Page 66

CULS Articles

“Customer is king” - How the post-COVID Private Rental Sector will be defined by what tenants want The ‘customer is king’. This idea affects all industries. In this interconnected world, information can be shared instantly and globally at the click of a button. The customer has become exponentially more important for businesses and investors in real estate and beyond.

A

bad decision, or badly-phrased comment showing a lack of care for your customers can cause your business value to plummet. The recent rise of Cancel Culture in some ways echoes Gerald Ratner’s well-known misdemeanour. Both reflect the point that with power and profit come a great responsibility to do right by your customers and stakeholders. In real estate, COVID-19 is exaggerating and highlighting specific and significant impacts around the importance of the customer. The Private Rental Sector (PRS) is a much-discussed example. This trend did not begin in 2020. Nonetheless, customer wants and needs have never seemed so important. Considering this is essential for PRS investors now. Three key areas of consumer need are relevant: 1. What customers want 2. What customers are willing to pay for, and 3. Confidence

The PRS market context

Anna Clare Harper CEO, SPI Capital (and Author of Strategic Property Investing)

Before sharing my thoughts on how customer wants and needs, willingness to pay and confidence are changing what works in the PRS in a post-COVID world, it’s important to set the context. In the current environment, powerful global investors tip the UK PRS and warehousing/ distribution as top investment sectors. As an aside, the focus of both of these emphasise the point that the customer is king. The popularity of UK residential property is not new. National and international investors have been attracted to it for many years. UK residential property investment in general, most often in the form of PRS investments, has come to be seen as a safe haven. A positive outlier, through its low perceived ‘risk/reward’. For many years it has offered compelling stability, growth, yield and a hedge against inflation. The UK PRS has doubled in size in the 20 years from 2001, from 10.2% to to 20.3% households1. Since c. 1997, and the wide-spread take-up of ‘Buy-to-Let mortgages’, the make-up of investors has diversified dramatically. 94% of the PRS was owned by individuals in 2018, with the vast majority of landlords owning 4 or fewer properties, and only 1% owning more than 10 properties in 20102. The diversity of ownership has fallen since the Montague Review (2012) and a raft of regulatory changes such as Mortgage Interest Relief via ‘Section 24’. Many investors concluded that they must either scale up, or get out. Despite policy intentions, real estate is slow, and the market won’t concentrate quickly. Unlike other real estate sectors, more than 95% of the PRS is made up of assets worth <£5m. It’s these assets that have been my focus since studying Land Economy. They


Millions discover their favorite reads on issuu every month.

Give your content the digital home it deserves. Get it to any device in seconds.