Monthly Archives: September 2019

BTR – The New Anchor Tenant

In recent articles, we have looked deeply into the BTR sector in some analytical detail. We have also shown how BTR can act as a strong catalyst to broader urban redevelopment. But in this piece, we consider how modern Build to Rent residential development can potentially help alleviate one of the pressing urban dilemmas of today; the decline of the traditional high street and shopping centre.

 

The demise of the high street is ‘internet linked’, with the decreased need to leave home and purchase goods. Can this loss of footfall, by having more people living centrally, close to or on top of the high street, create a new demand; albeit, potentially more orientated towards leisure and A3 uses?

 

Can residential become the new “anchor"?

 

For the last 50 years, the successful development of retail investments has been predicated on securing a big name retailer to act as a magnet, sitting in the centre or, better still, at either end of the high street or mall to attract customers. These "anchor" tenants drew crowds and created footfall for the benefit of the centre as a whole.

 

But the internet is putting pay to the old norms as goods are readily available, often more cheaply, online; why make that arduous journey to the shops?  See this in the context of the societal shift in the young from materialism to the desire for experience and you understand why the last 20 years has seen the growth in the catering, entertainment and leisure components of successful high streets and shopping centres. 

 

Where can retail go next to support dramatically declining in-store sales? Sure, more focus on the experience can help, but it comes at a price and not universally welcomed. Shopping centre landlords pass on any entertainment costs back to the retailers through the service charge, yet does the footfall generated by entertainment result in actual sales? Unfortunately, it’s not always the case.

 

Lateral thinkers are, therefore, now looking outside of the retail "box". Anchors were about footfall but what if we deliver that activity another way? Why not bring the consumers to the retailers by creating homes for them in the very vicinity of the stores?

 

The ‘death of the mall’ and the turn to Build to Rent has been a trend in the US for a while now. Global Apartment Advisors, whose build to rent roots originate from the US, has seen this become an established real estate play. Once-tired districts are being uplifted with new homes and crucially, the retail offer is being curated to the residents above, thus servicing both their needs but also the wider community too.

 

 

BTR avoids the pitfalls of “For sale" residential.

 

Tarnishing shiny retail Investments with problematic homeowners over them has been avoided like the plague in the past, and only incorporated when the planners demand it. Residents with gripes and moans and, more importantly, legal rights to hinder development and change have been kept far away from prime retail assets. But modern residential investment, in the guise of BTR, delivers active consumers with a vested interest in a vibrant community but with no individual frustrating-mechanism to scupper progress. In fact, if not actually the same investor, the owner of the residential investment will share similar aspirations for the vitality of the collective built environment as the retail investor.

 

So, once again, BTR avoids some of the pitfalls of earlier residential investment formats. But just like putting a shop at the base of residential development is no guarantee of its success, putting people above a shopping centre doesn't automatically create footfall and needs sensitive planning. This includes careful consideration of resident journeys but a revised outlook on the retail offer to provide an appropriate retail amenity that genuinely services the local area.

 

As GAA notes, from a development and funding perspective, the retail component of a project is becoming an ancillary use and the need to have blue-chip covenant strengths from your retail occupiers is no longer crucial. With residential income so sought after by institutional capital, and that income making up say 90% of the total rent roll, there is scope to allow less well known and local brands to move in, providing ever more authenticity and vibrancy to a neighbourhood.

 

The shop window effect will become ever more important

 

These guys don't even need to spend their cash in the store. Increasingly the shop window will become exactly that; an introduction to the goods of a company that is agnostic to where the purchase actually takes place - in-store or online. It has recently been reported that The White Company had opened a new store in Newcastle which traded ok but which drove an increase of 80% in associated local online sales. 

 

This all helps great “placemaking”

 

Realise too that all these additional people will also want entertaining, feeding, educating and access to leisure facilities which don't have to be in their own residential building, nor be exclusive to residents. They will support a more vibrant, holistic, urban environment, one which operates both during the day and the evening, unlike the often monoculture high streets and shopping centres of recent years.

 

These newly created hubs naturally serve the wider community too and so become a new feature to the cultural tapestry of the high street.

