Quintain has plans to roll out its Tipi brand nationally.
“The management platforms you need to operate these sites cost a huge amount of money including the training of staff and getting the right IT systems and processes in place; it’s not a cottage industry,” he says.
“The lessons we’re learning from Wembley are absolutely applicable elsewhere and we have a shareholder in Lone Star who ultimately is very keen to see us leverage off what we’ve done at Wembley on other sites.
Dodd also says several political and economic factors are combining to boost the sector and lessen the risk for investors.
For example, the number of renters is rising as the property ladder becomes more difficult to clamber on to; government policy has swung away from the traditional buy-to-let market and its army of accidental and small-time landlords; tenants are getting fed up with the service offered non-professional landlords; and the UK continues to experience a significant housing shortage.
Despite these helping hands, build-to-rent has a long way to go before any of its brands including Tipi gain significant brand recognition among consumers.
The UK’s most recently-launched property brand, Purplebricks, spent five years and in excess of £50 million blunder-bussing its way into people’s consciousness.
Tipi does not have access to this kind of marketing budget. It runs campaigns on London’s tube network from time to time but most of the other operators in the sector are almost invisible and rely on the portals to source tenants most of whom, until they arrive at a viewing, have no idea what they’re being shown.
“Ask most people to name a build-to-rent brand and they wouldn’t be able to, but ask them to recall a hotel brand and they can,” he says. “This will change but it’s a ten to fifteen-year task; it’s not going to happen overnight.”
Starting out in 1989 Angus Dodd began his career as a chartered surveyor at JLL. After rising through the ranks at several companies including BZW and Investco Real Estate, he was appointed MD of US private equity giant Lone Star’s European operation in 2009. The company bought Quintain in late 2015 for £745 million after a tussle with some reluctant shareholders and Dodd was appointed CEO soon after.
Tipi is trying to accelerate this process and recently invested in proptech company Movebubble, which is both an on-boarding platform for letting agents but also an app-based alternative to Rightmove and Zoopla for renters.
“We invested in it because for renters it’s a much more sophisticated search and criteria-choosing process than the main, sales-focussed property portals and it’s a very interesting business model which is doing extremely well,” says Dodd.
“We have an aspiration which we’re not far away from now which is to enabled tenants to turn up at Wembley and rent a flat within an hour.”
This is typical of build-to-rent operators; like Tipi most are very keen to put clear water between themselves and the traditional private rented market.
But is it a revolution in renting, as its website copy suggests? Dodd is keen to position build-to-rent alongside Uber and Netflix because, like them, it’s all about enabling people to have more flexible lives where they control their lifestyle consumption, rather than being dictated to by the traditions of the established rental sector.
People laughed at Uber and Netflix when they launched, so perhaps build-to-rent and its new model for renting may soon be taken more seriously as word of mouth and increasing unit numbers help get the ball rolling.