Housed: The Shared Living Podcast

Audience Q&A Special: Is BTR better than PBSA? Is the Uni Resi Experience still Relevant? What do Neurodiverse Residents Need? And Rental Growth vs Ops Budgets.

• Season 4 • Episode 12

Share episode

Send us a text

For the last episode in season four of Housed we opened the floor to our listeners and asked them to send in any questions. A huge thank you to Matt Burton of UPP, Seb Horst of Host, Benjamin Hall of LOFT, Noella Colingridge and Tom Ferber of HOMIE for contributing.

Sarah, Dan and Deenie discuss:
- Is a uni residential experience still a priority?
- Is neurodiversity being considered in building design?
- How can BTR do all the things PBSA say they can't?
- Are operators being realistic about budgets and does good interior design support rental growth?

PLUS find out what Housed has in store for the summer...

Thank you to our season four sponsors:
MyStudentHalls - Find your ideal student accommodation across the UK.
Utopi - The smart building platform helping real estate owners protect the value of their assets.
Washstation - Leading provider of laundry solutions for Communal and Campus living throughout the UK and Ireland.


Speaker 1:

Hello everyone and welcome back to How's the Shared Living podcast. This is the 12th and final episode in season four and we're as grateful as ever to have you with us every week as we update you with the latest news, views and opinions from the world of shared living. The last three months have been brilliant. Thank you so much for listening week in, week out. I'm Sarah Canning from the Property Marketing Strategists.

Speaker 2:

Brian Smith from Resi Consultancy and I'm Deanie Lee from the Property Marketing Strategists. I'm Dan Smith from Resi Consultancy.

Speaker 1:

And I'm Daini Lee from the Property Marketing Strategists. And also a huge thank you to our sponsors. Let's hear from our headline sponsor first, season 4 of Housed is sponsored by mystudenthallscom.

Speaker 3:

List your properties, commission free and reach thousands of students searching for their university home.

Speaker 1:

Dan and the team have been supporters of HALES since the beginning and, in very exciting news, we can confirm that my Student Halls, Utopia and Wash Station, are all coming back for Season 5 in September. We're so glad that sponsoring HALES has worked so well for you and we're delighted that we're working with you again. So if any listeners are wanting partnerships, there are many other ways you can get involved. Just drop us a note to find out more. Now this episode is our traditional Q&A episode, where we have given over all the content to you and your questions, so let's dive straight in Now. We're going to start with a question from Matt Burton, the Chief Partnerships Officer at UPP. He said I'm really interested in how we can, as a sector, talk with more clarity about the benefits of a residential experience at university. Does it matter? What benefits does it bring? How do we speak with clarity when being faced with the cost of living challenge, and what are the drivers to recruit more locally, even if it means more commuters? What do you guys think?

Speaker 3:

um, I was really glad that matt asked this question because back at my time at clv it was something that I worked really hard to to try and make happen was to do some research on actually what is the benefit of offering a residential program within accommodation. Does it help people to retain in their degree, to stay in their degree? Does it improve their kind of mental well-being? And actually I don't think there's still any research on this. I don't think we still know the answer and I think Matt's absolutely right we need to know the answer. We need to know about if we can invest in these programs. What's the benefits and outcomes from that? And I think, all told, we all think it does add value, and it probably does, and it does bring that sense of community. It does bring that sense of belonging which we all know is important to mental wellbeing. But we don't have any hard cold facts on it and I think it's still a piece of research that would value the sector and would be good to be done.

Speaker 1:

We do know the answers and I think that's part of Matt's question. Well, they don't know necessarily the answers, but the UPP Foundation's Inquiry into Widening Participation 2025 does have a lot of maybe not the answers, but it certainly raises some of the challenges around this. So it's a really great read. I recommend everybody gets hold of a copy of it. But yeah, before I dive in, because I was at the UPP Foundation reception and I have read the report, so I'm probably one step ahead. But, Dan, what do you think the answer is?

