Why has Atlas Residential chosen the UK market over other European markets?
The UK residential market, and specifically the private rented sector, is the closest in Europe to the North American model, which we are familiar with, having owned and operated there since the early 1990s. For example, rent control, which is more common on the continent, is largely absent from the UK (with the exception of Scotland) and therefore the country is better suited to an ‘active’ property manager like Atlas, which seeks to drive revenue via the delivery of good on-site property management and maintenance, and in particular the provision of ancillary resident amenities and services.
We’ve seen investment into build-to-rent (BtR) schemes across various regions in the UK. Which areas are the most attractive?
Approximately 60 percent of the known BtR schemes in planning, construction or operation are in London, which continues to demonstrate strong demand at both the investor and customer level.
However, Atlas also identifies value in locations that display positive job and population growth and good transport infrastructure, such as Birmingham, Leeds and Manchester, to name just a few regional locations that sit within our pipeline.
Do you believe the BtR sector, or private rented sector (PRS), in the UK will experience the levels of investor demand seen in the US?
Yes, relative to the size of its market. Subtle differences exist at the investment level, for example, real estate tax in the US is paid by the landlord. No such tax exists in the UK—the closest thing would be council tax, a pass-through tax paid by the resident.
The primary difference in the UK market at the resident level is the absence of customer service. In the US, the customer is king and is treated as such.
For the most part, both markets function in the same way in that they are lightly regulated ‘free’ markets. The main observation we have is that the US is 20 years or more ahead of the UK in terms of maturity. Being both a US- and UK-owner and operator we feel this gives us a tremendous advantage in the UK, as we feel that we have ‘seen this movie before’ and know how it turns out.
What are the challenges and opportunities facing the UK BtR market?
Construction cost inflation continues to be a perennial challenge that we anticipate may be exacerbated depending on the outcome of the Brexit negotiations vis-à-vis the free movement of labour. The other challenge is asset price inflation, which always occurs at this point in every real estate cycle. Our working assumption is that assets are generally over-priced and due a correction.
How does Atlas Residential plan to raise the standards in the BtR market in the UK?
Through the introduction and rollout of its tried-and-tested US operational model, which has been nuanced to succeed in the UK, focusing on good customer services, high levels of resident satisfaction and retention, and the provision of on-site amenities not previously witnessed by the UK consumer.