Undoubtedly, an adaptable asset is a more valuable asset — so where does this leave BTR — flexible enough to withstand market turbulence, or too bespoke a product to allow for flexibility?
While 2023 has been a trying year for the property market, BTR has shown considerable versatility.
Up and down the country, BTR has taken on would-be open market housing schemes and provided their owners with beneficial financial solutions.
Before Covid, institutional investment in UK real estate was focused on commercial property. But today, residential property is demonstrably the more robust asset class, with yields consistently out-stripping those of the commercial sector.
At LRG our clients increasingly include institutional investors, including those with both commercial and retail assets which have subsequently been converted for residential use under permitted development rights and let with extremely favourable yields.
If BTR, specifically BTR suburban communities, were to become less viable in future, what potential is there for flexibility? BTR suburban communities provide an ultimately diverse mixed asset portfolio, and such as provides a steady, long-term, resilient income.
For investors, there are other distinct advantages of BTR suburban communities.
For example, the variety of property types (residential, commercial, retail and leisure) which exist within any one portfolio, create a combination of immediate sales revenue and long-term rental revenue, with the potential to spread the investment according to the market conditions.
In our 40 years’ experience as lettings and management agents, we have seen institutional investors disregard investment in individual residential properties on the basis that they are too fragmented and management-intensive.
But as a single mixed-use portfolio, the BTR suburban communities model holds significantly greater appeal to investors.
From our vantage point, the future for BTR suburban communities shows no sign of abating. And yet were BTR to cease to be a viable asset class, two both very buoyant asset classes could utilise the buildings.
The first is student accommodation, which has seen a substantial increase in investment throughout the last decade, despite the pandemic.
The second is the later living sector.
In practice, student housing and later living should coexist very easily in BTR suburban communities.
Furthermore, all are institutionally backed, managed rental products with enhanced amenity spaces and a focus on services and community.
Each requires similar facilities: social spaces, quiet spaces, wellbeing spaces, postal and delivery rooms, cleaning, and maintenance.
Perhaps the industry would benefit from a further shake-up, forcing it to provide the variation in property types which we know, theoretically, are the basis of a truly vibrant community?
There are many exciting directions in which the property industry could move in 2024.