Speaker 2:

I had that question firstly and I think we are in an era where students are really questioning the value of their degree, and that's partly driven by AI, but it's partly driven by quite how expensive degrees have got not just degrees but living in student accommodation, just generally student living. Ultimately it's become unaffordable for some, but it's also led to a lot of questioning of the value of a degree, especially when it's being completely upended. Your degree and your qualification and your work life affiliate to the sector is to showcase that experience and quite how positive that can be, to enrich your life experience. This is what I think we're starting to see. Yes, there's a flight to quality. Everybody's looking for the best possible degree from the best possible university. But you have to give them the best possible life experience because ultimately students aren't just going for that academic qualification, they are going for the all round life experience and if you as a PBSA operator or a BTR operator or a university, are not offering that to them, they will go elsewhere.

Speaker 2:

Or if we're not doing it well enough as a sector, they will just stop going and there will be more commuter students, as we've already seen that there are.

Speaker 2:

There's a huge number of commuter students.

Speaker 2:

That number is increasing exponentially across the country and it will not just lead to more commuter students, it will lead to students thinking, actually, maybe I'll just do an apprenticeship or beyond that, maybe I just won't bother going to university and I'll just learn a few AI hacks or become a freelancer or whatever it might be.

Speaker 2:

So I think it's hugely important and we've got a lot of work to do within the real estate sector to really showcase that, and that is through various different events, that pastoral care and support that we need to be showcasing, but also things like tech enablement. How are we making things really easy for the student to live and cost effective and affordable? And I think that's where, at the moment, I think we're falling down as a sector as a whole. Not necessarily that all PBSA operators are falling down, because you know, we know that some are doing a brilliant job out there with regards to the res life experience and a lot of universities are too, but as a higher education sector and, you know, a supporting sector to it, I still think there's a lot of work to do.

Speaker 1:

What do you think, sarah, obviously, having read the report and been to the UPP foundation event so there's a lot in it about the disparity between cities really, between kind of attainment ambitions really, and you know there's certainly a lot about. You can only be what you can see, and we have to remember that in some parts of the UK there is less demand for graduate roles and we assume, I think, that most students go to a city, they study, they have an amazing time and they stay in that city, but that not the case for everybody. A lot of people want to go back to their home town or their home city, but if the jobs for graduates aren't there, then what's the point in getting it, like you said, down in so much debt in order to go back to a place where your degree isn't required or respected? I think that the education about universities and lifestyles should be brought forward much earlier to students as young as year nine when they're making their GCSE choices. My son's 13 and he's got friends that go I don't want to go to uni because I don't want to sit at a desk. They've got no idea what university is, but they're already making that assumption at 13 years old that they don't want to go, and that's before they've really been told anything about university. So I think, bring open days earlier. But what are they showing at open days? They, you know they should be doing trips to universities, but it should be showing the sports facilities, the accommodation, the student union. It needs to dispel this kind of myth that university involves sitting at a desk for hours and hours and hours.

Speaker 1:

But you know, back to kind of what you said, dan, about the student lifestyle as well, I was thinking that whether the government should actually be subsidising societies, as all of this costs money. And, deanie, we've spoken to students before that can't afford to join societies, or they're commuting students and want to be part of the society but you know, can't really commit to going to netball practice every week if their timetable doesn't suit it. So they don't want to outlay to be part of a society that they can't really fully commit to, but they kind of want to dip in and dip out. So I think that part of the student lifestyle could be made cheaper, could be made cheaper. And then commuting students.

Speaker 1:

We've discussed this before on the podcast that universities, potentially even PBSA, need to be looking at something a bit more flexible. You know, if a university campus has empty beds, could they offer it to commuting students for one or two nights a week, like on a hotel kind of basis. But it needs resource, you need to advertise it, you need to turn the rooms over. Resource you need to advertise it, you need to turn the rooms over, you need to administrate it, you need the booking system to be able to allow for short-term lets. I just I think it's a change.

Speaker 1:

Like you know, I think the report from UPP shows that and it's really great that they've done it, because I think it busts a lot of myths that are out there. Really, and because of that, because gen z is so different, gen alpha is going to be hugely different. Again, you know they're they're growing up not only in a digital age but in an ai age, so of course everything's changing. So I think we need to rip up the rule books and just look at, you know, different models for universities, different models for accommodation. So thank you, matt, for that question. I'm not sure we answered it, but we massively appreciate the report and hopefully more ideas into the space are better. We're just going to take a break and hear from one of our sponsors.

