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SHAPING the PRIVATE RENTED SECTOR
Private Rented Sector
Peter Bolton King RICS
Judienne Wood Young Group
Robert Horsford CML Software
Lesley Roberts Young Group
Howard Morgan RealService
Michael Oakes Young Group
Miles Shipside Rightmove
David Mackenzie Young Group
Neil Young Young Group
Kris Wadia Humanized Leadership
Stuart Corbyn Get Living London
Operating in the Private Rented Sector
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Welcome Welcome to Young Group’s latest biannual PRSupdate publication. During the past six months my fellow Directors and I have seen a noticeable change in the Private Rented Sector (PRS) discussions that we’ve been having. No longer is the conversation dominated solely by talk of acquisition, whether land or existing stock. It seems that the industry has awoken to the fact that, what makes or breaks investment in the PRS, is the robustness of the operational platform; the customer experience that it delivers, risks that it mitigates and the actionable asset management insight that it reports. It was encouraging to hear so many of my fellow speakers at the British Property Federation (BPF) Residential Conference acknowledge the importance of listening to residents, understanding their needs and delivering product and service propositions that fit their needs as well as the needs of investors. However, the property sector has been slow to look outside the industry and appreciate that residents will be comparing the experience that they receive when renting, not with other operators within the PRS, but with the customer experience that they routinely receive from retailers and service providers across every sector. The bar is set high and, notwithstanding the innovations and customercentric model that PRS operators such as Young London have championed, there remains a lot of work to do; Young Group can help. The Government is listening too. From our conversations and involvement with the PRS Taskforce it’s clear that they’re making real progress in understanding the needs of the sector as a whole. It’s to be hoped that the knowledge gained will help shape policy for the benefit of all involved in the sector as it continues to mature. I hope you find our latest collection of articles interesting and informative – and remember to regularly take a look at PRSupdate.co.uk to stay on top of the latest PRS news, comment, research, opinion and guest articles.
Neil Young ACMA CGMA MARLA Chief Executive Officer Young Group and Young London firstname.lastname@example.org
Inside... 4 Stamping Out Poor Practice Peter Bolton King RICS 7
Knowledge Is Power In The Private Rented Sector Judienne Wood Young Group
Does Your Property Management & Accounting System Work For You? Robert Horsford CML Software
Share Perspectives And Insight To Create Added Value Lesley Roberts Young Group
Delivering A New Way Of Renting At East Village Stuart Corbyn Get Living London
Making Customer Feedback Count Howard Morgan RealService
Turn Reputational Risk Into Magic Michael Oakes Young Group
A Window On The World For The Private Rented Sector Miles Shipside Rightmove
Sometimes It’s Not What You Know... David Mackenzie Young Group
Processing The Profits Kris Wadia Humanized Leadership
PRS Operations: Why Function When You Can Really Fly? Neil Young Young Group
© Copyright Young Group 2014
Peter Bolton King Global Residential Director Royal Institution of Chartered Surveyors
Stamping Out Poor Practice Last year, as confidence began to return to the market, more people were looking to sell or let their property. All told, things are beginning to look up for the residential sector with the January RICS Housing Market Survey showing sales demand at a six year high and rental demand holding up well.
However, a pick-up in the market also means that the issue of industry regulation, for sales and lettings, has become more prominent in recent months. For far too long estate and letting agencies have operated without the necessary training or knowledge to properly serve their clients. There is a need for a greater number of agents to be working to properly enforced standards. Problem 1 – Attitude Although there are many agents who are professional and work hard for their clients, they are badly let down by the minority who continue, whether by ignorance or deliberate flouting of the law, to cause real problems. It is often quoted that there are over 100 pieces of law and regulation that could affect a residential letting, these include; consumer protection regulations, deposit protection, various legal documents, health and safety legislation (asbestos and legionella regulations), selective licensing schemes and licensing of Houses in Multiple Occupation. Many of these requirements differ depending on the local authority, which adds to the confusion. Breaches of a number of these bring the risk of criminal conviction, including potential charges of manslaughter. It is difficult enough for good, professional agents to keep up to date with the ever changing regulations and it is therefore easy for those who do not bother, or do not care, to fall foul. It is of course not only the agent who is affected but 4
often the landlord and the resident too. Despite this clear potential of consumer detriment, as mentioned above, there are still no requirements to have even a basic knowledge of the law. Surely it’s wrong that anyone, with no qualifications and no experience of client money insurance, can set up a lettings agency?
“Codes of conduct only apply to Agents who choose to abide by them.” Problem 2 – Enforcement Although there is a general feeling that further targeted regulation is required, that does not mean that there is currently none, as shown by the plethora of legislative regulations mentioned earlier. However, enforcement is often down to local Trading Standards departments who, in most areas, have limited resources to effectively deal with issues. Last year the Government failed to change the legal definition of an estate agent to include letting agents. As a result the Office of Fair Trading can ban an estate agent from practicing but cannot stop them changing their name and operating as a lettings agent. Surely this is a crazy situation? In addition, things would be simpler if there was a cohesive and agreed upon framework that local authorities used when setting up a licensing scheme. If local authorities continue to see the
need to set up licensing schemes then wouldn’t it be best for consumers and agents if this was dealt with once and for all by central Government? Politicians, from all parties, frequently tell me that the lettings market is dysfunctional and that the industry should get its own house in order. Much has already been done, with agreed operating standards and codes of conduct, but these only apply to agents who choose to abide by them. One has to ask, why would those currently getting away with poor and illegal practices join? This brings me on to the third problem. Problem 3 – Lack of Consumer Knowledge Another point politicians make to me is that consumers should just go with the better agent whom they trust. Unfortunately this makes the assumption that the choice is there. In many areas, where demand outstrips supply, renters are desperate to get a roof over their heads and do not necessarily think about, or care, who they deal with; their focus is on the property. This issue is exacerbated by the clear lack of knowledge amongst consumers as highlighted by a recent RICS survey of 1,000 tenants. Despite 92% of tenants saying they were satisfied with their lettings agent, two thirds of those surveyed across England said they had not received an inventory after moving into a property, demonstrating the worryingly low standards expected by tenants.
Also, four out of five renters believe lettings agents are required to abide by a code of practice backed by the Government, the ombudsman or a regulatory body – demonstrating a lack of accessible information on legal requirements of lettings agents. In addition, there is a clear demand for regulation with 87% of renters supporting a single compulsory regulation scheme for letting agents.
One thing in particular has stuck in my memory from last year – a BBC investigation in October exposed groups of London-based lettings agents who were actively discriminating against would-be tenants on the grounds of their race. As I said to the BBC, when I was interviewed on the issue, this sort of practice is absolutely appalling and, sadly, is symptomatic of a market that still remains largely unregulated.
Other findings from the report include: • 89% agree agencies should be made to register with a regulatory body. • 93% support lettings agents being required to meet an industry code of practice. • At least four out of five believe that compulsory regulation would lead to renters: -- Receiving better protection regarding unethical and unfair practices (89%) -- Receiving an improved level of customer service (84%) -- Having a greater understanding of the rental process (83%) -- Trusting letting agents more (80%) This clear lack of awareness, or apathy, from renters on what they should expect from their agent compounds the lack of effective regulation and is leading to potential consumer detriment. From the survey it was also sad to see that renters have come to expect extortionate fees and unfair terms from letting agencies. As an industry we badly need to improve consumer confidence, especially as the market continues to recover. Without the trust of the people we serve we are nothing. In my view, the only way to gain trust is through ethics and knowledge.
