It finally seems that the build to rent (BTR) sector, with institutional investors providing purpose-built new housing for rent, is establishing itself in Scotland.
The country still only has one operational scheme (Lasalle’s at Forbes Place, just outside Aberdeen), but recent announcements have accelerated the pipeline supply in Scotland. Platform, which has about 600 BTR units under management south of the Border, has just announced its first foray into Scotland through the buying of a two-acre site in Glasgow’s Central Quay.
This scheme intends to deliver over 450 rental units, including a concierge, lounge and gym.
Also in Glasgow, Moda has applied for planning permission to develop their 433-unit Holland Park scheme in the city centre, swiftly after another planning application for a Get Living BTR scheme in the same city. Last year, an application was also submitted for a 345-unit BTR scheme on the old Candleriggs site in the city centre, with student housing, commercial property space and a hotel also proposed there.
In Edinburgh, there are significant proposed BTR schemes at Springside and India Quay and there is also a large scheme in the pipeline in Aberdeen at the former Broadford Works site close to the centre.
In Dundee, work is starting on the Studio Dundee scheme, where One Enterprise aims to deliver 117 BTR units, sitting alongside creative co-working space and a social hub. This innovative scheme aims to retain students and entrepreneurs within the city.
Also in Dundee, the VOX BTR scheme by Whiteburn, at the former Dundee Colleges site, has just received planning approval for 110 BTR units on the edge of the city centre. This mixed use development will also provide workspace, a new café, a gym, lounge, cinema, auditorium and extensive landscaped gardens for residents and workers.
All of this new activity has increased the total number of BTR units operational or in planning in Scotland to nearly 4,000, with around 1,800 units in Glasgow, 1,000 in Edinburgh, 900 in Aberdeen, and over 200 in Dundee.
Meanwhile, Rettie & Co has project managed the funding and delivery of another 138 units for Mid Market Rent (or MMR, essentially affordable BTR) on the latest phase of the Western Harbour scheme in north Edinburgh. Working on behalf of Forth Ports and with Hart Builders as contractors, this development will add to the 96 MMR units provided there last year and take the total long-term rental portfolio to 234 properties.
An important investment benchmark – gross rental yields – remain strong in the main Scottish cities compared to other cities down south, which is stimulating increased investor interest.
Average gross rental yields in Glasgow, for example, are now close to 6 per cent. Scotland also has lower entry prices for housing and its main cities have strong and growing demand for housing and continuing weak supply, attracting investors who see the clear market signals.
The new private rental sector tenancy reforms as well as wider political uncertainty issues have held back many investors from pushing into Scotland, but the more critical mass that the BTR sector builds up here, the more it will entice others into the market, particularly when the schemes prove themselves viable.
Proper management and planning can mitigate the risks, perceived or otherwise. Scotland also has BTR ‘offers’ that are not available down south such as a Rental Income Guarantee Scheme (RIGS), promoted by the Scottish Government and Scottish Futures Trust, and the exemption of Additional Dwelling Supplement (ADS) on Land & Buildings Transaction Tax (LBTT) on purchases of six or more units.
It’s an exciting time for Rettie & Co and others involved in creating a new housing tenure in Scotland. Given the chronic housing supply shortages in the housing market, it is these types of innovations that need to succeed.
Dr John Boyle, director, research & strategy, Rettie & Co