Speaker 3:

Wash Station proudly sponsor this episode of Housed. We provide best in class laundry solutions that complement your buildings. Wash Station Smart, green, clean.

Speaker 1:

Right now on to our next question. Benjamin Hall, founder of Loft, says have rents peaked and if so, how important are interior design and furnishings to maintaining rental growth? Dini Dan, have you got any ideas on this question?

Speaker 2:

This is a biggie. Great question, ben. Now, obviously we know why he's asked it because he runs Loft and they do furnishings and they'll be having a really interesting time at the moment with what's happening in the sector with David Phillips. So I'm pretty sure that Ben is going to be unbelievably busy at the moment fielding calls left, right and centre. Now do I think rents have peaked In some locations? I think that the revenue growth and therefore the annual rental increases will stall or will be negative.

Speaker 2:

I think that there are already quite a lot of cashbacks out there in some markets. There are some where the suppliers really come to fruition, where we are going to see that, yeah, really make the rents more competitive. And I think that, yes, for those old, tired buildings, freshening it up with new amenities, being more innovative and not just giving it a lick of paint, but really having a think about what does what should the design look like? And obviously Loft can help with that. I think there is an opportunity there to drive rental growth. However, I don't know quite how much that would drive, given the cost of the CapEx to actually renew it. I think it's probably quite tight in terms of the amount of Cappex that you'd have to spend or the amount the size of the capex project you'd have to do to get that rental growth. At the moment. It used to be as simple as saying right, let's redo some of these amenities, chuck in a cinema space. We did this at west hampstead, probably spent 100 grand on on the space, nido west hampstead and and then tried to push rents up by 10% and actually it worked. So it looked better. When it toured, students were happier to pay it. It looked more executive. They felt like they were in a newer building than actually it was, because it hadn't been, to be honest, designed particularly well beforehand. So NIDA were able to put their stamp on it.

Speaker 2:

If you're taking over a new building, definitely do a CapEx. If you've got an existing building that's looking a bit tired and by a bit tired I mean five years old whether the FF&E is probably about five years old don't just rely on that sinking funds to just replace what was there. Have a bit of a think about what can be done. And obviously you don't just want to be spending CapEx and keeping rents the same. You want to make sure that your CapEx project is going to deliver those rental increases. So it should be doing it, but is it as obvious as it used to be, maybe five years ago? I don't think so.

Speaker 2:

But I do think there's definitely an opportunity in some of those key locations, especially where it's getting more competitive now. And I think this is where brand standards and design guidelines really come into play. Here you want to make sure that you are in a building and, as a student or a resident, you're living in a building where you know what the brand is, you know what it stands for, you know the design principles and I think you can be proud to assimilate yourself and your own personal brand with that company. So, yeah, there's a definite opportunity there. Personal brand with that company so yeah, there's a definite opportunity there. It's just a bit more complicated than just doing a capex project and then chucking the rents up by 10, unfortunately, well, I just think that there's.

Speaker 3:

It depends on the building, it depends on location, it depends on the customer, it depends on the market. But I'd probably argue that in some cases that it's really important for rental growth. That actually, like you say, if you've got a tired building you want to make an investment. That's about growing your rent.

Speaker 3:

But in many cases, investing in good interior design, good quality furniture, maintaining that is about maintaining rental income. So if you don't do that, you're gonna just have to. You know you're not going to be able to achieve the rents that you want to on that model. So I think it's you've got to look at it both ways that ultimately, people want to live in a nice space that is well looked after, that that looks great. And an interior design isn't just about looking great, it's about making people feel comfortable in that building and adding value to that building. And done properly, that does add real value to that building and done profitably, that does add real value to a building. But I think there's two ways to look at it that I've got to maintain my rental income and I'm going to make this investment to get rental growth.

Speaker 2:

I just want to be clear. There are some properties on the market at the moment. There are some in Coventry, some in Nottingham, Leeds, sheffield. They are completely lost causes. No matter what you do with the capex, they're either in the wrong location or they are so old and tired, or just the wrong type of building with the wrong room mix that you would need to completely redo the entire building. So I think it's being really careful about what your, what your business goals are, how much you actually feel you need to invest to really make a difference. But but yeah, great, great question from Ben.