“Redress only tackles problems once they arise.” Until a recent amendment was passed in the House of Lords, agents who let property and weren’t a member of a professional body such as RICS could operate completely unchecked. There was no comeback for consumers if things went wrong. After a long industry campaign, of which RICS was a part, the Government finally agreed to introduce compulsory redress schemes for all agents. However, this is not enough to properly protect the consumer, as redress only tackles problems once they arise. Tenants and landlords will still be left exposed as long as agents can continue to operate without any formal qualifications or training. Standards, professional ethics and targeted regulation will make sure that the sort of behaviour the industry has become associated with, like that exposed in the BBC investigation, is stamped out. One of the most effective ways of doing this is to make sure that only those who are properly trained, registered and regulated can operate in the sector.
Until this happens we are unlikely to have heard the last of exposés such as the BBC investigation, and this is something that I would hope to see the Government act on over the coming year. Peter Bolton King RICS
Young Index Report regulation findings Regulation of the Private Rented Sector (PRS) continues to be hotly debated so, in Young Index Q4 2013, we polled a cross-section of landlords on their views of PRS regulation. The Young Index findings show that there is an appetite for increased regulation among landlords with 63.3% of respondents believing that there should be increased regulation of the PRS in one form or another. 36.7% believe there is currently adequate regulation of the PRS. 3.3% (down 13.8% on Q4 2012) believe that only lettings agencies should be compulsorily regulated by a Government body, while 26.7% think regulation should be handled by an industry body. 16.7% of those polled believe that both landlords & letting agencies should have to sign up to be compulsorily regulated by an industry body, while 13.3% believe it should be handled by a Government body. Young Index Q4 2013
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Judienne Wood Non-Executive Director Young Group
Knowledge Is Power In The Private Rented Sector Compliance is paramount for all operators in the Private Rented Sector (PRS) as the failure for not keeping up-to-date with the latest legislation can be costly in financial and brand reputation terms.
As Peter Bolton King mentions on page 4, there are more than 100 pieces of legislation relating to the PRS, so detailed knowledge of the legislation is vital. It’s not enough to have a few expert employees who know the legislation and then expect them to keep tabs on everyone else. Best practice is for all employees to have, at the very least, a basic understanding of PRS legislation. The Housing Act 1988 is predominately there to protect the rights of the tenant so, as an agent, it is your duty of care to protect your client (the landlord) from any potential litigation by making sure all your actions comply with statutory legislation. This is because a breach of a tenancy agreement, through the failure to comply with legislation, could void, and make unenforceable, that tenancy agreement. Most likely this breach will be followed by the tenant claiming for damages against the landlord and the landlord recouping their losses from the agent. An outcome that is likely to end the relationship between the agent and client. Abiding by legislation not only protects the client but also ensures the safety of the tenant. An agency also has to provide a duty of care to the tenants to keep them safe from harm. This is not only important for the possible legal implications but also moral ones. I’m sure there are not many people who would be able to stomach the knowledge that their failure to comply with legislation led to serious harm, or even the loss of life.
Also, as the PRS continues to come under greater scrutiny due to the bad publicity generated by a minority of rogue agents, a major breach of statutory legislation could create adverse publicity for the agent and damage their brand. It’s easy to say that it’s important to be up-to-date with legislation but sometimes it’s not that simple. This is why organisations, such as the Association of Residential Letting Agents (ARLA), regularly publish guidance pre-regulation to help agencies prepare accordingly. Forewarned is definitely forearmed as it enables PRS operators to ensure that they can make, test and implement the necessary adjustments to their processes and procedures in plenty of time.
“Best practice is for all employees to have at the very least a basic understanding of the legislation that runs through the PRS.” Young London, Young Group’s operational business, understands that compliance is part of being a professional organisation, which is why every member of staff undertakes the National Federation of Property Professionals (NFoPP) technical awards. Young London also ensures that, through internal procedures and training, staff stay informed of any changes in legislation and how it impacts the business and their clients.
The importance of undertaking the NFoPP technical awards, and obtaining ARLA membership, can not be understated. The technical awards provide in-depth knowledge of various aspects of the lettings industry including; general law, the legal aspects of lettings & management, residential property letting practice and residential property management practice. Training also provides staff with an understanding of how other departments operate which helps in cross department support and communication. Having staff obtain ARLA membership highlights a business’ dedication to providing clients and residents with the peace of mind that they will be dealt with in the most professional manner possible. Having informed staff, who are fully up-to-date with current legislation and money protection, means that clients, colleagues and residents will be able to trust their ability to make the correct decision. Any organisation that strives towards high levels of professionalism within the PRS will understand that knowledge is essential because it provides the power to avoid costly mistakes. Judienne Wood Young Group
Robert Horsford Managing Director CML Software
Does Your Property Management & Accounting System Work For You? Businesses within the Private Rented Sector (PRS) face the same fundamental challenge as those in every other sector; the need to create, maintain and enhance shareholder value. It’s a tough challenge and the fundamentals of success lie in the management of business risk and increasing profits. Part of the business toolkit is the Management Information System (MIS) and the role of the software provider to the PRS is to design, deploy and support a Property Management & Accounting System (PMAS) which supports management in the achievement of these critical business objectives. The manager of a PRS portfolio requires an unusual blend of critical requirements for their businesses PMAS. Typically, there are several distinct professions operating within a PRS business, each with differing requirements for system functionality. The PMAS must maintain complete connectivity and transparency of data across these multiple disciplines, meaning that the PMAS must be extraordinarily capable and flexible if it is to satisfy the diverse needs of the business.
“A PMAS needs to provide the necessary insight to help with value creating decisions...” Generic Requirements There are areas of PMAS functionality that have generic application for all users and, whilst individually they might not be significant, as a working whole they enhance the system beyond the routine to create a value enhancing business tool. The ability to create a system file note, and attach it to a database record in context, is critical as it allows other users to be apprised of actions being taken in real time. A task management tool ensures that any portfolio task 8
can be logged, assigned, progressed, tracked and completed. Some tasks will be compliance critical so the PMAS should assist management in ensuring adherence to internal compliance standards. Some form of document management functionality is required so that documents can be imported and held within the system and be available to all users. A PMAS must include provisions for users to add their own fields to the database, in context, to accommodate data capture requirements beyond the standard data fields provided. Any unique fields should be held by the PMAS so they can be accessed for analysis and reporting, as with any other standard data field. Accounting Fully embedded industry standard accounting functionality should be a core feature of any PMAS, including the requisite internal controls that one would expect to see in any market leading accounting application. The accounting structure must be sympathetic to the PRS business structure, with due recognition of the legal and physical relationships between legal entities, buildings, units, tenants and leases. Such an arrangement requires the ability to facilitate management reporting at macro, intermediate or micro levels within the portfolio. The PRS portfolio differs from its commercial cousin because it typically will have a high volume of lower value transactions. Consequently, due regard should be given to process automation with the objective of minimising administrative costs within the PRS.
For this purpose the integration of the PMAS with complementary systems (tenant referencing, deposit protection registration, digital document signing etc.) is critical for the expedition of the routine. Such integrated systems have been shown to have tangible benefits in business risk reduction by shortening deal progression times, thereby reducing the incidence of agreements failing before contract.
