While it hardly compares with the massive, nationwide programme of housebuilding by local authorities which took place during the 1950s and 60s, the construction of homes for private rent is certainly gathering pace. And the part of the UK that is most ripe for an acceleration of development is Scotland because until recently activity in this field has been low, certainly in comparison to south of the Border.
Last year marked a rise of 51 per cent in build-to-rent (BTR) completions, with Glasgow a significant contributor. The number of BTR homes either completed, in construction or going through the planning process increased from 2,909 at the end of the fourth quarter of 2018 to 3,297 a year later, according to the British Property Federation.
However, Glasgow seriously lagged behind similar English cities. Indeed, Birmingham recorded more than two and a half times the number of BTR completions/in the pipeline than Glasgow.
Last year fewer than 500 BTR units were built in Scotland and while there was a substantial number in the pipeline, with a further 6,300 units (at the time) at varying stages of planning, this represented just 1.7 per cent of the total number of privately-rented households north of the Border.
On a brighter note, this suggests the existence of a vast untapped market in Scotland for BTR, which has just taken another massive step forward with the beginning of construction work on Buchanan Wharf in Glasgow by Drum Property Group, funded by Legal & General. This is L&G’s first entry into the market in Scotland.
Two 18-storey towers will accommodate 324 flats within the latest commercial/residential regeneration area overlooking the River Clyde. Edinburgh has a limited supply of completed BTR flats, located in the Fountainbridge area, and rental returns appear to be significantly above the average for the capital as a whole.
Just for the young 'uns?
But who is BTR specifically aimed at? In addition to the apartments, Buchanan Wharf will also include a 4,250 square foot communal roof terrace, dining space, lounge, gym and games room, which would appear to be most appropriate for younger tenants engaged in the professions or skills sector.
According to the latest survey from Goodlord, a letting software company, the average age of private sector tenants in England and Wales ranges from the early to mid-thirties (for some reason Scotland does not figure in the statistics). One can understand the thinking behind the complementary leisure features due to be contained within Buchanan Wharf.
While welcoming developments of this type, it is clear that BTR schemes aimed at families or older couples and singles still has some way to gaining acceptance despite what I believe is an underlying demand.
The housing market is still based on the trajectory that the average young person enters adulthood by living with parents, follows this by renting a flat, then enters owner-occupation and remains in that position for as long as he or she is able to live independently.
This is still the hope of many – perhaps the majority – of our young people, but life does not turn out as we expected. Middle-age brings challenges like job relocation, job loss and divorce, all of which have a consequent effect on housing tenure and, sometimes, owner-occupation is not always the most appropriate solution.
So let us take forward the undoubtedly welcome growth in BTR by extending the concept to accommodation suitable for all generations and circumstances. For example, families who would prefer to rent, rather than own, a home. Or the divorced father for whom renting is the best option but who would desperately like a house with a garden for when his children come to stay.
With the backing of the financial institutions and economies of scale, this should be achievable in a purely commercial sense. In a nutshell, BTR is great but has yet to achieve its full potential.
- David Alexander, MD of DJ Alexander.