Speaker 1:

Yeah, I think that when we have discussed this before, to me it doesn't really make sense that we keep seeing rents go up every year for most buildings, even if the buildings are getting older. So on this basis, obviously maintaining properties and keeping them good quality and tidy will help maintain the rents really. And students do notice these things. I'd argue that on a viewing, if they see faded, stained sofas, they're going to notice that and it just makes the feeling that the building has been unloved and uncared for. And then what does that say about the rest of the operation? If people can't maintain the decor or the furniture, then it probably gives the assumption that there is a lack of care and attention within that building operationally generally. So I kind of think that you can't have it both ways, that the rent can't go up for no tangible reason.

Speaker 1:

And you know, dini and I in our youth forum we've interviewed students about this and they do notice it. They're saying why is my rent going up when I'm not getting anything else for it? You know. So, maintaining properties, keeping the furniture looking good, keeping the interior relevant for the audience, you know it doesn't go unnoticed. So yeah, thank you very much, benjamin, for your question. We now got a question that is kind of related to that and it's from Noella Collingridge, a DEI consultant, formerly of CLV. She says how can we design student accommodation to be more inclusive for neurodiverse students? And actually I wonder if it links to Matt Burton's question as well. You know, we know that there are more young people with a neurodivergent diagnosis and surely that might be impacting decisions about universities as well. So how does that relate to accommodation spaces for a neurodivergent population?

Speaker 2:

This is a really interesting one. We need to ask them. I know that UPP and Unite have done some work on it and that needs bringing to the fore again. I think that we need to be addressing it because there's an increasing number of neurodiverse students in the student pool and they will be wanting to go to university and staying in PBSA and they will be international students. They will be domestic students.

Speaker 2:

It'll be interesting to see how many more students we have per country neurodiverse students from each country and what they're looking for and if there's any kind of difference between what demographics are looking for postgrads, undergrads, indian students, domestic UK students, whatever that might be.

Speaker 2:

So I think that's where I think we need to see a bit more data and a bit more information broken down and sort of segregate those demographics a bit more. But it will be things like they need more quiet space, they need subtler colors, and I know that sounds really basic, but there's so many companies out there, operators out there, with big, bold colors. Unite is bright yellow, iq is bright green and I think there needs to be this sort of focus on okay, let's have a look at some of the nuances and some of the smaller details and really make sure that that is going to be appealing to those students. But again, how far down do you go in terms of the amount of students that that is actually going to affect and how is that going to improve their lives students that that is actually going to affect, and how is that going to improve their lives, and how much is that then going to cost you to do a full rebrand or create those spaces or whatever it might be?

Speaker 3:

we've got to make sure that we are sensible about cost but that we're also providing as much as we reasonably can to neurodiverse students to help them thrive well, I think this is an education piece as well, and I think we often talk about how operational staff at the heart of delivery of student accommodation they absolutely are, and actually loads of providers went through a process of training their staff in mental health first aid.

Speaker 3:

But actually I think this is a another layer of education because it's it's going to be about how people react to those spaces or what they need from those spaces, and a lot of that can be done through customer service and operational practices and understanding and awareness.

Speaker 3:

And I think if we're not training people to understand how different people see the world, then it's much harder for them to be able to react and make those reactions and make those changes. And that, you know, for many operators, those managers of those buildings are the people that are making the calls, making the shots, knowing what they need in their building, what they want to do in their building, how they want to invest in that building, and without that training, it's very difficult for them to be able to understand those differences and what those people need. So, yes, absolutely agree, let's ask them. And I think back to my earlier point. I still think that there's something around some, some academic research that we need on understanding how how the operation of a university student accommodation building adds value to their experience, and that needs to take in neurodiversity as well, and I know there's lots of research out there.

Speaker 3:

I'm not saying that we can't take bits from all that different research, but I think there's still more that we need to understand about this, and I think education is a big part of it.