“Many events are time critical so the PMAS must have an integrated task manager...” System automation, to facilitate the bulk processing of transactions, and integration with modern banking systems are necessary prerequisites for dealing with the high volume of transactions a PRS business will expect. As tenant arrears management is critical to cashflow and business risk management the PMAS must include a competent and flexible arrears processing functionality. Property Management If a PRS business has a property management team they will need a PMAS that has a wide range of features that are critical to risk management. Many events are time critical so the PMAS must have an integrated task manager that can generate actions from standing data, e.g. reminders about annual gas safety testing. Procurement management is central to property management and is critical to business risk and profitability management. Typically the property manager is instructing
services rather than acquiring goods so the procurement system must accommodate this by providing some of the following functionality: • Contractor registration and approval • Produce a scope of works • Request and process quotes • Create, and issue, works orders • Track job progression • Sign off quality standards • Purchase invoice and receipt matching
“Critically the PMAS should be capable of performing useful analysis...” Block Management If the businesses portfolio includes housing built in blocks, with communal areas, then the PMAS will require specialist service charge accounting functionality. A service charge is intrinsically a simple mathematical analysis of costs and apportionment in accordance with the terms of the property leases. However, without a competent PMAS, this can become an expensive and time consuming management liability. Good budgeting functionality, utilised alongside a competent accounting ledger, will keep the process under control. Value Added Reporting A PMAS needs to provide the necessary insight to help with value creating decisions or to neutralise value destruction. The PMAS achieves this by converting data to information via relevant reporting. Traditionally, budgeting with variance analysis is used for this purpose and, while this still has its place,
utilising Key Performance Indicators (KPIs) and exception reporting is equally as effective and these methods have the advantage of timeliness over other historic reporting methods.
“The next stage in the development of a PMAS is its interaction with web portals...” A KPI can be either financial or physical and can be derived from any dataset that produces a valid and meaningful output. For example, a common KPI is the time rental income is in arrears. Tracking this trend would help to quickly identify any abnormal increases in arrears enabling swift recovery action.
The Cloud The next stage in the development of a PMAS is its interaction with web portals. Increasingly, all kinds of entity stakeholders are seeking to interact with the organisation using the internet and the expectation of utility is constantly increasing. The challenge is on for PMAS providers to develop functionality to meet the demand and this is where, at CML Software, we are focussing our resources. Robert Horsford CMLSoftware
The PMAS should provide “drill down” reporting so that, once an adverse trend is identified, it is possible to explore the derivation of the KPI variance by interrogating the dataset to identify what data subset is causing the off-trend performance. Exception reporting has the advantage of brevity in that it will only report an exception to a rule. For example, a PMAS report might seek to list any property with an electrical safety test expiring within the coming working week. Management would expect this to be a null report but any exceptions arising would be highlighted. Critically the PMAS should be capable of performing useful analysis by blending financial and non-financial data. A typical example is yield analysis to identify the types, locations and values of property that offer the best investment proposition. This information will empower portfolio managers to match the best properties to a client, given their objectives and appetite for risk and potential reward.
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Lesley Roberts Director of Consultancy Young Group
Share Perspectives And Insight To Create Added Value “The whole is greater than the sum of its parts.” Keeping this in mind I want to look at the tangible benefits of an effective, crossdiscipline Private Rented Sector (PRS) operating platform and how this can positively affect the bottom line. A fully integrated system can reduce communication issues, improve effectiveness and provide a consistently good service to clients and residents. Recently I found myself in a room full of prestigious property industry professionals, at a Department for Communities and Local Government (DCLG) PRS Taskforce workshop held at the Royal Institution of Chartered Surveyors, and I took a moment during the day to reflect on the varied comments and viewpoints being raised regarding standards in the sector. Whilst pondering the insightful content I considered how one could measure the worth and relevance of the input of each individual to each other, as well as the feedback they were individually receiving from the group as a whole, i.e. how was the value to each individual contributor enhanced by the discussion in the round?
“There is a greater return on the input which increases the potential for working synergies...” It struck me at this point that the mechanisms of a well run group discussion are not dissimilar to a successful cross-discipline operation. If it is done well then there will be significant benefits to the business and its clients. But if it is done poorly then, at worst, it is a disaster which could lead to serious business risk and, at best, a waste of everyone’s time. ‘Siloed’ perspectives that have been brought into a greater context combine to create more than the collective input i.e. the whole becomes greater than the sum of its parts.
As there is a greater return on the input this increases the potential for working synergies which, through a strong communication flow, ultimately delivers business efficiencies that add to the bottom line.
“What is always evident is the need for a mechanism to share information across different areas of the operation...” From a PRS operational point of view, letting and managing large numbers of residential property can be a multifaceted, tricky, sometimes ‘bitsy’, sometimes meaty, multitasking job of varying priorities and returns. A cross-discipline working platform is the mechanism that links all aspects of the business, enabling consistently good service delivery and ultimately that much needed ‘added value’.
I’ve been fortunate enough to work for large international institutions, mid-sized businesses and very small operators, across a variety of industries including mining, hotels and residential property and - regardless of the sector or the scale of the business - I’ve learnt that the proof-point for crossdiscipline platforms is the ability to use the shared information to add value through internal efficiencies, enhanced insight and smooth, ever-advancing, service delivery. So did our individual input at the DCLG PRS Taskforce Workshop add value as a collective? I guess the proof will be in the release of a DCLG endorsed PRS Code of Practice… so watch this space! Lesley Roberts Young Group
So what does a cross-discipline operating platform look like, exactly? Well, it can be many things to many businesses. For an institutional player it could be a fully integrated IT system (think SAP and Oracle), for a smaller scale company it may be as simple as identifying key inter-departmental working processes and information flows, and for a mid-sized operator a mixture of both. What is always evident is the need for a mechanism to share information across different areas of the operation to enable sharing of insight and reporting, leading to consistently good service delivery. 11
Stuart Corbyn Chairman Get Living London
Delivering A New Way Of Renting At East Village As the Sochi 2014 Winter Olympics came to a close it was hard to imagine that it had been nearly two years since the eyes of the world were on a corner of the East End during the London 2012 Games. And, while the spotlight on Stratford may have diminished since the summer of 2012, the level of work and regeneration in the area has only increased. For us at East Village, the new neighbourhood at the former Athletes’ Village, the progress has been particularly significant. Over the past 18 months, what were beds for athletes have been transformed into new homes for Londoners and in November 2013 we welcomed our very first residents. While the Olympic sports venues are making their own strides towards their post-Games use, having the first residents living in a brand new neighbourhood next to the Olympic Park is arguably the strongest legacy of the London Games so far. A History Lesson Before looking at how London’s newest neighbourhood is taking shape, it is worth starting at the beginning with a quick recap on the East Village project. The use of the Village by the world’s best Olympians and Paralympians was effectively just a ‘house warming party’. The development was always designed and built to become long-term new housing. With 2,818 new homes being delivered, the Government and Olympic bodies were keen to quickly embed leading investors and property managers in the project to ensure the huge potential of the legacy neighbourhood was maximised. First out of the starting blocks were our partners at Triathlon Homes, a joint venture between two housing associations (East Thames Group and Southern Housing Group) and developer First Base. In 2009 Triathlon Homes were appointed to own and manage 1,379 of the new homes 12
as affordable housing, with a range of tenures including social rented, intermediate rented, shared ownership and shared equity. In 2011 QDD – a partnership between Qatari Diar and Delancey – were appointed, in a deal worth £557 million, to own and manage the remaining 1,439 homes in the Village, together with the overall freehold of the site and a series of future development plots. A cornerstone of QDD’s bid, and subsequent appointment, was that all 1,439 homes would be available for private rental. So, with Triathlon Homes and QDD in place, the roadmap for the development of East Village was established – 2,818 quality new homes with private and affordable housing integrated on an unprecedented scale.