 

Your bottom line benefits too

 

This is all very good news for the currently beleaguered retail investor. BTR both acts as a catalyst to improved retail performance but is a very valuable asset in its own right adding to their pressurised bottom line, if developed effectively.

 

This latest chart from investment market analysts, Real Capital Analytics (RCA) shows that residential investment is gaining in appeal, in direct contrast to the waning of the retail market, and underpins new spending in the sector.

 

 

 

...and some are already profiting

 

One of the largest projects announced so far is the upcoming £245 million development of the Harvey Centre in Harlow town centre. Addington Capital and Tristan secured planning permission  to provide 447 new homes and have sold the investment on to Strawberry Star Group.  A substantial part of the centre will be demolished and four new buildings will be constructed, ranging from 3 to 16 storeys, arranged around landscaped public spaces to provide open-air boulevard shopping. Addington and Tristan’s bold move, swopping retail space for residential, demonstrates the thinking lying behind the trends shown in the RCA findings.

 

A further example is New River securing permission to develop 227 units in Cowley, Oxfordshire at their 1960’s-built Templars Square shopping centre. They have identified the need to upgrade the centre but also the opportunity to meet the demand for new homes in Oxford and add much-needed choice of restaurants and hotels. They will rationalise the existing car parking and use airspace above the centre.

 

Hammerson is using permitted development rights to deliver new residential from former office space at Cabot Circus and Broadmeads, Bristol, as PLATFORM_ have done in Crawley town centre where an existing office building has been repurposed to deliver 185 units.

 

Spread the word...BTR is good for your local town centre

 

GAA, believe that regional town centres can have a viable future and generate strong returns with a collaborative approach between residential and commercial.  They argue that this has hitherto never been possible with the traditional “for sale” model for residential.  They aim to increase the awareness of owners and investors and to demonstrate to Councils why they should positively support Build to Rent, both at the Local Plan making and scheme decision making stages. 

 

At Geraghty Taylor we are actively involved in schemes to integrate BTR into existing assets as well as developing new assets in existing retail environments. We see this as a welcome development in creating rejuvenated town centres.

 

Create differently

 

#BTR #BuildtoRent #Brand #Brandbeforebuilding

 

 

Our thanks go to Dominic Martin of Global Apartment Advisors, (GAA) for his input into the preparation of this article.

 

 

In recent articles, we have looked deeply into the BTR sector in some analytical detail. We have also shown how BTR can act as a strong catalyst to broader urban redevelopment. But in this piece, we consider how modern Build to Rent residential development can potentially help alleviate one of the pressing urban dilemmas of today; the decline of the traditional high street and shopping centre.

 

The demise of the high street is ‘internet linked’, with the decreased need to leave home and purchase goods. Can this loss of footfall, by having more people living centrally, close to or on top of the high street, create a new demand; albeit, potentially more orientated towards leisure and A3 uses?

 

Can residential become the new “anchor"?

 

For the last 50 years, the successful development of retail investments has been predicated on securing a big name retailer to act as a magnet, sitting in the centre or, better still, at either end of the high street or mall to attract customers. These "anchor" tenants drew crowds and created footfall for the benefit of the centre as a whole.

 

But the internet is putting pay to the old norms as goods are readily available, often more cheaply, online; why make that arduous journey to the shops?  See this in the context of the societal shift in the young from materialism to the desire for experience and you understand why the last 20 years has seen the growth in the catering, entertainment and leisure components of successful high streets and shopping centres. 

 

Where can retail go next to support dramatically declining in-store sales? Sure, more focus on the experience can help, but it comes at a price and not universally welcomed. Shopping centre landlords pass on any entertainment costs back to the retailers through the service charge, yet does the footfall generated by entertainment result in actual sales? Unfortunately, it’s not always the case.

 

Lateral thinkers are, therefore, now looking outside of the retail "box". Anchors were about footfall but what if we deliver that activity another way? Why not bring the consumers to the retailers by creating homes for them in the very vicinity of the stores?

 

The ‘death of the mall’ and the turn to Build to Rent has been a trend in the US for a while now. Global Apartment Advisors, whose build to rent roots originate from the US, has seen this become an established real estate play. Once-tired districts are being uplifted with new homes and crucially, the retail offer is being curated to the residents above, thus servicing both their needs but also the wider community too.

