Surveying and BTR: valuing and maintaining a lifestyle
A Build to Rent scheme, whether traditional BTR or a BTR suburban community, is a complex, inter-related and intertwined selection of diverse uses: from residential units to restaurants, home working facilities to hospitality suites and shops to swimming pools, each component requires a different approach within the context of our work as surveyors.
New approaches to valuation
But unlike those on a high street or housing development, these wide-ranging facilities are part of a single entity. Determining the value of that entity is more complicated than carrying out a set of independent valuations. And yet the standard method of valuation - finding a comparable in the local market – is not usually possible.
And it’s not bricks and mortar that is being valued: a concierge service is much more than a reception desk and an office; a car club is much more than a car park.
Build cost indices enable us to calculate very accurately what a swimming pool, shop or house costs to build, but not whether it's viable as a business. And in a future BTR suburban community, the swimming pool is unlikely to be a business entity in itself; instead, it is part of a wider service and should be valued in that context. After all, an under-used (uncrowded) pool is likely to appear more attractive than a crowded pool. And if the location of the pool generates footfall for other components of the scheme, its value is significant, albeit intangible.
Added complications in valuing alternate uses include a lack of comparable evidence and the need to consider both the profitability of the business and the value of the physical building. Consequently, valuations and acquisition reports differ significantly in the case of BTR.
The importance of PPM and future-proofing
We work for a number of existing residential-led communities, which include a wide range of services, and as such have much in common with BTR suburban communities. These include later living schemes which similarly provide both homes and services. So the BTR suburban communities model isn’t new to us, it’s an extension of what we do already.
The role of planned preventative maintenance (PPM) is important in ensuring that each property retains its value and to prevent lengthy void periods. Leasehold services are vital for putting in place inventories, assessing and quickly rectifying any damage. Three Sixty Space has a maintenance team which, combined with our annual inspections, maintains the condition of both individual properties and the wider environment. But in the context of a long-term rental investment, considerations about maintenance should also take place at the design stage – for example, in ensuring that durable products are used to avoid repairs and refits.
As it does in the case of so many other property services, BTR poses challenges to standard surveying practices. But these challenges are not insurmountable: they require us to think differently, and to take inspiration from other sectors. Holiday parks, later living schemes, even the structures of PCP car financing give us insights into this nascent product, enabling us to understand its nuances while providing valuations and other services consistent with RICS guidance. And at LRG we are committed to learning and expanding our skills as property diversifies into fascinating new sectors.