Private rented sector will be ‘unrecognisable within five years’, claims property entrepreneur

“IN five years time this industry will be unrecognisable” said chief executive of Eddisons Residential, Graham Bates.

With a pair of Prada specs on, Mr Bates looks like he could be sunning himself on a beach somewhere, but that could also be his cheerful demeanour and passion for his industry.

I popped by the Eddisons Residential offices to discuss the Private Residential Sector (PRS) a subject close to Graham Bates’ heart, and a big project on which he and his 60-strong team have been working for two years.

Eddisons Residential has been led by Graham and his sister, managing director Helen, for the past six years as a joint venture with Eddisons Commercial before the two took full control in a buy-out last October.

Initially the brother-and-sister team had seen a gap in the market for dealing with distressed assets, which proved highly successful and Eddisons Residential now manages 11,000 properties across the UK.

They have now seen a similar gap for PRS. Eddisons Residential is already a specialist PRS operator, currently advising on almost 5,000 residential units nationwide, and now the firm is launching the brand LIV to focus specifically on this market.

Mr Bates said: “The buy-to-let sector has grown up as a cottage industry of small landlords but this is not the future of the private rented sector in the UK. Going forward it is about building specifically to rent with a single owner controlling an entire building. We have been living and breathing the new world of PRS for the past two years and with LIV we will play a key role in redefining the private rental sector.

“The benefits of this new approach to PRS is that investors are involved from start to finish. That means buildings are better designed with every element planned carefully with long-term rental in mind. The result will be better returns for investors but importantly better quality homes for rent with better services for tenants.

“For me, the new PRS market we’re seeing develop is a massive plus for the private tenant. Investors with household names are getting involved and they have big reputations to uphold so the quality of what is delivered will be under constant scrutiny.

“These days city living is hugely popular, and people are renting not only because of affordability issues but out of choice. People have more transient careers and like the flexibility of the lifestyle, and these factors have been a big driver in the growth of PRS.”

Eddisons Residential

Eddisons Residential 

Mr Bates said: “We are already seeing see large scale institutional investors such as AIG, Aviva and M&G, who have largely avoided residential previously, making big commitments to PRS, which we expect to grow in a similar way to the US model.”

Mr Bates said that in Europe and the US, institutional investment in the private rental sector is the norm, with major investors developing purpose-built sites for renting under single ownership, and on a large scale.

“One key element of a true PRS building is the management operation with all aspects of property management including lettings and block management under the same roof. LIV is developing management operating models years in advance of buildings being completed because the operating costs are a key factor for institutional appraisal.

PRS is expected to become a major asset class according to Mr Bates, and with London values making it difficult to achieve rental returns, the big players are now focusing on the regions, which includes not only prime locations such as Manchester but also secondary cities where there is still big rental demand.

In Manchester, LIV has been retained to help develop the operating model for Angel Gardens, which is being developed by Moda Living.

It will include 450 units of differing sizes, with the services and amenities including a cinema, gym, lounge and bar, and it plans to be one of the first new wave of PRS sites, providing large scale, purpose built rental accommodation under single corporate ownership.

Mr Bates said: “Manchester is currently the number one city people are looking at for PRS with Birmingham also a key target. Leeds and other Yorkshire cities are slightly behind the curve but this will change.

“For example, LIV is currently working with AIG on delivery of a new 330 unit PRS scheme on the edge of Leeds city centre where huge attention to detail is being paid to create an outstanding living community.

The appetite for PRS investment is growing, which is why we invested two years ago in the launch of LIV.”

He added: “LIV has been born as a holistic management firm for properties built to rent and owned by a single investor. As the operator we will manage tenant relationships as well as the buildings themselves. Buy-to-let landlords need to pay attention to what is happening in the sector because they are going to face significant competition from institutions with deep pockets and tenants will have far greater choice of better quality homes to rent.

“At LIV, we are aiming to revolutionise the customer experience for the tenant, and provide a total institutional standard management solution for corporate owners”

From inception of a development working as part of the project team to help shape the way buildings are created, through to total management, including smart app-driven technology that will significantly improve the way services are delivered to tenants, LIV has spent two years in refining its business model.

Mr Bates said: “The aim is not only for people to want to rent properties in our PRS portfolio but to want to stay and this will only happen if we can deliver superbly designed buildings with a great service offer designed with the needs of the tenant at the heart of the proposition.”