Listening To London QDD’s purchase of East Village saw the joint venture become one of the UK’s largest PRS landlords almost overnight. In May 2013, to meet the challenges and huge opportunities this created, QDD launched Get Living London – a new residential owner and rental management company. An Olympic development deserved an Olympic-sized vision, so Get Living London set its ambitions high with the aim of changing the way Londoners rent and setting new standards for the PRS. To achieve such lofty aims we knew that listening to the needs of London renters was crucial – a period of extensive research took place with over 2,000 renters sharing their likes, dislikes and ‘pet hates’ of the rental market. This
Get Living London has listened to renters and created a new way of renting – no fees, longterm tenancies and on-site management.
information helped to ensure that Get Living London could offer a new PRS approach that broke the mould. Get Living London decided to turn the landlord-resident relationship on its head by introducing a range of innovative new measures that shifted the balance of power and convenience towards the resident. The thorny issue of the hidden costs of renting was resolved when Get Living London decided to offer its residents transparency and noticeable savings by making a commitment to charging no fees. Research suggests that additional charges, such as administration fees, agency fees and referencing charges, can cost renters around £350. The research also highlighted that, as part of the unsettling nature of renting in London, there was a constant threat to renters due to a lack of tenancy security and the possibility of sharp rental increases. As a result, Get Living London aimed to offer greater certainty in regards to occupation and costs. Residents can have a one, two or three year tenancy with the flexibility of a resident-only break clause and those committing to a longer tenancy will have rental increases fixed to the Consumer Price Index, giving them added peace of mind and transparency on costs. Our approach to long-term tenancies and fixed rental increases has already been applauded by Shelter, highlighting it as “market-leading” and a “guiding light” for the industry. Another main issue highlighted by the research was renters’ frustration with absentee landlords or complicated relationships involving agents and middlemen. Get Living London’s
East Village will be a true neighbourhood with 30 shops, cafes and bars, a school and a medical centre. response was to offer renters the convenience of a direct relationship with a team based on site seven days a week, who would quickly respond to enquiries and issues. So, by listening to the needs and wants of London renters, Get Living London have been able to use the unique scale of East Village to create a new way of renting – no fees, long-term tenancies and on-site lettings and management team to ensure residents get the best service in high-quality homes. Value Adding Partnerships To further add to the rental offer, Get Living London has created a series of unique partnerships with leading brands and services, ensuring apartments are set-up for the styleconscious, tech-savvy renters looking to live in London. A partnership with renowned designer Wayne Hemingway MBE has allowed Get Living London to bring stylish furnishing and interior design to each home with different packages of ‘Best of British’ furniture.
State-of-the-art technology is also built into the homes and all residents receive free 20Mbps fibre optic broadband (through Hyperoptic), free UK phone calls and savings on Sky TV. All of Hyperoptic’s and Sky’s services are activated at check-in to ensure that renters can enjoy super-fast broadband and Sky TV as soon as they move in. Building A Team We have also spent significant time and investment in creating a leading team to manage the Get Living London rental offer. Property Consultants, the front-of-house staff, have been brought on board to deal with enquiries and viewings – with the vast majority of the team coming from customer service backgrounds rather than the property industry. This is because quality customer service, and not a hardsell numbers-driven approach, is the primary driver for Get Living London.
continued overleaf... 13
Taking this ethos one step further, staff bonuses are awarded based on the results of monthly in-depth customer feedback surveys which chart every stage of the rental ‘journey’, from the quality of information on website and marketing materials, to the level of service offered by staff on enquiries, viewings and subsequent move-ins. So, by offering Londoners a convenient new way of renting and hiring a customer-driven team, who are incentivised based on the quality of service they provide, Get Living London has devised a fresh approach that has already struck a positive chord with renters.
“London’s newest neighbourhood is continuing to take shape.” Creating A Neighbourhood Following on from the post-Games transformation works the first homes were handed over in late November 2013, with residents moving straight in. Over the first 50 days more than a 100 properties were let and interest continues unabated as more homes become available. Including the Triathlon Homes’ tenants there are, at the time of writing, over 500 residents living in East Village. But East Village offers more than just new homes and there has been progress towards creating a vibrant neighbourhood. In September 2013 the East Village school, Chobham Academy, opened its doors, offering 1,800 spaces for pupils aged 3-18, with priority places for East Village residents. Chobham Academy is a key part of the new neighbourhood 14
and an important link between families in the local community and the new East Village residents. There is also the Sir Ludwig Guttmann Health Centre, which opened earlier this year, and provides a range of GP and healthcare services. Following closely behind these essential community facilities, a series of retail units are also due to arrive in East Village this summer. A number of the residential buildings in East Village include ground floor retail units with space for more than 30 shops, cafes and bars. With the large retailers and department stores of Westfield Stratford City already on the doorstep, the focus for these retail units has been on smaller, independent shops and services that will offer residents a greater breadth of choice. East Village has already agreed terms on a third of the units with a range of independent retailers, many already based in East London, including an award-winning hair salon, boutique wine shop, dry cleaners, gourmet pizza delivery, cycle shop and two independent coffee operators. To complete the residents’ retail offering, the 30 smaller shops will be complimented by a larger retail unit, set to open in summer, which will house a convenience supermarket, gastro-pub and gym. So, high-quality new homes are starting to be occupied, essential community facilities have opened their doors, and a vibrant mix of retail space will open to offer residents a breadth of choice. It is still early days for the East Village project, using an obvious Olympic analogy, it will be a marathon not a sprint. We have made a strong start
and with more homes now becoming available, there continues to be huge interest with more residents moving in every week. For Get Living London, the PRS deal at East Village was of a size and complexity rarely seen in the industry and we are harnessing this to create an innovative new way of renting which we believe will help raise the bar for the industry. I look forward to updating you all in future on this exciting PRS venture and how London’s newest neighbourhood is continuing to take shape. Stuart Corbyn Get Living London
Michael Oakes Director of Communications Young Group
Turn Reputational Risk Into Magic Reputational risk has often been quoted as one of the principal barriers to entry when it comes to institutional investment in the Private Rented Sector (PRS), and became an issue of mythical proportions following the publication of the Montague Review.
Happily though, two years on, we’re seeing active heavyweight investment in the industry, which proves that reputational risk should be no more of an issue in the PRS than in any other sector. After all, every industry has its own risk factors, yet it doesn’t prevent hotels offering rooms for rent by the night, or airlines from taking to the skies or institutions managing pension funds; all potentially risky and brand damaging activities, but none so much so that they’d be considered to be wholly un-investable… The key to mitigating business risk is twofold: minimising operational risk and maximising brand protection.
