Build To Rent is finally delivering the goods in Scotland, says Will Scarlett
With the news that L&G have committed to a Build To Rent (BTR) scheme for 338 apartments (subject to planning) in Edinburgh and Platform have acquired a site for 220 units in the city, it is beginning to look as though BTR in Scotland is finally here to stay, subject to continued support from politicians and elected members.
For several years the Scottish market has watched on as UK institutional capital has poured into other regional cities (over 66,000 units outside London), deterred from the Scottish market by the combination of tenancy reform and potential Indyref2.
These fears have now faded somewhat; the new Scottish Private Residential Tenancy was introduced in December 2017 and is now an accepted feature of the rental landscape. And whilst Indyref2 may re-emerge in the future, it feels as if the turmoil caused by Brexit has kicked the can down the road for now. Finally, the Scottish Government has put its weight behind the BTR sector in the form of the Rental Income Guarantee Scheme (RIGS) – the significance of which is perhaps more psychological than actual but significant nonetheless.
Due to previous uncertainties, the number of operational BTR schemes in Scotland can be counted on one hand – LaSalle in Aberdeen and Aberdeen Standard in Edinburgh. As well as that, there are few significant “new-build” blocks (“accidental” BTR) that command strong rental levels such as Quartermile and The Foundry (at Fountainbridge) in Edinburgh, plus Buchanan Gardens in Glasgow.
With forecasts that house prices will rise by 17 per cent by 2022 and it becoming increasingly difficult to get a foot on the housing ladder, over the last 24 months we have seen a healthy build-up of pipeline for significant purpose-built BTR schemes in both Glasgow (2,246 units approved) and Edinburgh (1,197 in planning/pre-planning). Institutional investors and major players in the BTR sector have now committed to Scotland including MODA, L&G, Platform, Vastint and Get Living.
Although a small scheme, the 36 BTR units in Glasgow’s Merchant City (by Kelvin Properties) is significant in that it is now completed and fully let following only six weeks of advertising. Rents ranged from £995 to £1,350 per month for a two-bedroom home with 60 per cent of the tenants aged between 24 and 34.
It is clear that BTR is a concept which will become increasingly popular in the city and has the benefit of reviving city centre living, with Glasgow City Council setting a target of 40,000 people living in the city centre by 2023. This shift in lifestyle is well recognised by those who have already committed to BTR in Glasgow; MODA, Platform, Get Living and L&G have committed to 1,947 BTR homes in Glasgow between them.
Edinburgh lags some way behind Glasgow in terms of committed BTR homes but is now gaining momentum. MODA are committed to 477 units in Fountainbridge; Vastint are in planning for 243 units,S1/L&G are in planning for 338 units at Skyliner in Leith and most recently Platform will be developing 220 units on the former John Lewis depot site in Bonnington.
Scarcity of suitable BTR sites of scale in Edinburgh is a major issue. The answer is for developers to look to emerging secondary locations with strong transport links such as Leith, Bonnington, Gorgie and Shawfair (in Edinburgh) and Finnieston, Yorkhill and Merchant City (in Glasgow).
Meanwhile Sigma have launched a Scottish PRS Fund assisted by a £30m credit facility from the Scottish Government. And the City of Edinburgh Council are bringing forward the first of their own master-planned Council owned sites at Fountainbridge, including 113 apartments for social rent and 64 apartments for mid-rent.
Critical to the success of BTR is that perceptions amongst politicians continue to evolve as the benefits of BTR to tenants and key-workers become better understood.
Rental stock in some parts of Scotland perhaps suffers from a negative legacy of individual private landlords offering inconsistent and poor-quality rental properties. What institutionally-backed BTR offers to tenants are the benefits of a stable and responsible landlord who takes a long-term approach to investment and offers professionally managed homes.
Investment capital is fluid. Institutional investors want to invest in Scotland but do not need to invest in Scotland. We need to attract the large-scale investment that BTR involves to the benefit of private tenants and mid-market tenants alike.
Will Scarlett is Director, Scarlett Land and Development