Speaker 1:

I'm lucky enough in my life to have lots of fantastic neurodivergent young people and I think, from my own experience of being around them, I think aside from design, I think from my own experience of being around them, I think, aside from design I think consideration to flatmate matching is really really important. But let's be honest, it's important for everyone and we've uncovered this time and time and time again in our youth forum research and we're not really seeing it for many reasons that we won't don't need to go into in this episode, but that's really really important that people feel comfortable with the people they're living with. We've seen one university and there's probably other ones, but we just know this one that have created a spare flat that people that have having challenges with their flatmates can go to have some time out. They effectively can have a sleepover in this spare flat and it's got bedding and it's got decor and it's calm and you know, and calming, like you say, dan, but it's also got a spare bed. So if they want their mum or dad or carer to come and stay with them just to help them process maybe something unpleasant that's gone on, you know, in the last 24 hours, they can do that.

Speaker 1:

Now that's a university, in pbsa they're, you know, probably not going to keep a whole flat or, you know, a studio or something aside for people to have some time out. But I just thought that was such a wonderful idea and I can totally see how that could benefit people that just need a little bit time away from their flatmates. That's a great idea and I can totally see how that could benefit people that just need a little bit time away from their flatmates.

Speaker 2:

That's a great idea and I think in some of those bigger buildings it's certainly something that we should be looking at. I think pets as well is quite an interesting one. I'm starting to in my client work across multiple different, you know, sectors and operators. We're getting asked a lot more about pets in PBSA, and so I think that might be something that starts to kind of come to the fore a little bit more. You know what constitutes a pet that you'd actually have to ask about. I'm not saying that you know you have to ask about your sea monkeys if you can bring those in as a blast from the past for anyone there that see monkeys. But you know cat dog et cetera, like how does that work? And I think that's where you know in BTR it's typically a different story. In the US it's very common to take your pet with you.

Speaker 3:

I just think that is quite an interesting one that we might have to solve at some point fairly soon.

Speaker 2:

ESG compliance to energy efficiency and resident engagement. Utopia turns real-time data into action making buildings better for people, planet and profit. If you're in asset management or operations and care about the residents, Utopia is your essential partner. Find out more at utopiacomuk. We are just going to take a break to hear from one of our other sponsorsuk.

Speaker 1:

Okay, moving on, the questions are coming thick and fast. We now move on to a question from Seb Horst from Host, who says are operators for new properties being realistic about budgets? Using Bristol as an example, some third-party operators seem to be pricing rents based on existing schemes that will never achieve those revenue targets. This is obviously a question close to our hearts that we've covered many times before. Has our stance changed really, dan? I'll come to you first.

Speaker 2:

Perfect. So when I first started doing tender processes for investors looking to put a management operator in place and we've done a lot of these now I expected to find certain operators really being overly optimistic in terms of their budgets, saying that they would hit 100% occupancy at ridiculous revenue and rent expectations and with really low operating costs. It wasn't as simple as that. When I first started properly doing them, I was pleasantly surprised by the fact that it felt like every operator was being realistic, certainly with a couple of tender processes that we started with. But we do see that there are clearly some operators that are more desperate for business than others. Some of them are either they have new business development teams, for example, that are trying to prove themselves, or they have just got this kind of scale at all costs mentality, and some of them don't. And I think that it really varies from place to place or depending on the time of year or whether there've been certain targets hit, and there are some really good operators out there. I don't think there's any really unscrupulous operators that are being wildly unrealistic. But, that being said, I do think that you have to strike that balance between giving the investor or developer what they want in terms of showing the highest possible revenue and a low OPEX and the best possible business case, and then not being able to deliver on that. And this is where it falls down slightly, in that management operators can sign a contract with a base fee of whatever percentage of NOI and then know that they've got X amount of hundreds of thousands of pounds coming in as their management fee and they don't really have to perform for it management fee and they don't really have to perform for it. And I think this is where we just need a bit of a reset in terms of how we're incentivizing management operators, what that base management fee looks like and, ultimately, how we're holding them to account to manage as they go. And I just don't think that's done well enough. Firstly, I don't think it's done well enough with agents either. I think agents can tell you that your property will hit 100% and with a huge revenue target, and then they can take their fee and walk away. And I think we need to be incentivizing agents on a long-term incentive plan and a sort of effectively an earn out based on performance.

