The UK’s Nascent PRS Sector Looks To The U.S. To Understand How To Deliver Space As A Service
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Knowing your tenants is still one of the biggest challenges to building successful private rented sector homes in the UK, attendees heard at Bisnow’s London PRS Growth & Expansion event Thursday. The market is so new — “pre-nascent,” Greystar managing director Bella Peacock called it — that developers are still grappling with the idea of space as an experience, the importance of getting the basics of property management right, and figuring out which stats and demographics matter.
The demand for high-quality build-to-rent housing clearly exists. In 2016, for the first time in the UK, there were more renters than owners — but only 10% of those renters were in purpose-built accommodation. About 13,000 purpose-built apartment units were built in the UK in the last year, and about 9,000 of those were in London. Compare that to Dallas, the second-largest metro area in Texas, where over 600,000 apartment units were built.
Dallas developer and PegasusAblon principal Michael Ablon said one of the keys to his success was simply understanding the tenant’s mindset. After determining the average age and income of his potential tenants, he curated an experience specifically for them. For instance, when a potential customer enters one of Ablon’s properties, she is presented with a kiosk and an iPad that has pricing, layouts and all the community information at her fingertips. There is also a model home to review, where she can Bluetooth her music in the set-up speakers and project her movies on the flat-screen.
“The experience is the product,” Ablon said.
He said in Paris, a cup of coffee in a café costs €1 to take with you. To sit inside, it costs €2. To sit outside on the sidewalk, it costs €3. The point is not the coffee, it is the experience of having coffee in Paris on the sidewalk, where you can people-watch and feel part of the scene.
The details of an apartment, from the amenities to the layout, spring from that idea. In Ablon’s developments, the bedrooms are small and the closets are large. Clothing is important to people — it is part of their brand, and he subtly acknowledges that by allowing them a lot of space for their clothing.
Peacock said that because the sector is so new, there is still some distrust to overcome, so in addition to amenities, developers need to focus on professional management.
“Customers don’t yet know if we can be trusted yet to fix things in 24 hours, for example. We need to prove to them that we can deliver on expectations.”
Fizzy Living managing director Harry Downes noticed that when tenants have a lot of little problems, the rental rates actually increase because tenants and management are interacting and getting to know each other, and the flat — and the experience — becomes more valuable over time.