How is Built-to-Rent Sector Revolutionizing Urban Living for Students?

The Build-to-Rent (BTR) sector in the UK has witnessed exponential growth in recent years, presenting a unique investment opportunity. As of 2024, this trend is particularly noteworthy in urban areas, where students seek modern, convenient living solutions. This blog explores the viability of investing in BTR real estate, focusing on its impact on students living in the UK.

These developments, known for their high-quality, purpose-built rental accommodations, have been on the rise. They cater to a growing demand for flexible, well-located, and amenity-rich living options, especially among young professionals, families, and students. Knight Frank revealed projections indicating that the total value of the UK's Build-to-Rent sector is poised to nearly double in the next five years, potentially reaching £126 billion by 2028.

Factors Contributing to BTR Growth in UK Student Housing

From its nascent stages in 2016 to the projections made for 2022, the Build-to-Rent market has witnessed a significant influx of capital. Here are a few factors contributing to the growth of this sector in the student housing market:

1. BTR Investments: Build-to-rent investments have steadily gained popularity among investors due to their stable yields and the high demand for rentals in urban areas. According to the quarterly investment volumes in the graph below, a marked increase in investment flow can be observed, demonstrating the robust growth of the sector and the increasing confidence of investors in the viability of built to rent developments as an important component of modern real estate investment portfolios.

2. Revolutionizing Urban Living: Build-to-rent developments are revolutionizing living by offering features that align with the modern generations. This not only makes the living more convenient but also makes the tenants stay for a longer duration. For students

• Location Convenience: These properties are strategically positioned in bustling urban areas, offering unparalleled proximity to key destinations such as workplaces, universities, essential amenities, and vibrant social hubs.
• Amenities & Services: Modern facilities such as gyms, communal spaces, high-speed internet, and 24/7 security make living completely hassle-free. These amenities are thoughtfully designed to cater to the diverse needs and preferences of the residents, fostering a sense of convenience, community, and overall well-being within the living space.
• Community Aspect: Fostering a strong sense of community holds paramount significance, particularly for students who find themselves distanced from their homes. Establishing a supportive and interconnected community environment not only addresses the geographical and emotional distance students may feel but also contributes significantly to their overall well-being and sense of belonging.

3. Competitive Advantage Over Traditional Student Housing: In recent years, the student housing landscape in the UK has undergone a significant transformation. BTR offers a superior alternative to traditional student housing by providing better quality, services, and flexibility.

• Unlike HMOs, Build-to-Rent developments are designed with young tenants' convenience and comfort in mind, providing amenities and communal spaces with regular maintenance, enhancing their overall living environment.
• Both BTR and HMOs share the common ground of providing rental housing. Still, build-to-rent takes it further by fostering a sense of community and offering modern, professionally managed spaces.
• While HMOs may appeal to certain demographics seeking shared living arrangements, built-to-rent stands out by providing a more tailored and premium living experience, attracting a broader range of tenants in the competitive real estate market.

Investor Appeal for BTR Sector in 2024

The following points explore the key factors that make BTR real estate not just an investment in property but a strategic move toward long-term financial success in the dynamic real estate market.

1. The build-to-rent sector continues to attract investors due to its resilience and consistent demand. With a consistent influx of student population and young professionals, the players operating in the Build-to-Rent sector, need to adapt to the changing preferences in accommodation, to attain stable investment returns with quality housing.
2. BTR units, distinguished by their premium quality and exceptional services, have the potential to command higher rental rates compared to traditional student housing, thereby translating into superior returns for discerning investors.
3. Furthermore, the attractive features and strategic locations of properties play a pivotal role in reducing tenant turnover rates and fostering a more stable and predictable income stream. In essence, built-to-rent stands not only as an investment in property but as a strategic move towards long-term financial success in the dynamic real estate market.

Market Trends & Growth Potential of Build-To-Rent

The UK's student population is a key driver for the robust demand in the rental sector, particularly in urban areas where universities are concentrated. The expansion of universities and the increasing influx of international students have further amplified this demand. This trend presents a significant opportunity for Build-to-Rent investments.

1. Expanding Student Demographics: The UK has long been a prime destination for higher education, attracting students from across the globe. This diverse student base requires quality living accommodations, and as universities expand their intake, the demand for suitable housing rises accordingly.

2. Building Community: Developers in the UK enhance the likelihood of long-term tenant retention by offering benefits that foster a strong sense of community spirit. These include amenities like communal spaces, flexible workspaces, fitness facilities, and pet-friendly apartments.

3. Changing Student Preferences: Today's students are looking for more than just a place to stay; they seek accommodations that enhance their overall urban living and learning experience. BTR properties can adjust to meet these new demands, whether it's through offering more communal spaces, incorporating flexible working areas, or integrating more advanced technology. Furthermore, by offering their modern amenities and community-focused living, property operators can adapt to changing preferences to thrive in the market.

4. Innovation in Living Solutions: The BTR real estate sector is likely to continue innovating in response to market trends. This could involve more collaborative living spaces, integration of mixed-use developments, or even the incorporation of virtual reality and AI technologies in property management and tenant services.

Challenges of Build-to-Rent Sector

While the Build-to-Rent sector offers substantial opportunities, it is not without its challenges and risks. Built-to-rent investors and property managers must navigate these carefully to ensure long-term success.

1. Regulatory Changes: The rental market is subject to regulatory environments that can shift, impacting profitability and operational models. Changes in housing laws, rent control policies, and building regulations can significantly affect this sector.

2. Market Fluctuations: Economic cycles can influence the rental market. Factors like employment rates, income levels, and economic downturns can impact demand and rental prices.

3. Operational Challenges: Managing a BTR property involves several operational aspects, from tenant acquisition and retention to maintenance and service provision. Efficient management is key to maximizing occupancy rates and ensuring tenant satisfaction.

Future Outlook of BTR Student Housing

The future of the built to rent sector, particularly in areas with high student populations, appears promising. As living preferences evolve, Build-to-Rent developments are well-positioned to adapt and meet these changing demands. The Build-to-Rent sector is poised for growth in 2024, driven by the expanding student market and trends towards sustainable and tech-integrated living.

However, navigating the associated risks and staying attuned to the dynamic market will be crucial for stakeholders and built-to-rent investors to capitalize on this potential effectively. This is where student housing solution providers like amber come into view. Listing your properties with amber will not only help in tenant acquisition but will also help in staying up-to-date with the ongoing trends in the student housing industry. As the sector evolves, it continues to offer both financial returns for built-to-rent investors and enhanced living experiences for students.

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