Speaker 2:

I think we need to be doing that more with management operators too, because there are some locations where they will be basing their management proposal on competing schemes nearby. Take Bristol, for example. And I know that there are some operators using a bit of an unrealistic base for what they expect to be achieving in terms of their rents. And then they just know that there will be discounts, there will be cashbacks, they will be under-occupied and I think that is going to be a bit of a problem.

Speaker 2:

But in those oversupplied markets, how do you then win the business? Know, you've got to find that balance as a as a management operator and I think I'm not seeing anyone being wildly unrealistic at the moment, but it is something we just need to watch. And that's to be fair. That's what we do at resi consultancy. We sit there and say, guys, you know you're not going to hit that and you know that next door they're at 50 occupancy at the moment. They should be at 75, but because the market's a bit more oversupplied, then you've got to be more realistic. And you know your noi, you're wildly out on your uh, utility costs or your staffing costs or whatever it might be. So I do think you need you know this isn't just a plug for us I think as an investor or developer, you need some kind of help to be able to sort the wheat from the chaff and work out, yeah, ultimately, how much of what you're seeing is bullshit and how much is just finger in the air.

Speaker 2:

We're not sure. We think it might be this and there is a certain amount of guesswork. Of course, it's all forecasting, but you can do that based on a realistic and pragmatic approach, and I think that's where I've been really lucky with the investor client. The majority of investor clients that I've had doing tender processes for that. They've all been realistic and they've actually not gone for the one with the highest revenue or the best NOI. They've actually gone for the one where they feel most reassured that they will adjust and adapt and I think that's that's a really important piece. You've got to be realistic as an investor and as a client doing that tender process in particular. So I hope that's answered that for you. Sarah Dini, did you have any further thoughts on that?

Speaker 3:

I think you covered most of it there, dan. Sarah dini, did you have any further thoughts on that? I think you covered most of it there, dan, but it just comes down to actually what are you? You know when in seb's question he talks about kind of his existing schemes, and we probably know that most of those existing schemes probably have a cashback incentive in place that isn't being accounted for in this whole process.

Speaker 3:

And without that transparency and that understanding of what the rents are and it's so much smarter to look at a building, look at a rent and say, well, actually they're chucking out loads of cashbacks, probably spending a lot more on marketing, and actually, if I can just base my rent at this level, I can still generate X amount of revenue and I can sell the building because it's at the right rent that people want and I don't have to chuck, you know, 2000 pounds, two and a half thousand pounds cash back to back and this and as you said it, dan, and we just need more transparency, more honesty and more education to investors so they're not putting the pressure on these management operators to make these bold claims just to win the business and yeah, that being said, I've got one client who, effectively, is going to need to refire pretty quickly, so he's not going to be thinking long-term about which operator he has in five years time as a consultant.

Speaker 2:

I need to be thinking about that. I need to be thinking about what if Matt Merritt comes in and buys that for IQ that property sees a report that says, oh, you should put this operator in place because they have the highest revenue and the lowest OPEX. He's going to be like, dan, come on, what were you guys thinking when you pulled that report together? Because you know that they're not going to be able to deliver those rents or the annual rental uplift, or that NOI, and it's all about credibility. And I think there are just some investors that are just looking for a refi. They want to get an operator in and then probably move them on again within a year, maybe two. And that's where, again, you've got to find that balance as a management operator.

Speaker 2:

Third party Do you go for those properties where you know you're just going to get moved on? How bad is that for your brand? It's really not great. If you're getting moved on from a property, it's because you haven't managed it well enough. It's really that simple. The investor is not happy, they are moving you on, or the property has been bought. Obviously, I just think we need to be a bit more long-term about our thinking here, and that doesn't really sit well with a lot of the business development teams that are obviously super focused on let's get the properties in.

Speaker 1:

So, yeah, it's a really interesting one. Yeah, I think I mean this time of year is always busy for Dini and I, because people have problems in their buildings and they want us to troubleshoot. But this year we've had more inquiries from investors than we have done before who were saying we're not quite sure about this operator. Can you please do a marketing audit? You know? Can you check the budgets, can you see what's been done? So they're getting wise to it. Really, I think and that's what you're saying, dan is you know they're not necessarily going to go with the operator that's charging the lowest fee, or, if they do, they then work out why, you know. So those budgets need to be in place. You know, like Denis said, let's not hide the cashbacks, let's just get it right in the first place. Slow and steady, I think probably what investors are looking for.

