The Art of Boring: How To Make Manchester BTR Pay
Build-to-rent is all about branding, best lives and cool looks. And yet creating that sizzling irresistible package requires investors, operators and developers to concentrate on some very boring realities. How does this paradox work?
Two of the UK's leading BTR operators and one of its largest investors explained the art of boring success at the Bisnow Manchester Build To Rent event.
Manchester’s built-to-rent residential sector has been one of the most exciting property stories of the last three years. Mushrooming from nothing to 25,000 units in a series of skyline-defining towers it is easy to see why. Yet according to those who know, what lies behind all this excitement is a massive, thundering, yawn-inducing volume of sheer boredom. And that is no accident, they say, because the art of boring is the key that unlocks the most thrilling, successful and eye-catching development.
To make BTR work you need to focus, in a very unexcitable way, on some basic human needs. The project also requires a laser-like focus on those needs to produce a dull, unfluctuating long-term income stream.
Asked by Savills National Planning Director Jeremy Hinds whether Manchester BTR was about providing short-term roosts or long-term homes, Legal & General BTR fund manager Dan Batterton said the answer was not exciting.
“What this is about is having a big portfolio of BTR assets, with thousands of leases, giving us a boring stable income," Batterton said. "We had to do the sex, drugs and rock 'n' roll to get this market started, but it is going to end with something boring. So are we providing homes or staging posts for residents? The answer is I can be whatever you want me to be. If customers want to be there for six months or their entire life, BTR can be whatever they want.”
No matter how funky the BTR business model looks, Batterton insisted that deep down it was very, very dull.
“There are lots of new business models — there are no right business models for BTR because different funders invest for different reasons and new models are emerging all the time," Armstrong said. "We’re four to five years into the life of this asset class in the UK, we have so much learning to do, so much evolution, the range of options is huge.”
They Don't Like Ovens
Boring is also at the heart of the (on the face of it) excitement-generating business of branding and operating BTR. This is all about creating a buzz, right? Yes, but to create a buzz you don’t have to go mad for gimmicks. Focus instead on the important but unthrilling business of getting customer services right.
“It was a culture shock when I moved here [six years ago] I was always saying, ‘what, you do that?’ or ’wait, you don’t do this?’ to UK operators because there was uncertainty about what the sector was trying to achieve or what customers were looking for," Atlas ResidentialUK Portfolio Operations Director Stephanie Smith said. "But you can tell those who have learned. And today there is an arms race in amenities. But the most important thing to focus on is customer services, which is growing [in importance] here but is not yet fully embraced. We’ve come a long way on this in six years, but we still have room to grow.”
Get Living Chief Experience Officer Christian Armstrong strongly agreed that building a community that lasts is not about installing the latest flashy amenities, but is much more about listening to the boring details.
“You have to be flexible and adapt, and learn how residents actually use those amenities, or do not use them at all. We have some communities where people don’t use ovens — we get homes back with pristine kitchens — because they live in areas with vibrant restaurants,” he said.
Fortunately, the latest generation of BTR is being built with this changing palette of needs in mind.
“We’ve learned: don’t go for flashest, brightest amenities and do learn how people used space, what breaks first," Armstrong said. "And look at businesses like AirBnB, WeWork, Uber, because they are doing a lot of work on short-term floorspace and they are going to steal our lunch if we’re not careful.”
Get The Reception Desk Right
So forget the gym, maybe opt for a flexible event space instead? Maybe form some useful partnerships with local facilities and suppliers, so those residents who want them can have them, and those who don’t can ignore them?
The final lesson in getting the boring basics right came from Batterton.
“I’ve seen some estimates that up to half of UK pension funds’ real estate allocation should go into the residential sector, which compares with zero four years ago. That could mean several £100B coming into the sector in the near term. And what those investors want is boring, stable income which is really expensive to buy in other asset classes,” he said.
“I don’t think most of our residents care that we are their landlord. But they do care about things like the on-site staff. The face on the front desk is probably the most important things in the scheme and whilst land and development is important, we make a huge mistake if we hire the wrong person for reception.”
So it all boils down to making one good hire? How boring is that.