PRIVATE RENTED SECTOR
I’m proud of the journey we’ve been on to position ourselves as one of Manchester’s leading Property Management Companies and I’d go as far as to say that we are one of the best in our field at what we do. It’s been done through a period of real depression in residential property and it’s the past – the future is far more promising for both residential and Manchester.
PRS – What are we talking about
Rather than debate that here, I’ll put it very simply what area I regard as PRS as the Private Rented Sector is one that been around for a while. I am talking about City Centre High Density Housing (apartments and flats in old money) which have been designed from the outset to rent to customers and owned by one asset owner and managed by one asset manager.
I am hosting a Breakfast panel discussion on Wednesday in MIPIM (Cannes) at the Manchester bar and one thing that is a given, nationally and locally, is the all-time high demand that has been doubling since 2005 due to PRS. That’s a doubling of Private Renters not social housing stock and this has been coupled with minimal or no supply of stock in the regions. Manchester needs more apartments and needs a lot of them over the course of many years to meet the demand the city has and for it to grow alongside its aspirations.
Manchester Place has the inviable task of working with partners to deliver 55k homes in around 15 years. These won’t all be flats but we assess there’s around 30 schemes or so in the public domain with around 12k units being flats in Manchester and Salford. I believe those apartments could arrive soon enough.
Will PRS / Build To Rent on this scale Work?
Renting in the city centre is not new, 83% of our city centre units are buy to let but the way in which this market will evolve will be new over the next 5 years. PRS or Build to Rent works financially from Management and Life Cycle cost point of view – we’ve modelled several sized schemes and compared with the typical freeholder, letting agent and managing agent approach and costs savings are 40% or so.
PRS scheme should be viewed as Net Operating Income and whilst this is impacted on every aspect of the design, management and type of services you wish to provide, we believe this can range from 70 to 80% Net, most sensible scheme costs account for around 21 to 25% of gross revenue.
Moreover, going back to the customer (formerly known as a tenant), developments and the apartments, including the type, furniture and finishes, can be designed with them in mind from the outset as the PRS scheme will want a long standing relationship with their market. I honestly believe we’ll see an exodus of tenants from private rented stock that’s 10 years old into the new, better equipped schemes as PRS schemes hit the market in 2016 to 2018.
For Residential Asset Managers like ourselves, the whole dynamic changes. Many agents see apartment owners as a bottomless pit of charges and levies to make up for their poor cost management of a scheme. Having one agent looking after the scheme, the apartments and the customers appointed by the Asset Owner changes this completely and I believe PRS will see a natural improvement in quality on this aspect alone.
New Look Residential
With the scale of schemes (300 to 800 units), cost and scale efficiencies, focus on customer care and quality management and a whole range of new facilities and services, the landscape of residential is about to change. I think it couldn’t come soon enough and I am 100% confident it will be far better than the last curve.
We’ll be posting lots more on www.manchesterprs.co.uk from our work out here in MIPIM and the residential survey conducted in the preceding 3 months, including a very colourful and we hope, insightful infographic.