Speaker 2:

I agree. And on the marketing, you're totally right to flag the cashbacks. The marketplace commissions as well is something that are getting hidden and we just need to be really mindful of that too. So let's do some more investigative work and due diligence on what operators are actually proposing. Is the incentive budget realistic? I see some incentive budgets that they might be saying cashbacks or marketplace fees. We reckon 20 grand will allow for that. I see some that for the same pitch, are allowing 400k. So it's just being really mindful of what that looks like and, honestly, that was the difference. I couldn't believe it when I saw it as well. So you know, not all operators are made equal.

Speaker 3:

You need to find one you can trust and one you can rely on, ideally for the long term I just want to say, because it's something that we battle about time and time again but those cash back incentives and those agent commissions should not be in your marketing budget. If they're hiding your marketing budget, they're in the wrong place because they should be under cost of sale and that frustrates us very much.

Speaker 1:

So, and while we're on the bandwagon, reslive again, not marketing budget, that's not generating leads, that's a budget for the people that already live in your building. So, again, if you take all of that out, your marketing budget would look very, very different. Anyway, we're going to move on to the last question now, and it's from Tom Ferber, from Homey, who is saying how come BTR can rent their flats so much cheaper than PBSA? And I guess we've talked about this a little bit more. It's probably not just the rental income, but it's building cheaper, which is enabling them to rent competitively, and we hear this all the time. For example, you know we've been pushing for ages based on our research, three and four bedroom flats and in PBSA they're saying we can't afford to do that. We can't afford, but BTR are doing it. So you know why are BTR doing things differently? And are they you know they building a sustainable business? Dan, I know that you want to say something.

Speaker 2:

Yeah, this is a great question from Tom and congrats on them on a recent deal. Look, this is a real struggle. It's one of the most asked questions because of BTR having popped up in lots of different locations where operators of PBSA are struggling. Leeds is a prime example, but there's plenty of others out there, glasgow as well, and you know, even though I know, uh, there's many operators out there saying glasgow's okay at the moment well, let's see at the end of this year and let's see how your. You know it certainly won't have been double digit rent growth, that's for sure. I it's a longer term capital from what I see.

Speaker 2:

I think that there's more institutional capital thinking about BTR and therefore they can cope with some indigestion is what the agents like to call it where there's too much supply that pops up for BTR or PBSA in the same city and as a result, yeah, btr is not fully occupied in some locations and also they then take a lot more students than probably their business case and the investment really would have liked or allowed for. Typically and I think that's one thing that we need to be quite mindful of is built off the backs of students in several locations where there is an oversupply, should we say, of PBSA and BTR, or a concentration of supply. Let's not say oversupply, we won't edit that out, but you know what I mean where there is a lot of supply coming to market, and I think that that's where BTR is then quite happy to say, okay, well, look, we do need to show some kind of return to it. If we just rely on young professionals, we are not going to be filling our building at all, so we have to take students in certain places. That's then leading students to compare and think hang on a minute, why is BT? I could get a three bed apartment or a four bed apartment for a lot cheaper than I could get, you know, a studio room in a in a PBSbsa property, even though it's specifically built for students, and btr, I think in some locations and co-living of course are happy to take those students on. Why wouldn't they be? They offer a great service, great amenities, great flexibility, great pricing. I am not saying that they shouldn't be going after students. I'm saying that that's an issue for pbsa because these pbsa properties in Leeds in particular have not been built or developed based on BTR taking a significant proportion of the students in that city, and so that is going to impact it.

Speaker 2:

I think personally in the likes of Leeds for the next 10 years. I think that's going to take a long time to really flush out. I do think this comes down to the fact that they can take lower rents, they can offer more flexibility. That is built in. It is a different yield, it is longer term capital backing it in the most part, and they seem a lot calmer. Whenever I speak to the MDs and CEOs and whoever of a moda or a native or anyone like that, they just seem quite happy to really be playing the longer-term game. I think because they don't have the private equity firms breathing down their necks for their three-year returns like PBSA does and that's not all of them. Obviously, some of them will do.