“It’s a brave organisation that sets out to be a challenger brand and promises to change a market for the better.” Operational Risk Driving down operational risk can be achieved through operational excellence by employing robust processes and procedures. Make sure that you’ve considered all eventualities, planned for the worst, devised a strategy for ensuring that it doesn’t happen and, for things that are completely out of your control, know how to react should the worst really come to the worst. These are the fundamentals of any business and achieving operational excellence requires a knowledgeable and challenging mind-set.
Ocado is a great example of a superb operational business. The founders had a single objective when they set out in 2000; “To revolutionise the way people shop forever, by giving them a uniquely innovative and greener alternative to traditional grocery shopping.” All of the organisation’s business decisions were sense-checked against this one overriding aim. It led to them partnering with Waitrose and pioneering online grocery retail. Fast forward a decade and when Morrisons were looking to develop an online grocery offering, rather than build their own, they turned to Ocado to leverage their already tried and tested operational platform, safe in the knowledge that it could deliver. Brand Protection Over-promising is dangerous and it’s a brave organisation that sets out to be a challenger brand and promises to change a market for the better. Get it right, however, and the rewards are there to be had. Clear messaging that carefully sets the tone and manages customers’ expectations is critical; as is delivering an experience that consistently exceeds expectations. The best way to gauge whether you’re achieving this is to ask. Continual social media conversations and ongoing, independent monitoring of customer feedback can provide the insight needed to stay on track. Linking this to training and staff remuneration helps to maintain a focus on customer experience while feedback will make sure your service enhancements are having the desired impact.
Adding A Bit Of Magic However, the most robust operational platform, slickest of processes and most engaging brand will only get you so far. To really fly, PRS operators need to add a touch of magic. In my mind, that magic is empowerment; empowerment to flex the processes and bring a little bit of personality to bear; no one should have to deal with an inflexible automaton. This was perfectly demonstrated when I contacted BT to fix my broadband. I had an allocated time slot of between noon and 6pm but the engineer called at 10am saying his previous jobs had finished ahead of schedule and, if convenient, he could arrive earlier than planned. Great news for me, as it would mean fewer hours waiting around at home, but, apparently, not great news for him. When he arrived I found out that by turning up early to fix the issue the job would count as a ‘fail’ in his performance report because he’d “missed” the allocated timeslot by coming earlier. The engineer was being punished for flexing the rules and providing me with an improved customer experience. The moral of this example is that processes and procedures should enable an organisation, not disable it. So, add some magic to a robust operational platform, look after your brand, live by its values and you could change the face of the PRS forever… Michael Oakes Young Group
Howard Morgan Founder & Managing Director RealService
Making Customer Feedback Count When RealService was founded 15 years ago the idea of measuring customer satisfaction within the UK lettings industry was virtually unheard of. In 2014, customer satisfaction measurement has become a core operational skill for many of the leading owners and managers, looking for competitive advantage, in the Private Rented Sector (PRS). For years the PRS in the US has been gathering feedback from residents, and measuring customer satisfaction, but this is a practice that has only just started in the UK, where the PRS is still a developing market. So, what lessons can we learn from the USA and the UK commercial lettings sector? And why bother gathering and measuring customer satisfaction in the first place?
“The best programmes are led and supported from the boardroom.” Talking, listening and responding to residents is not about being altruistic – it’s about being commercial. Being armed with up-to-date resident feedback will enable a company to improve customer service and boost performance in the 3 Rs of real estate – Revenue, Retention and Reputation. High resident mobility in North America means that retention rates in multifamily complexes typically average 60% which is why operators recognise the financial benefits to be gained from building trust and loyalty among residents as a means of enhancing retention. In the US, and increasingly in the UK, a lot of effort goes into building property brands that are recognised and trusted by the customer. There are five key elements that any property brand needs to get right, these are: • Tangibles – The quality of the homes that are let and the property management services delivered. • Reliability – Making sure that the developments and property management services deliver each and every time. 16
• Responsiveness – Reacting quickly to customer needs and wants and rectifying issues quickly. • Assurance – Inspiring trust to help residents sleep easy. • Empathy – Demonstrating an understanding of the changing needs of individual customers and making them feel listened to. Measurement of customers’ satisfaction is one of the tools that can be used to monitor how well a company is doing in these areas but there are operational challenges involved in doing so (more on that later). Measuring customer satisfaction has become a mainstream operational activity among UK commercial landlords like Land Securities, Derwent London and SEGRO. While there are lessons that can be learnt from these companies, when it comes to measuring customer satisfaction, it is important to recognise that there are key differences between the residential and commercial sectors, namely: • You are dealing with people’s homes and this is an emotive topic. • Residential sample sizes, from which to collect data, are larger. • Tenant turnover is usually greater in residential providing the opportunity to collect more feedback. • In the residential sector the customer journey is more easily defined, creating an opportunity to measure satisfaction at key events such as after moving in, contract renewal and exit. At RealService we believe that there are seven operational best practices that need to be navigated when embarking on a customer satisfaction measurement programme.
1. Commitment and leadership The best programmes are led and supported from the boardroom. Commitment is needed to fund, plan and resource the programme effectively and to accept and act on the findings. Commitment is also needed to sensitively deal with feedback. The programme needs to be seen through from beginning to end so if your commitment isn’t genuine then don’t bother starting! 2. Cost The invention of free online survey software, like SurveyMonkey, means that it has become cheap and simple for anyone to pump out a questionnaire and say they are engaging with their customers. However, there is a big difference between just creating a simple questionnaire and having a systematic approach to gathering and utilising customer feedback. While internet surveys can be an effective way to gather quantitative data, they are not as effective at providing the qualitative insights you would receive from conducting interviews. Personal interviews, either by telephone, face-to-face or though focus groups are far more effective at getting beneath the surface of any issues that arise and have the potential to yield far more valuable information. A number of our residential clients, including Young London and Get Living London, are using a combination of web and personal interviews to collect resident feedback, believing the results gathered are worth the extra level of investment. Michael Oakes, Director of Communications at Young London,
says: “Customer feedback is the lifeblood of our business and RealService’s independent and personal interview approach helps us to secure extremely granular, high quality feedback.”
surveys is not always easy. People are pressed for time and increasingly suffering the effects of survey fatigue as organisations clamour for feedback.
It’s important to remember that it’s not just the cost of the survey that needs to be taken into account but also the man hours required to devise, implement, analyse and follow-up on the data collected. Those who undertake the research in-house tend to underestimate the amount of time involved.
The key to maximising response rates, and minimising intrusion, is to explain to people why their views are being requested and how they will be used. For example, Young London and Get Living London explain to residents that their feedback will not only enable them to improve their service but also influences staff remuneration, as it’s based on customer feedback scores rather than transaction-based commission. RealService Senior Consultant Mandy Barash, who conducts personal telephone interviews with residents, says: “Residents really appreciate the fact that you have taken the time to call them personally to gather their views. When you explain why their feedback is so important they are usually more than willing to participate.”
As well as deciding the most appropriate method to use for surveys, a company needs to decide who is going to carry out the study. Using an independent agency helps to ensure that the results are credible to customers, staff, suppliers and investors.
As you are dealing with peoples’ personal details and views, data protection and confidentiality rules need to be agreed upon and respected. There are a number of pitfalls when handling data that need to be planned for. For example, you will need to seek permission to pass on contact details to a third-party research company and should inform residents your plan to do so.
“Often organisations that collect data “in-house” develop a culture of delivering the results that management wants to hear...”
