Fragmented rental market needs seismic change - Nick Freer

WeWork founder Adam Neumann was in the business news last week, with lofty venture capital firm Andreessen Horowitz backing his latest venture, Flow, to the tune of $350 million - equating to the VC firm’s largest ever investment, and turning Neumann’s fledgling residential property play into an instant unicorn with a $1 billion valuation.

The Kingsford Residence apartments in the former Broughton High School on McDonald Road

Renowned for being an extrovert party animal (just Google to find out more) and equally persistent businessman, Neumann founded WeWork in 2010, with the co-working behemoth going on to be valued at almost $50 billion ten years later in 2020. Today, its value sits at around $4 billion. In spite of a shocking decline in valuation, WeWork has played a central role in an area commonly described as the future of work.

Neumann’s new startup Flow aims to rethink the future of living by addressing the housing crisis in the States, and the fact that many cities are pricing out talent. Sound familiar? Flow already owns apartment blocks across the US, is expected to offer concierge type services to its tenants via an app, management services to third party landlords, and has plans to launch a digital wallet that can store cryptocurrency.

So, very much a bricks-and-mortar business, underpinned by technology, and playing to a well documented saying of Neumann’s: “As the world becomes a more digital place, we cannot forget about the human connection”.

Nick Freer Picture by Stewart Attwood

Neumann’s big name backer, Andreessen Horowitz principal Marc Andreessen famously penned an essay in 2011, “Why software is eating the world”, although in 2020 he had revised his thinking somewhat, saying it was “time to build”, with particular reference to schools, hospitals, and homes.

In the Scottish context, on the Edinburgh scene, we have an entrepreneur who has been building companies in a not dissimilar vein to Neumann, although with a character makeup that is much more agreeable.

Alex Watts is the CEO of Kingsford Group and Let Tech, with Kingsford running business and co-working space around the city, and Let Tech an emerging property technology startup that is digitising the whole letting journey.

Catching up with Alex this week, he reminded me that Kingsford was one of the very first Scottish operators of Build to Rent, a category of housing provision that is much more prevalent in the US and Europe. The 75 designer apartments Kingsford Residence operates at the former Broughton High School building on McDonald Road in Edinburgh, deliver a new way of living for professionals who demand an altogether higher level of service. It’s a demographic that Neumann describes as Generation R, with the ‘R’ being for rental.

As Alex puts it, “the fragmented rental market requires seismic change, the archaic status quo is ripe for rebooting and upgrade, and it’s such an important area when you consider that residential real estate is the single largest asset class there is.”

If you don’t know Alex Watts, in addition to his entrepreneurial acumen he also throws a great party. One of those happened this week, with an evening of bands playing live music at his Kingsford Business Club. Sadly, yours truly was on babysitting duty and had to miss what I gather was a good old fashioned knees-up.

Nick Freer is the founding director of strategic corporate communications agency the Freer Consultancy