Britain’s rented homes sector is about to enjoy a substantial transformation as newcomers to the market will, for the first time in a long time, construct blocks of accommodation specifically designed for rental.
In London alone, two million people live in rented accommodation, in 800,000 homes with rents totalling £300bn, noted Nick Jopling, executive director, property at Grainger’s recent results presentation. “That is a largely a portfolio that was never built for rent, it is a lot of it below standard and below quality.”
Grainger’s first new development is being built by Bouygues, in Barking, east London and will contain 100 flats. “There is considerable anticipation about this first build to rent project being handed over by Bouygues, six months early.”
“We think that when you put buildings like this that are designed for rent, and will be serviced for rent, they will not just be attracting new tenants in the market, but absorb existing tenants that are already out there.”
Grainger expects it will lease all the flats in the development over a three to four month period.
A second project, also in partnership with Bouygues will deliver 211 flats at a site in Pontoon Dock, in London’s Docklands. “It will be designed using the ULI design code, and there will be considerable attention to customer focus and to an effectively and operationally smart building, because that is what will drive the net incomes,” promised Jopling. He expects to be on site 2016.
Jopling said Grainger’s aspirations were to see the medium to long term growth of a market rented portfolio and “to be first and foremost truly national market rented landlord in the UK”.
One area where Jopling sees funding coming directly into the private rented sector is from the nation’s pension funds. At Pontoon Dock, the London Pension Fund Authority is backing the project. “There is an increasing attraction of funds like the London Pension Fund Authority,” said Jopling. “The local pension funds of the UK have over £180bn in reserve. I think you will see that on a more local level.”
The current issue in the market, he added, was the perception that the development stage different to that of the “stabilised stage”, when projects are completed and let. “There is plenty of appetite to own that stock once it’s up and built, but getting it up and built is quite a challenge. And that’s what many funds are looking at, at the moment.”