Often organisations that collect data “in-house” develop a culture of delivering the results that management wants to hear rather than the message that the customers want to convey. The survey process can then become self-serving and fail to provide any tangible benefits to the company. When the results lose credibility the measurement programme should be abandoned as it provides no return on the investment (money and time). 4. Co-operation Getting
6. Content When setting up a survey you have to also consider when to ask it. For example, RealService was appointed by Young London to gather feedback at the key points in the relationship; after check-in, renewal and exit. A broad range of topics are covered, including satisfaction with; the rental and contracts process, property management, quality of the marketing
material and their overall experience. Young London receives an email whenever ‘poor’ and ‘excellent’ ratings are given so that they can immediately access interview transcripts to quickly respond to issues. 7. Consistency There is an emerging discussion on how important it is for companies in the PRS to be able to objectively compare customer service performance. This would require the PRS industry to agree some rules for measurement and a forum for benchmarking. There may be lessons to be learned from the RealService Best Practice Group – a not-for-profit benchmarking and best practice group of 20 leading owner, investor and property manager organisations, which was formed ten years ago to provide a forum for the development of benchmarks. Conclusion It has taken 15 years for customer satisfaction measurement to become engrained in everyday operations of the major players in the UK commercial sector. As the PRS in the UK enters a period of expansion, there’s clear evidence that customer satisfaction measurement and the operational expertise required to deliver it, will become a priority issue. It’s easy to pay lip service to the importance of good customer service. But it will be those residential organisations that have the foresight to engage with customers in a disciplined way and measure their performance, that stand to gain the most in terms revenue, retention and reputation. Howard Morgan RealService
Miles Shipside Commercial Director Rightmove
A Window On The World For The Private Rented Sector Young Group Foreword Having great homes, a superb service offering and the most efficient operation is all well and good, but if potential renters aren’t aware of your properties then they will stand empty and generate no income. It may come as no surprise that around 90% of new home searches start online, so it’s vital that PRS operators capture the attention and imagination of surfing searchers. Over the years many property portals have come and gone, and new entrants, such as Agents Mutual and NeedAProperty, continue to launch. However, Rightmove remains the market leader and is now the seventh most visited site in the UK, placing it firmly alongside sites such as Amazon, BBC and eBay. I’m not suggesting that property portals are a marketing panacea but, as a direct channel to reach those who are actively looking for a new home, Rightmove can’t be beaten. So, here, Miles Shipside, Rightmove’s Commercial Director, provides advice on how the Private Rented Sector can get the most out of this virtual shop window.
As a Rightmove Director and housing market analyst, I was approached by Young Group to pen an article with advice on how to improve the quality of online property marketing, especially for portals, to ensure that they show well and attract the best tenants. Some areas of the country have an abundance of available Private Rented Sector (PRS) property, especially in major cities like London, and making sure a property stands out is paramount as the PRS continues to grow. The Market Outlook During 2013 we saw the rate at which new rental properties were being added to Rightmove increase as more investors were attracted by the better returns from property, especially when compared to other asset classes. Data from the Council of Mortgage Lenders shows that there was a 29% increase in loans to buy-to-let investors and we predict that this market growth will keep rental price increases in check during 2014.
We also expect there to be a greater turnover of tenants as those currently renting look to buy, due to more favourable lending criteria. Results from a recent Rightmove ‘Consumer Confidence’ survey show that 32% of UK renters are planning to buy their first home in 2014, a 6% increase compared to 2012. Making properties stand out is more important than ever so I’ve compiled the following tips to help agents make the most out of their online presence. Rightmove Rightmove is experiencing a period of increased activity as the effects of the financial crisis, and all that followed, start to wear off. In January 2014 we recorded ten of Rightmove’s busiest ever days and, for the first time, page views reached 50 million in one day. This means that more than 500 pages were viewed every second. Also, year on year visits to Rightmove are up by 29%, to 69.7 million and
searches via mobile devices accounted for 43% of all page views on the busiest day, which highlights the growing trend for house hunting on the move. Think Mobile
More than a third of all Rightmove traffic, and around a quarter of email leads, now comes from people using a smartphone or tablet. Because of this increase in mobile browsing an agent must make sure that their property presents well on this platform. Rightmove is taking mobile platforms seriously and, as such, we have heavily invested in developing our mobile offering. We have new and updated apps for iOS, Android and Windows with recent tweaks including the ability to clearly display larger images.
We have found that, for optimum results, it is best to ensure that each property listing has between five and nine high quality images. As people are driven by visual stimuli it is paramount that properties look their best when online. To liven up a drab room it is a good idea to give the prospective tenant an idea of what the room might look like once it’s lived in (see Figure 1). Tenants have told us that images of the kitchen and living areas are the most important to them, so it is best to have images focusing on these areas and to make sure they look their best.
Loading any floor plans as separate images helps prospective tenants gain a better understanding of the property’s layout as they can get a sense of scale and use the zoom function to look closely at rooms of interest.
It’s best to keep the text factual, unique and as specific to the property as possible. Try to avoid generic phrasing or using the same text for similar properties.
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Spend time thinking about the unique selling points and features of the property that would attract the attention of a prospective tenant and get them to click through to the property. Conclusion
Since January 2013, all advertisements for rental properties must clearly show the energy rating of the building with an EPC. Failing to display an EPC could lead to £200 fine (per property). It’s also best practice to include the rating as part of the property description.
If you want to make sure that your property stands out from the crowd you should consider using an enhanced feature. At Rightmove we have a range of value added features, including premium listings and featured property adverts. These features help properties to be seen by more prospective tenants and help properties stand out from the competition.
As more properties continue to come to the market, and demand for property increases, 2014 is shaping to be a good year for PRS and hopefully these tips will help set you on the way to getting the best out of your property listings, whether it’s on your own website or on Rightmove. Miles Shipside Rightmove
SHAPING the PRIVATE RENTED SECTOR
P R I V AT E
O P E R AT I O N S
“PRS operators need to think of themselves as retailers.” Neil Young, CEO, Young Group BPF Residential Conference, 2014
Young London Residents’ Drinks Event
To start the conversation call: Neil Young Chief Executive Officer
Lesley Roberts Director of Consultancy
David Mackenzie Director of Asset Management
020 7531 7700 | younggroup.co.uk
David Mackenzie Director of Asset Management Young Group
Sometimes It’s Not What You Know... Currently, articles abound, enthusing about how companies, family offices and individuals are getting into the business of investing in the Private Rented Sector (PRS) in the UK. Whilst there is usually a lot of excitement around the physical product and getting it to completion, it can sometimes seem that the huge piece of work and pre-thought that needs to happen in setting up the ‘operator’ side of the investment, in a nutshell the ‘Asset Management’ of the PRS portfolio, is forgotten. This encompasses everything from algorithmic based pricing, to marketing, release phasing and mix, through to lettings, property management and back office technical support.
“Knowledge and experience of operating assets on a larger scale is something that takes years to assimilate.” Thought leadership in this field is paramount in order to optimise the returns on investment and for future capital preservation and enhancement. Running a PRS operation at this scale has evolved into a complex animal which is proving to add significant value to the overall asset base. A common pitfall is to bolt on a pseudo PRS Asset Management discipline once the physical product is near to completion – often in the guise of a third party high street agency. To an extent this has worked in the past but the PRS is an ever evolving market and it is becoming more complex as it moves from infancy to adulthood at a rapid pace.
