Much-needed market data revealed: just what are the true value of amenities in BTR property?

We were very interested to read some excellent research from Cast Consultancy publicised in this article.

BTR Premium Services

The report states that a rental premium of up to 10% might be necessary to offset the cost of including a cinema room, private dining room, resident’s lounge and gym. The total loss of residential space for a development containing all of the above amenities was said to be 8 apartments.

We would advise some caution when using the analysis to gauge the viability of amenities in an individual development. One key factor is location, i.e. the higher rental returns in a London development will more easily offset the cost of the amenities than in Manchester for example.

We never the less welcome the publication of this kind of data and echo the comments of Ana Nekhamkin of Inhabit Residential, who said: “While market data is sparse, the challenge we face is engaging valuers to think about build to rent in terms of net operating income (NOI) and how NOI can be boosted through the inclusion of amenities. This is business critical and something the industry really needs to focus on solving if we’re to maximise the huge potential of the sector.”

PRS across the UK

Considering the diversity of our cities in the UK and the variety of current rental stock available for prospective tenants, we firmly believe a broad array of BTR / PRS stock needs to be developed. A perfect analogy for this is the hotel sector, where you often see a 4 – 5 star offering in the same vicinity as a business / budget hotel. Therefore we believe there will be demand for premium amenities and services in BTR developments (where the rental is all inclusive) alongside demand for well-designed budget rentals where key amenities and services are already provided in the local area. This is reflected in our sister brand, Gridizen, which has evolved to operate a varied array of developments.

Careful attention needs to be given to the exact location of a development, what rental levels are expected and then their ultimate level of service, so it is critical to have joined-up thinking between the service provider (operator) and developer from the very beginning of the development cycle. In our view this is the best way to maximize the value of amenities in any development. However designed, the integration of amenities and services will surely be fundamental to the success of the BTR model.

Words by Kamran Mahmood (originally published on prsinvest.com)

(CEO of PRS Invest & Chairman of the British Hospitality Association PRS Committee)