Within Manchester & Salford, c. 20,000 BTR apartments are under construction, with the first wave of purpose-built developments coming to market. Occupiers are demanding fresh ideas and high quality. Here our director, Mike Perry, gives his advice on how developers can make the most of this niche class asset by striking a careful balance between capital investment and annual leave. See what he has to say..
“Meeting the developer’s and occupiers’ desire for quality, amenities, services and support needs to be carefully balanced against the commercial viability of a scheme, given that land values and build costs have continued to rise over recent years relative to rent levels.
Design teams must acknowledge that amenity space and facilities will be major differentiators for potential tenants, potentially outweighing the investment in architecture or high-end fixtures that would be more standard in a ‘for-sale’ model. Amenity spaces such as gyms, business areas, cafes and creches may be viewed more favourably by potential tenants. Areas that can be hired for private functions will also be popular, and communal outdoor spaces – roof gardens, green areas, quiet corners – will be important for families.
What is unique about the BTR model is that it is creating small communities and the objective of the BTR operators is to make the life of the occupier as easy as possible as well as providing the best facilities. These two key points are often seen as greater attractions than the actual specification of the apartments.
With any project, design and specification must be balanced against its ultimate viability, and BTR developments are no exception. Successful BTR schemes understand the need to create a demand based product, not a supply based product.
Branding will create a crucial part in helping create a specific BTR offer and the case for consistency of branding across materials and products, and the use of brand guidelines will help drive cost effective procurement.
Many tenants will hold relatively short leases, and so operators will need to attract a steady stream of new occupiers to keep revenues flowing.
With fragmented ‘buy to let’ being the only product in the market at present, there is little industry wide understanding about what amenities do occupiers look for and are some best provided for in common areas? What additional services will tenants pay a premium for and what would be the expected standard? Clearly optimising yields depends on a clearer understanding of these aspects of product design.”
“At Abacus we are currently delivering in excess of 2,000 BTR units within the North West with a variety of amenity provision. The desire to provide amenities to promote brands to meet the ever increasing demands of occupiers, developers and designers must carefully consider the design of the apartments to ensure sufficient monies can be allocated to these common areas, amenities and branding. It is critical to the success of a scheme that key parameters are carefully considered:
Net:Gross ratio – The building’s efficiency will be affected by the amount of amenity space. While more amenity space means a less efficient building, good amenities may help attract a higher rental value.
Wall:Floor ratio – Clearly this has a significant impact on viability, as the external façade generally contributes approximately 15 – 18% to the overall construction cost. The height of the building will also trigger many other cost drivers namely:
– Frame solution
– Façade strategy
– Lift traffic analysis
– Intermediary plant space provision
– Fire Strategy
– Material transportation and handling
– Programme duration.
– Contractor and sub-contractor selection
Balconies – Balconies are not being driven by consumer demand and appear to be used as additional storage space.
Car Parking – “Basement car parking is extremely expensive and has a dramatic impact on a projects viability. Minimising car park numbers or incorporating and element of surface or undercroft parking is a preference.
Overall, an effective building shape and core arrangement can mean the difference between a viable scheme and a non-viable one.”