At one end, the requirement for local market knowledge is a given, but it is also paramount to understand the wider market and how that is behaving in context. It is often quoted that there is no one ‘housing market’ because, in reality, there are markets within markets within markets. The consumers of PRS products are becoming ever more sophisticated and this requires the operators to break with tradition, and requires them to embrace innovation and flexibility. In order to get the best possible returns, asset management data and accurate management reporting and analysis are crucial. Understanding performance in real time enables fleet-footed flexing of pricing and any incentives; an opportunistic increase in rent of £5 per week across a large portfolio can have a significant annual impact on EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). As a result, often the interests of the asset owner and operator are being aligned at the outset – not just through a simple remuneration model, but aligned for the long term, for instance, through capital performance, or even consumer satisfaction; now there’s a break with tradition!
reputationally – and can consume senior management’s time and effort to unwind, distracting them from more valuable strategic work.
“In order to get the best possible returns, asset management data and accurate management reporting and analysis are crucial.” Turning to a PRS operator with experience brings added value from day one. Their knowledge will drive asset performance from the outset and, with a ready made operational team with the training and experience to spot pitfalls ahead of time, it can help maximise returns and give the consumer a fantastic experience. These characteristics will translate into longer than industry norm tenancy periods, increased absorption rates, lower voids and much more efficient ways of working; all ultimately driving down Gross to Net leakage and driving up capital valuations. David Mackenzie Young Group
Knowledge and experience of operating assets on a larger scale is something that takes years to assimilate. For those new to the sector, unintentionally misinformed decisions are easily made and can often prove to be costly – both financially and 21
Kris Wadia CEO Humanized Leadership
Processing The Profits Businesses operating in the Private Rented Sector (PRS) can increase profitability through Process Improvements.
Let’s begin by understanding the state of the UK PRS in early 2014, using the limited, and sometimes conflicting, datasets available. The UK PRS demonstrates all the characteristics of an immature market in that: • 89% of landlords are private individuals and are responsible for 71% of all dwellings in the PRS (DCLG Private Landlord Survey 2010) • 78% of all landlords only own a single dwelling for rent (DCLG Private Landlords Survey 2010) • Only 8% of landlords stated they were full time landlords (DCLG Private Landlords Survey 2010) • There has been an increase, from 2,445,000 households in 2005 to 3,483,000 households in 2011-2012, within the PRS (DCLG Committee – First Report The Private Rented Sector). The result? A cottage industry of individuals supplementing their income, or funding their retirement, through an investment vehicle that they manage on a part-time and ‘best efforts’ basis. This dysfunctional approach invites near daily newspaper headlines about rogue landlords, unsuitable tenants, dilapidated premises and increasingly stringent conditions on buy-to-let lending. So, is there a magic wand that will solve all problems and improve profitability for businesses that provide investment, development, asset management, lettings and property management services to the PRS? Probably not… but they could make a positive start by revisiting a simple discipline called 22
Process, and its application within their own operations. Simply put, a Process is a series of actions, changes or functions bringing about a result. When implemented correctly, it manifests itself to customers in the form of effective customer service, whilst saving the business a significant amount of time and money. If ignored, or implemented poorly, the impact on the bottom line will be painful both in the short and long terms. Figure 1
Let’s take a real life example. In Figure 1 (below) there are three emails from Vodafone as part of the renewal of a mobile phone contract. Based on their robust back-end processes, the emails allow a customer to track the progress of their order from placement through to warehousing, right up to the estimated delivery date and time of their shiny new phone. Quite rightly, the functional and technical specifications that underpin this complex stream of activity are invisible to the customer. But by
keeping the customer constantly updated, simply using email, the Vodafone brand conveys an image of seamless efficiency. More importantly, from a cost perspective, it materially reduces the number of enquiries to its Call Centre, resulting in a negligible ‘cost-to-serve’ of its existing customer base and, by inference, improved profitability. So, what are the steps for any business that decides to pay attention to Process Improvement? Depending on scale, complexity and budget, it can either hire a global Process Improvement Consulting firm or a local independent, who will begin by helping to define the end state, project plan, milestones and deliverables. There is an important, and sometimes unrecognised, advantage in hiring an outsider to help. It allows someone to ask that all important question – “Why?” – and not accept the glib response that derails most Process Improvement Programs … “Because we have always done it this way!”. Process Improvement consultants can also bring some of the latest industry developments into play to significantly alter the operations of the business. Key amongst these are Outsourcing (or even Offshoring) and Cloud Technology. Let’s examine each one in a bit more detail. Outsourcing Outsourcing involves handing over a function or activity to a company who is better positioned to undertake it, usually with cost savings and quality improvements. If the services are performed outside the UK, typically in low cost locations such
as India, the activity is referred to as Offshoring. So, for example, an Asset Management business employing 50 people could Outsource or Offshore some of its Finance functions, such as payroll processing, time and expense reporting, accounts payable and more. Cloud Technology Cloud Technology includes, amongst other things, the ability to access applications and data when outside the office. Using another example, a property development company could subscribe to, for example, Microsoft Office365 for £10 per user, per month. Each employee would then have access to email plus all the usual software, such as Word, Excel, Powerpoint, etc, and each user could also retrieve any of the files stored in the Cloud (in this case OneDrive) on practically any device ranging from a laptop, tablet and even a smartphone. All of which reduces the need for an in-house IT department with all its associated costs. Process Improvements can be implemented across multiple dimensions. These could include horizontal activities such as all the tasks associated with a new order, regardless of whether the department involved was marketing, finance, warehousing or customer service. Alternatively, there could be vertical process improvements, which typically takes place within a single division, department or function. A well thought out Process Improvement Program can also serve to provide a business with key differentiators vis-à-vis their competition, often known as their Unique Selling Proposition (USP).
Take the case of Young Group, who recently replaced their accounting systems. Instead of simply replicating their original system, they listened to their clients’ requirements, one of which related to annual UK tax returns. The need was, prima facie, simple as they wanted to give their clients data on the rents received and expenses incurred in the same format as that required by Section UKP2 (Qs 20-43) of the UK tax return. Not only would this save the clients endless hours reconciling data provided by Young Group but also avoid introducing unintended (and potentially expensive) errors. Thanks to their Process Improvement Program, they can now provide the necessary data in the relevant configuration, thereby strengthening their valuable brand (and existing customer loyalty) even further. Once the base Process Improvement Program recommendations have been implemented, there is still scope for continuous improvement. Over time, robust business processes can be industrialised and automated, making the cost savings even greater. The key stumbling block, as with most things in life, appears to be ‘getting started’, given the multiple demands on the time of a typical PRS business owner. So, how can we summarise the impact of Process Improvement on businesses that service the PRS? Boring? Possibly. Profitable? Definitely! Kris Wadia firstname.lastname@example.org
Neil Young CEO Young Group & Young London
PRS Operations: Why Function When You Can Really Fly? With its focus on operational aspects of the Private Rented Sector (PRS), this edition of PRSupdate has gathered together a selection of articles that gives a flavour of the elements required in managing PRS assets on a day-to-day basis. Undoubtedly clearly defined processes, supported by robust procedures are at the heart of successful PRS operations, as Kris Wadia explains on page 22. Kris was, until recently, a Managing Director with Accenture, a global consulting organisation. He is now CEO of Humanized Leadership, which advises businesses on profit improvement. However, it is how those processes are brought to life within the business and delivered (both internally and externally), and the tools that are employed that have the potential to differentiate between a business that functions and a business that flies. However, it’s not enough to merely identify the tools required. Whilst they can each add value in isolation, expertise is required not only in seeking out the best in class providers, but also in crafting the different elements into a cohesive cross-discipline toolkit. As Lesley Roberts explains on page 11, it’s only then that real added value can be derived. Identifying the right tools for the PRS operators’ toolkit is not as simple as it might appear. It requires suppliers and partner providers to share one’s vision and aspirations to move the PRS forward. It’s vital to find like-minded organisations that are willing to work together to develop their solutions to meet our ever-advancing needs. Our Management Information System (MIS) provider CML is a good example. When Young Group’s operational platform business, Young London, wanted to offer potential residents the option to complete their tenancy paperwork online, CML (featured 24
on page 8) worked with the team to bring the functionality within the MIS. This ensured that internal processes, external communication and compliance reporting is seamless and remains within a single system. And in our quest for Young London to offer a paperless operation, CML worked with our inventory software provider to the same effect. They share our vision of delivering an enhanced customer experience to support our business objectives – in this instance through development of their software product.
