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JLL's Adam Challis: ‘This is build-to-let year’

Adam Challis, head of residential research at Jones Lang Lasalle, explains why build-to-let is set to be developers’ principal focus in 2013

What trend will define residential development in 2013?
This is going to be the year when build-to-let housing moves from theory to reality. There are real deals happening oriented around creating a bespoke rental product. Willmott Dixon’s be:here concept and Grainger’s efforts to create a genuine build-to-let concept based on US principles are among the most exciting in the sector. London’s Athletes Village will also be one to watch. This is a growing sector with a number of new players and serious money and is worth taking quite seriously.

Which architects are leading the way?
The US multi-family model is modelled exclusively around build-for-let. There are a couple of firms in the UK, such as Assael Architecture, that are really getting their heads around what design for the rental market means. Those firms will get a strategic advantage when the sector gets going. There are also a few US practices that are looking to bring their skills across.

What are the key design issues?
Renters have lower vehicular traffic needs, they don’t need car parks but they require easy access to the Tube. They tend to need smaller places and they want a higher quality of service: a concierge, for example. The building should also be able to handle an increased rate of moving, with space for removal vans and an elevator able to fit a large sofa comfortably.

Why is the quality of design so important to making private build-to-let work?
The design of multi-family units can fundamentally change the investor’s yield. A big criticism of residential in comparison with other asset classes is the increased yield erosion caused by absorbing income to manage the building. A more efficient design will cost less to run, which means there is more monthly income staying with the investor, thereby significantly altering the equation.

Which parts of the UK are most ripe for private rent investment?
Investors are trying to maximise their return and London has the greatest opportunity for that, so investment has been highly orientated towards the capital. The really strong robust rental markets in London are Zone 2 locations that are well connected and vibrant in their own right. 

Are recent figures indicating a triple-dip downturn likely to scare investors?

The low or no growth story is very much a national picture. London’s economy is going reasonably well. The capital has inherent long-term attributes which make it a desirable place to live, work and spend leisure time that are not easily lost or gained.

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