 

 

BTR avoids the pitfalls of “For sale" residential.

 

Tarnishing shiny retail Investments with problematic homeowners over them has been avoided like the plague in the past, and only incorporated when the planners demand it. Residents with gripes and moans and, more importantly, legal rights to hinder development and change have been kept far away from prime retail assets. But modern residential investment, in the guise of BTR, delivers active consumers with a vested interest in a vibrant community but with no individual frustrating-mechanism to scupper progress. In fact, if not actually the same investor, the owner of the residential investment will share similar aspirations for the vitality of the collective built environment as the retail investor.

 

So, once again, BTR avoids some of the pitfalls of earlier residential investment formats. But just like putting a shop at the base of residential development is no guarantee of its success, putting people above a shopping centre doesn't automatically create footfall and needs sensitive planning. This includes careful consideration of resident journeys but a revised outlook on the retail offer to provide an appropriate retail amenity that genuinely services the local area.

 

As GAA notes, from a development and funding perspective, the retail component of a project is becoming an ancillary use and the need to have blue-chip covenant strengths from your retail occupiers is no longer crucial. With residential income so sought after by institutional capital, and that income making up say 90% of the total rent roll, there is scope to allow less well known and local brands to move in, providing ever more authenticity and vibrancy to a neighbourhood.

 

The shop window effect will become ever more important

 

These guys don't even need to spend their cash in the store. Increasingly the shop window will become exactly that; an introduction to the goods of a company that is agnostic to where the purchase actually takes place - in-store or online. It has recently been reported that The White Company had opened a new store in Newcastle which traded ok but which drove an increase of 80% in associated local online sales. 

 

This all helps great “placemaking”

 

Realise too that all these additional people will also want entertaining, feeding, educating and access to leisure facilities which don't have to be in their own residential building, nor be exclusive to residents. They will support a more vibrant, holistic, urban environment, one which operates both during the day and the evening, unlike the often monoculture high streets and shopping centres of recent years.

 

These newly created hubs naturally serve the wider community too and so become a new feature to the cultural tapestry of the high street.

 

Your bottom line benefits too

 

This is all very good news for the currently beleaguered retail investor. BTR both acts as a catalyst to improved retail performance but is a very valuable asset in its own right adding to their pressurised bottom line, if developed effectively.

 

This latest chart from investment market analysts, Real Capital Analytics (RCA) shows that residential investment is gaining in appeal, in direct contrast to the waning of the retail market, and underpins new spending in the sector.

 

Click above to view a larger image...

 

 

...and some are already profiting

 

One of the largest projects announced so far is the upcoming £245 million development of the Harvey Centre in Harlow town centre. Addington Capital and Tristan secured planning permission  to provide 447 new homes and have sold the investment on to Strawberry Star Group.  A substantial part of the centre will be demolished and four new buildings will be constructed, ranging from 3 to 16 storeys, arranged around landscaped public spaces to provide open-air boulevard shopping. Addington and Tristan’s bold move, swopping retail space for residential, demonstrates the thinking lying behind the trends shown in the RCA findings.

 

A further example is New River securing permission to develop 227 units in Cowley, Oxfordshire at their 1960’s-built Templars Square shopping centre. They have identified the need to upgrade the centre but also the opportunity to meet the demand for new homes in Oxford and add much-needed choice of restaurants and hotels. They will rationalise the existing car parking and use airspace above the centre.

 

Hammerson is using permitted development rights to deliver new residential from former office space at Cabot Circus and Broadmeads, Bristol, as PLATFORM_ have done in Crawley town centre where an existing office building has been repurposed to deliver 185 units.

 

Spread the word...BTR is good for your local town centre

 

GAA, believe that regional town centres can have a viable future and generate strong returns with a collaborative approach between residential and commercial.  They argue that this has hitherto never been possible with the traditional “for sale” model for residential.  They aim to increase the awareness of owners and investors and to demonstrate to Councils why they should positively support Build to Rent, both at the Local Plan making and scheme decision making stages. 

 

At Geraghty Taylor we are actively involved in schemes to integrate BTR into existing assets as well as developing new assets in existing retail environments. We see this as a welcome development in creating rejuvenated town centres.