“There’s no single, straightforward one size fits all approach to operating in the PRS...” Those of you familiar with Young Group will know that this focus on customer experience runs through all that we do. In partnering with RealService (page 14), the independent customer service monitoring company, we gain live business insight at an incredibly granular level that’s fed back into our service delivery department and informs our ongoing training and development programme. Peter Bolton King, on page 4, discusses the impact that poor practice, by a small minority of agents, in the PRS has on the sector as a whole. I firmly believe that the key to stamping this out is to lead by example; to deliver a professional customer experience that becomes the norm in the industry and creates an expectation among
residents and prospective residents of the standards that they should demand from operators within the PRS. Clearly, there’s no single, straightforward one size fits all approach to operating in the PRS, but there are common themes that flow through the expectations of all customer groups; flexibility, consistency, responsiveness and communication. These are the elements that, when woven into business processes and procedures will raise the standing of the sector. Essentially, PRS companies are retailers and should be using all of the items in a retail business’ toolkit to match potential renters to their homes. The tenets of great customer experience are well practiced in the retail sector (as well as the hospitality and leisure industries), and I believe that:
Get this equation right and the oftenquoted issue of reputational risk can be mitigated, as Michael Oakes explains in more detail on page 17. John Lewis is a great example – not only because it’s recognised for delivering customer service – but also because it combines fantastic, efficient behind the scenes processes to deliver: Flexibility: You can choose to shop instore or online. You can collect from a store or choose from a range of delivery options. Consistency: The quality control of product (and service) is closely monitored and maintained.
Responsiveness: Instore, footfall and queue length are monitored and modelled to ensure wait times are low while online, stock levels are checked in real-time and orders confirmed and processed immediately. Communication: Instore, John Lewis advisors are well informed and on hand to assist and for click and collect or delivered items, automated progress updates are accurate and timely. As a PRS-specific example, Young London’s prospective residents have a choice about how they’d like to interact with us. For instance they can physically sign a copy of their AST in the office, they can receive it by post to sign and return or they can sign their AST electronically, so we can provide it by email, via Facebook messenger or direct tweet. Our preference may be for online signing (due to the audit trail, speed and efficiency), however, we recognise that different customers have different preferences and circumstances that mean we need to be flexible enough to offer an option that suits them. Our job is to ensure that our internal procedures make the delivery of that element of the process completely seamless, irrespective of the customer’s choice. Having the ability to anticipate a customer’s need, and the flexibility to evolve the service offerings to meet that need (and to shape it in some instances), is key to staying ahead in the PRS. Insight is critical and the huge advances being made in access to, and interpretation of, ‘Big Data’ will definitely separate the PRS wheat from the chaff. It’s this approach to bringing the
best operational elements together to deliver flexibility, consistency, responsiveness and timely communication that created the proven platform that underpins Young Group’s success. Our clients benefit from being able to experience Young London in operation, effectively seeing the platform in action and gaining comfort from the proof points of Young London’s achievements (25 industry and business awards in the past six years – and currently the UK Property Awards’ Best UK Agency 2013-14).
“Choose your PRS operational partner carefully; they have the ability to transform your business...” Operational management of PRS assets is a specialised area and, contrary to what you may hear on the ‘property circuit’, highly skilled PRS operators are active in the market. Young Group has been quietly getting on with the business of shaping the PRS for a decade and is now working on a number of the largest, most high profile and commercially sensitive PRS projects in the UK, with an asset value of £1.5billion and strategic pipeline of new business that is projected to exceed £4billion.
spared the time to write articles for our suite of PRSupdate publications, both online and in print over the years. Knowledge sharing and developing defined standards of best practice are vital if the PRS is to reach its full potential and I’m proud that our clients and partners embrace that. In building a cohesive platform that incorporates all the elements required to deliver for the sector, Young Group has trialled and discounted a wide range of providers; to coin a phrase, ‘we’ve had to kiss a lot of frogs to find the right partners’. Even with a robust proprietary platform available, operations aren’t a bolt-on that can be added at the point of go-live. As David Mackenzie points out on page 21, in order to get the very best performance from PRS assets, operational considerations need to be an integral part of the investment strategy, planning process, build and fit out phases, lettings strategy and marketing planning, prior to delivery, or acquisition, of PRS assets. So if I can leave you with one last thought, it is this. Choose your PRS operational partner carefully; they have the ability to transform your business from one that functions into one that flies… We look forward to hearing from you. Neil Young Young Group
Young Group works with developers, housing associations, private clients and institutional investors, all of whom share a common understanding of the need for PRS operations to be considered across all points of the assets’ lifecycle. I’m grateful that so many clients - and partners - have 25
Our Customer Service Commitment Young London wants to be AMAZING Since our beginnings we’ve questioned everything about ‘traditional’ estate agency. We look at everything afresh. We build lasting relationships with landlords and residents by delivering ‘AMAZING’ customer service. We’ve broken the ‘traditional’ remuneration model; staff are rewarded on their customers’ feedback NOT on commission. We keep as many aspects of the business as possible in-house, to remain accountable to our clients. Our approach has been proven through business growth and acclaimed by numerous awards.
We want to amaze YOU. . .
Young Group has been shaping the Private Rented Sector for a decade, having built an enviable reputation for delivering robust asset management supported by a proven customer-centric lettings and property management platform. Young Group’s operational business, Young London, has won multiple awards for the quality of its service and forward thinking approach to the day-to-day management of PRS assets, tenancies and resident services, from The Times, The Sunday Times, HSBC and Bloomberg. Recently, the International Property Awards crowned Young London the Best UK Lettings Agency 2013/14. Young Group’s clients include institutional investors, corporates, developers and housing associations. We provide a respected, tried and tested – yet ever advancing – operational platform to our PRS clients, as well as consultancy services.
Neil Young ACMA CGMA MARLA Chief Executive Officer email@example.com
David Mackenzie FCMA CGMA MARLA Director of Asset Management firstname.lastname@example.org
Canary Wharf Hub 30 Marsh Wall London E14 9TP +44 (0)20 7531 7700
London Bridge Hub 128 Webber Street London SE1 0QL www.younggroup.co.uk
+44 (0)20 7593 3300