London’s private rental sector is going through a long overdue transformation. One company that has played a major role in that is Southwark-headquartered Get Living, which recently marked the 10-year anniversary since beginning to turn the former Athletes’ Village at the Olympic Park into a new large-scale neighbourhood that is today home to more than 6,500 residents and a raft of independent shops and restaurants.
CEO Rick de Blaby is in a reflective mood as he recalls the progress over the past decade: “We really set about making the transaction of renting a home so much more easy than it was before.”
Before the company headed to Stratford in 2013 it took inspiration from North America where purpose-built blocks of flats - what we now call the build to rent (BTR) sector- were well-established. It aimed to disrupt a traditional rental market here in London where insecurity of tenure, large deposits and more have frequently made life a misery for tenants.
In came the options for three-year leases, resident-only break clauses after six months on two months’ notice, and an on site team that could help if needed and be easily reached.
De Blaby, chief executive of Get Living adds: “We are wired to make sure that people have a great experience because if they don’t, they can vote with their feet.”
The firm is not alone in aiming to further professionalise the lettings experience. A host of investors have created new build to rent schemes in London, such as Quintain in Wembley, Canary Wharf Group in the Docklands financial district, and insurance giant L&G's investment management division has worked on four projects in the capital, including in Walthamstow and Wandsworth. Last month Sable Capital revealed it has acquired a residential development site in Nine Elms where it wants to create around 200 homes for renters.
Two new sets of research show there is huge potential for the build to rent sector (typically managed by professional landlords or companies) to grow substantially, but that some activity has recently fallen in the capital as firms face several challenges.
With home ownership remaining unaffordable for thousands of Londoners, any obstacles to BTR will be viewed as unwelcome. Right now more professionally-managed rental homes are urgently needed, and properties are in high demand. Wider rental supply has been dented with many buy-to-let landlords heading for the exit as their mortgage bills climb.
Looking at future build to rent stock, latest forecasts from property consultancy Knight Frank put the industry as having scope to grow to £126 billion in the UK by 2028, 77% higher than today’s estimated value of £71 billion.
However, in London there has been a slowdown, with 3,172 BTR unit completions in the year to the third quarter 2023, down 13.6% on the 12 months to the second quarter. During the same period starts dropped by just over a third (35.6%) to 4413, according to Savills and the British Property Federation.
So what is it that makes big name investors view the industry as attractive, and what are the headwinds making delivery more tricky?
Long-term and stable income will appeal to many in the property market, and strong demand will help that. Nick Pleydell-Bouverie, Knight Frank’s head of residential investment says: “The strong jobs market in London creates persistent demand for rental properties, which underscores its long-term appeal. With a growing population that continues to seek high-quality rental options, the private rental market remains substantially undersupplied, creating a unique opportunity for BTR investors.”
But he concurs that there are obstacles in London that could deter some businesses from the sector, ranging from competition for land from traditional listed housebuilders, to council planning departments that are often understaffed and inconsistent in their approach, which makes applications lengthy.
There are also high levels of inflation ramping up the cost of materials and labour, says Savills’ Guy Whittaker. However, he also points out that total levels under construction look resilient.
De Blaby, who has previously worked at property group MEPC and developer United House, says: “A combination of the increased cost of debt, build cost inflation, an onerous planning system plus the prospect of further regulation is having an impact on the delivery of more schemes, with investors and developers taking a more cautious approach to risk.”
A combination of the increased cost of debt, build cost inflation, an onerous planning system plus the prospect of further regulation is having an impact on the delivery of more schemes
But his firm, which has rents in line with the market and is backed by a range of investors, including Dutch pension fund APG, fund DOOR and Australian developer Aware Super, has long term confidence in the market.
Get Living has a pipeline of 6,500 UK homes it could build. Future projects include creating more flats at its Elephant & Castle project, and having 649 homes in Lewisham with some ready to rent from 2024.
Get Living, like other large rental homes firms such as Grainger which has over 1300 units under construction in London, will be listening carefully for anything chancellor Jeremy Hunt says in his Autumn statement this month that addresses the acute housing shortage in the UK.
Helen Gordon, who leads Grainger, says: “Short term, a professionally managed private rented sector provides good quality homes to improve peoples’ lives whilst in the longer term there needs to be an actively managed construction programme to build homes at scale.”
Hopefully the BTR sector will return to strong growth soon as it looks set to play a crucial role in housing Londoners for many years to come.