 

Create differently

 

#BTR #BuildtoRent #Brand #Brandbeforebuilding

 

 

Our thanks go to Dominic Martin of Global Apartment Advisors, (GAA) for his input into the preparation of this article.

 

 

Beyond the Home Hub: The future of Wi-Fi in Build-to-Rent

High-quality internet access is by far and away the number one amenity for occupiers of BTR and student schemes.  Only a few months’ ago, WiredScore, the connectivity rating service, chose to launch its WiredScore Home certificate aimed at build-to-rent landlords, with 4,000 units already under review. 

It comes as no surprise really. I bet I am not the only one returning from this year’s family holiday with the sounds of phrases like these still ringing in my eyes:

  • “Oh no! I’m out of data!”
  • “Can I tether to you?”
  • “Are you hot-spotting?”; and even
  • “We’re not going there unless it has Wi-Fi!”

It’s not just the teenagers either! Good internet connection has become a basic requirement of life for those of us who are used to it.  This latest article, prepared for us by Darren Henwood of Glide, takes a close look at how the provision of best-in-class connectivity is changing for multi-occupier schemes and introduces the idea of Pervasive Wi-Fi.

 

The humble router has been the backbone of home broadband and Wi-Fi delivery for a generation.  As advances in technology and residential living converge, it’s time for a new approach to Wi-Fi and a new philosophy with futuristic experiences for residents and practical benefits for landlords.  

 

Over the last 20 years, we have come to depend on a small black or white box.  In 2019, this device still acts as a modem to connect us to an internet provider. It still performs routing which allows all of our devices to join a network and it still beams Wi-Fi around our homes.  The outdated technology was designed to work in the two-up two-down majority of UK homes and nothing much has changed.

 

Routers are still poorly positioned by Internet Service Providers (ISPs) or naive residents, they still need to be switched off and on again and firmware needs to be upgraded. Wireless performance is limited by interference and building materials and coverage is patchy.  The fixed port is disappearing, plugging devices directly into the router will become defunct and all at a time when people rely on mobile devices and mobile connectivity. 

 

Build-to-Rent is an emerging brand of residential development specifically designed for renting, managed by specialist operators who will look to evolve the provision of resident services like Wi-Fi. In this competitive market, developers and operators need to differentiate their properties to maintain 100% occupancy and profitability.  If people are to abandon the aspiration of owning their own home and commit to a lifestyle of renting, significant improvements to resident services and well-being will be needed to make Build-to-Rent a popular choice.

 

96% of tenants find going without the internet to be the most frustrating part of moving home so we know fast, reliable Wi-Fi is a key technology.

 

The future of Wi-Fi is Managed Pervasive Wi-Fi and represents an alternative approach; one that guarantees coverage over every inch of an apartment and spells the end of the familiar home router.  Pervasive Wi-Fi is invisible, on all of the time and it works, offering significant benefits to both resident and landlord without sacrificing privacy and security.  

 

Smart Home solutions like smart thermostats, smart lighting, smart metering and environmental controls can all be installed before residents move in. Services managed by the landlord but used by the resident with no cumbersome router and now, not just for tech-savvy homeowners but rather installed as standard. This means zero hassle for residents which is the main reason many are considering moving to a Build-to-Rent property.

 

Landlords face similar challenges with outdated building systems and devices for the provision of utilities. What does Pervasive Wi-Fi mean for building services?

 

Pervasive Wi-Fi will extend the reach and range of managed services available to landlords with new tools to efficiently manage properties.  Solutions, like utility sub-meters that automatically and accurately measure consumption and automatically bill residents, introduce a new level of efficiency and fairness.  Centrally managed thermostats mean the heating can be switched off for unoccupied apartments and ambient temperature settings for communal spaces used to maintain the green credentials of the property. Introducing new control systems over Pervasive Wi-Fi will be more cost effective and easier to introduce than traditional infrastructure.  

 

Living in Build-to-Rent is a lifestyle choice. Build-to-Rent should not just deliver spaces to sleep in but environments that enhance the lifestyle of the renter. Pervasive Wi-Fi means connected environments extend beyond the front door to the gym, the cinema room, yoga studio, cafes, parking lot and communal outdoor spaces so there is no limitation on the ambition of landlords to impress prospective residents.  

