May 4, 2016 by CallisonRTKL

Come the Revolution

John Badman discusses the London rental revolution and how developers can stay competitive by focusing on people, not just data. Article originally published in the March 2016 edition of Estates Gazette.

The build-to-rent sector is playing an increasingly important role in delivering market-driven, purpose-designed residential product. By responding to the demands of a new consumer, it is disrupting the status quo.

That’s not to say the status quo couldn’t use a bit of disruption, and all of this is already well documented. It’s hard to pick up an industry publication that hasn’t trumpeted the imminent housing revolution.

But what’s actually going on here? Is a new type of product really emerging, one that understands the relationship of consumer focus and lifestyle? And what is the industry doing to anticipate demand? When the revolution comes, who will still be standing?

My American colleagues have a saying: “Settlers settle, pioneers get shot.” But that shouldn’t stop us.

And so they come: new brands, developers and operators with ambitious new ideas. Some will fail, usually those with overly aggressive financial models and outdated product. Some will succeed, those plugged into the zeitgeist of an increasingly sophisticated renter.

Perhaps more than any other building typology, a residential product is a reflection of consumer aspirations. Nowhere is this more evident than build-to-rent.

Understanding the demographic profile of the target market is vital to creating buildings that people actually want to live in.

More and more we rely on Big Data to give us clues about the consumer: age, earnings, rent. These metrics are the engine of any viable financial model. But what gets lost is that renters are real people, not widgets.

We can make quantitative assumptions to a microscopic scale, but what of the qualitative ones? What makes people, well, people?

Today’s renters must be nurtured and considered in tremendous detail, which is why we set out to understand how they want to live as much as where they want to live.

Yes, we consider demographics but we also mine consumer psychographics for those hidden gems that make our schemes stand out: What kind of music does our renter listen to? Are they tech savvy? What do they do at the weekend?

Properly calibrated—a balance between ‘demos’ and ‘psychos’, the quantitative and the qualitative—consumer profiles give shape to key behavioural and aspirational qualities of the target market.

And this is indispensable to the design and leasing process, especially when it comes to the escalating arms race of building amenities.

In what might be the key trade-off, the rising cost of property and the scarcity of developable sites mean that flats are most assuredly getting smaller whilst the social benefits of living in a multi-tenant building are getting bigger.

Public areas like courtyards, lounges, rooftop terraces and even shared workspaces contribute to community building.

Smart home technology, on-demand dining rooms, cinemas and other social spaces all make up for what won’t fit into a 500-square foot apartment.

In a sense, residents are renting the whole building, not just a bed and a loo; so the service, lifestyle and experience which are fostered within that building are key.

Striking a balance to all this is no small feat and, as a series of new build-to-rent developments are about to open doors, we’re seeing a push for more creative and distinct offerings.

In Manchester alone, some 10,000 build-to-rent apartments will hit the market within months of each other, all targeting similar tenant profiles.

So, how best to stand out? Get creative. We’re starting to see the integration of work space, in-house bars, vegetable patches, libraries, farmers markets, meeting rooms, ‘life admin’ helpers, hotel-style rooms for guests, pet spas, wine storage, bike maintenance rooms…the list is endless.

These types of spaces create opportunities for people to meet, socialise and stay put longer. One of our North American clients has found that renters in their properties are 75% more likely to renew their leases if they have a friend in the building, and 90% more likely to renew if they have two friends as neighbours.

It seems self-evident that residential schemes should be designed as communities that foster meaningful social interaction among tenants.

Come the revolution, build-to-rent will be more than a clever configuration of open plan apartments with access to a club room and a BBQ on the roof. Today’s renters aren’t simply looking for a place to live; they seek a sense of community.

So, think 15 years down the line, when our cities have become denser, the build-to-rent market is established and the competition is no longer a Victorian terrace conversion.

Renting is a choice, not a need. Will your product perform?

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CallisonRTKL

For more than five decades, Callison and RTKL have created some of the world’s most memorable and successful environments for developers, retailers, investors, institutions and public entities. In 2015, our two practices came together under the Arcadis umbrella, expanding our sphere of influence and the depth and breadth of our resources. Our team is comprised of nearly 2,000 creative, innovative professionals throughout the world who are committed to advancing our client’s businesses and enhancing quality of life.