Whether it’s sporting heroes striving for the ultimate performance or everyday folk trying to better their lives, it is often said that those who are most successful focus all their energy on what they can control, not what’s beyond their sphere of influence. The same is true with creating an investment grade property asset.
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True, there are lots of unknowns and plenty of external factors which impact upon property conditions and performance but the skill here is on either mitigating or taking advantage of these variables whilst putting the bulk of your time into maximising operations and controlling the built environment.
This approach couldn’t be more suited than to that of the emerging build to rent sector which must be distinguished from PRS given the purpose-built nature of the assets.
While rental premium or additional income might well be plausible in the future when the right types of amenities are provided to the right tenants, the lack of empirical evidence makes it harder to account for these when evaluating any given property opportunity.
Factor in at the outset
Conversely, operating and management expenditure are much easier to quantify. That’s why purpose designed, specified and built BTR assets can provide more certainty and enhance long term value for investors. Get the asset creation right and you will have far more comfort over the long term in terms of achieving business plans.
These efficiencies, however unglamorous, will work best when they are factored into plans at the outset of any development. Understanding aspects –such as parcel collection, the building’s moving in/out strategy, refuse collection, energy consumption, window cleaning services, facade maintenance and leasing strategy – will all play a fundamental role in a tenants’ daily experience. It will also allow investors to sleep better at night.
I’d be the first to agree that how a tenant’s rubbish is stored and disposed of isn’t going to define a building’s success alone. But when combined with all the other factors, such processes will mean a property can work like clockwork and will quickly distinguish itself amongst renters from an ill-considered and ill-managed rental property.
We can’t fully future-proof properties but we can be cognisant of potential future trends
Fortunately for investors, the benefits are tangible. The prospect of being able to control and protect the bottom line with long term management processes in place will create two clear distinctions. First, it will assist in reducing operating expenses which for every £1 saved will translate into tangible value given the multiplier applied to the net rental income. Secondly, it provides investors with the ability to future-proof their investment and to plan for long term expenditure.
The right design is also fundamental for everyday management of the building. Staff wellness and back office functions, coupled with the latest leasing and tenant interaction technologies, can only enhance the tenant experience.
After all, if your staff are happy and enjoy their place of work, tenants are the ultimate beneficiary. The right design also assists in making sure the most efficient number of staff members are employed and where they are located in the building
Finally, quality and price have never been best of friends. Quality lies in the eyes of the beholder and price is merely a function of affordability. By focusing on the tenant’s personal space and their wellness by providing apartments which meet the space expectations of tenants will result in long term retention, lower churn and income certainty.
We can’t fully future-proof properties but we can be cognisant of potential future trends. How will communal living work and how will this change as people’s work place practices change? What will changing demographics mean – from an emerging renter economy and lifestyle choices to down-sizers and younger, city-dwelling professionals?
We don’t know all the answers but a plan that is adaptive and takes into account the most everyday needs of renters will surely be more resilient in the future – not just for those who live in our buildings but for those who invest in them too.
James Muir, head of UK & Ireland at PATRIZIA Immobilien AG
About PATRIZIA Immobilien AG
PATRIZIA Immobilien AG has been active as an investment manager on the real estate market in 15 European countries for more than 30 years. PATRIZIA’s range includes the acquisition, management, value increase and sale of residential and commercial real estate over own licensed investment platforms. As one of the leading real estate investment companies in Europe PATRIZIA operates as a respected business partner of large institutional investors and retail investors in all major European countries. Currently, the Company manages real estate assets worth around EUR 17 billion, primarily as a co-investor and portfolio manager for insurance companies, pension fund institutions, sovereign funds, savings and cooperative banks.