 

Extending the management of Wi-Fi into apartments and communal spaces means the level of service, coverage and speed is now the responsibility of the managed Wi-Fi provider.  Introducing a standard and benchmarking Wi-Fi coverage ensures service quality comparable with the best performing apartments across a portfolio.  This is analysis that leading operators can draw upon that their competition cannot and with a wider range of landlord services to help find additional cost savings and optimise coverage, the Build-to-Rent proposition continues to significantly differentiate properties from the rest of the residential property market. This added freedom also empowers operators to extract every discernible operational efficiency from their network.

 

What does 5G mean for the future of the Home Hub?

 

5G is the next generation of mobile networks to roll out across the UK, initially in major cities and deployed from a variety of familiar UK providers. 5G will be faster and more reliable, with greater capacity and lower response times. With more speed and capacity comes exciting new consumer and business applications that could replace 3G, 4G or Wi-Fi infrastructure with 5G.  5G driverless cars, remote healthcare, holographic technology, 5G phones and drones may well depend on the 5G technology but is the ambition of replacing Wi-Fi in the home with 5G a reality?

 

Advocates will say 5G will replace expensive fibre broadband infrastructure. This means no need for cables under our streets and into our homes. 5G will be beamed wirelessly into our 5G Home-Hub or wirelessly into our Smart Devices. Residents will deal directly with their 5G provider, likely the same provider as their mobile phone. Landlords of apartment blocks will have a separate 5G commercial agreement to provide for back office services and communal spaces.  Regrettably, 5G providers will face the same challenges as with 3G and 4G. The technology can’t penetrate every building material which means coverage will always be unpredictable.  5G can’t defy physics and the costs to guarantee the same coverage as Wi-Fi massively outweigh the benefits.

 

Mobile data is by some margin the most expensive. Residents will depend on 5G data services being available and deliver capacity to a range of increasingly bandwidth hungry devices like Ultra High Definition (UHD) streaming and online gaming. In the current market, the best residential 5G deals are approximately £75 for 100GB per month.  It’s possible that this would suffice for a typical online gamer but the comparable fibre services are uncapped, significantly more affordable and reliable and future-proof for the next generation of technology.

 

5G is fantastic technology but the rollout will be staggered. 5G will not provide as much resilience and no redundancy and will neither be as reliable or future-proof to meet the raising popularity of gigabit fibre broadband. This makes running critical building systems on 5G a risk and limits the appeal of a rental property to the next generation of renters.  

 

Every 5 years the headline speed offered by leading residential broadband ISPs goes up by a factor of 10. Significantly, 100GBs of capped data usage will last 13 minutes on a capped gigabit product. Replacing the fixed asset Wi-Fi infrastructure with 5G mobile data for a portfolio of properties would significantly increase the operating cost of the buildings. If you are investing or operating in a 25-year property asset why would you put in anything else other than fibre?

 

What does Wi-Fi 6 mean for the future of the Home Hub?

 

Wi-Fi 6 or 802.11ax Wi-Fi is the sixth generation and standard of Wi-Fi technology designed to support four times more devices on a crowded network and a wider Wi-Fi channel that will make Wi-Fi faster. 5G and Wi-Fi 6 are built on the same technology so all the benefits that 5G promises are already available at a fraction of the cost. 

 

Home broadband providers are already promising gigabit services to every home in just a few years.  Fibre broadband has unlimited capacity and is future-proof for at least the next 25 years so will support this evolution. Comparatively, the cost profile of 5G data services will be too much for a typical user afford.  For the majority, all roads lead to fibre broadband and Pervasive Wi-Fi as a common-sense solution.  Don’t believe the 5G hype.

 

Geraghty Taylor has appreciated that internet connectivity is the number one amenity service for BTR since we first started designing schemes. The WiredScore rating is a welcome independent review for occupiers and investors alike.  It is crucial to keep on top of rapid technology changes and design buildings than can accommodate future advances.

 

Create differently

 

#BTR #BuildtoRent #Brand #Brandbeforebuilding

 

Our thanks to the Glide Group team for preparing this review.  If you have any questions relating to the article please get in touch with Darren Henwood