September 4, 2019
At Womble Bond Dickinson, we are proud of our long association with new build for sales market and the private rented sector (PRS). PRS has formed a significant and important part of our business for over a century, long before it became the ‘red hot’ real estate investment it is today.
There are an estimated two million residential landlords and five million tenants in the UK and these figures are forecasted to rise dramatically – partly fuelled by challenges around homeownership affordability, the end of Help To Buy and stimulated by the high quality service on offer by institutional landlords rapidly developing purpose-built residential communities for rent at scale.
Renting is increasingly a choice for people where a degree of flexibility and high standards of service or amenities are a priority. Investors have been quick to respond and investment in the sector has grown exponentially. Between £25-£35 billion is committed to the building of new purpose-built rental accommodation in the UK.
A few years ago, we were talking about ‘millennials’ and ‘generation rent’ and an assumption that 18-to-30-year-olds would form the bulk of the customers. While they remain an essential part of the customer base, the ‘silver economy’ is now very much relevant to PRS.
The silver economy is the buying power of anyone aged over 50. Merrill Lynch recently estimated the global silver economy be $7 trillion – the third largest economy in the world. People are working and living longer, the buying power of this section of society grows and what also changes are the requirements of people over 50.
This presents challenges and opportunities for stakeholders in PRS. If purpose-built
new communities are designed with a mixed tenant demographic in mind, including the silver economy, the outcome will be long-term sustainable communities desirable to a larger customer base, with obvious benefits for customers and investors.
An advantage of Womble Bond Dickinson being a transatlantic law firm is that we benefit from unique insights form the PRS market in the US, known either as multi-family (for blocks of flats) or single family (for houses). They don’t have the historic pre-disposition to homeownership that we have in the UK and rental housing represents a hugely significant part of their real estate market. We can look to the mature US rental market, which has been through multiple cycles, to identify trends. Much of the current literature and research coming out of the US is identifying a pattern of significant demand growth for single-family housing as the age profile of the customer base rises and their requirements for space for family-living are suited better to single family housing, rather than multi- family housing.
So does this all point to the silver economy becoming even more important to the UK PRS market in the coming years? It’s simplistic to state that what happens in the US follows in the UK but I would not be alone in predicting this market trend. The scale of the silver economy as it currently stands can’t be ignored.
How do those involved in PRS work out what the silver economy needs when it comes to new homes? There is no better place to start answering that question than at the National Innovation Centre for Ageing (NICA), based in Newcastle. NICA is at the forefront of research and development of new ageing and data-orientated products and services. If you want data-driven facts about the requirements of the silver economy when it comes to housing, then NICA is the place to go.
At Womble Bond Dickinson, our door is always open too. We are happy to share our experiences in the sector, gained from a significant track record of acting for investors, developers, local authorities and other stakeholders in both the build for rent and the build for sale markets.
Womble Bond Dickinson
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