Speaker 2:

But yeah, I think the longer-term capital in BTR just means that they can make those decisions to say, look, yeah, we can take students for now or we can make sure that we have reasonable pricing to try and build up occupancy over time. But we're not in a major rush, and so I think that's where BTR will start to stand on its own two feet. It won't be that 40% of BTR is occupied by students forever. I don't think that will keep increasing. I think in mobilisation and after the indigestion has eased, should we say that that number will start to come down. And it may well get enforced by planning, who knows? I'm not sure how they do that, but yeah, that is. It's a. It's a really interesting one. I would say it comes down to the longer term outlook and the cost of the capital and the sort of institutional partners that are that are backing btr. I don't know what are your thoughts?

Speaker 3:

I mean I can't answer tom's question because I think I have the same observations and I think that actually pbsa maybe can learn something from btr if they can do it at that rent, what, what, what? You know? What are they doing right? But I guess I just want to pick up on what you said about btr filling the students to build up their occupancy, which in a housing crisis it would make me think, well, why is that required? Which can only be that maybe BTR might be building the wrong thing. And actually have they done enough research to understand actually what is required in those locations for homes to make sure that they don't need to take the student market to build the occupancy?

Speaker 2:

I do worry slightly at the moment. I mean, btr is ground to a halt. Let's be really clear about this With the Building Safety Act. You know it is very difficult to build BTR and make a decent return at the moment, so it is. I think that's where single family housing SFH is really coming into play here as well, because you know why would you build BTR and go through all the gateways and all of the planning pain when you could probably build three houses for single family housing rental in the time that you could build one apartment? This is where the planning regime and the current state of development is really hampering BTR at the moment and hopefully all of the shackles come off and we can see more BTR being built.

Speaker 2:

But, dina, your point is right. Are we building the right things? Does everyone want apartment living? Do you need another thousand beds in Leeds for btr? Probably not, and that goes the same for many other cities as well. But do you need more houses? Yeah, I I would argue that that you do, and I think that that's where it's finding that balance. There is a need for btr. You have to work out how much each city needs and that's where the planners need to be really hot on that and find that balance between yes, of course you build more and then the costs come down, etc. But actually are you then building the wrong stock and then building sort of slightly further out the city centre and thinking about single family housing. I'm really excited about that. I've got lots of conversations coming up about single family housing. But yeah, that's that's a fascinating question. Thanks ever so much for that, tom. That's a fascinating question.

Speaker 3:

Thanks ever so much for that, tom. Yeah, I just want to say that it kind of feels that shared living needs to come together and say, actually, what does this community need from a student sector, a young professional sector, from a family sector, and build the right things?

Speaker 1:

Because we're not building the right things in the right places. And I guess also just one final health point Most BTR is bills excluded, so that headline rent isn't comparing like for like. And you know, we know that we've kind of come out the other side of kind of energy hike price crisis, as it were, but it could only take another one of those before actually adding bills on to something like BTR might make it unaffordable again. So that is just something to watch out for. We have run out of time for today's Q&A episode and for season four. What a great episode to end on. Thank you so much for your questions. Join us again for a very special series over the summer with the Class Foundation. The Class Conference warm-up sessions will be coming to you over July and August.

Speaker 1:

As many of you know, the Class Conference is back in November, this time in Lisbon, and as the team there, are preparing a thoughtful and packed agenda as always.

Speaker 1:

We wanted to delve more into some of the key themes, such as the student housing strategy across Europe, regional housing strategies and how we cultivate the sector leaders of tomorrow. We can't wait to step into these hugely important and relevant topics with Kellyanne and the team. So make sure you keep an eye on our social media so you can get these episodes into your diary. Even if you're sunning yourself on a beach, you've got your headphones in whilst mobilising a new building. These are hugely important topics for anyone working within the sector, whether you are attending the conference or not, and we very much hope that the majority of you are. Thank you once again to my student halls for being our headline sponsor for the season. Your support is hugely appreciated. And, of course, thank you to utopia and bosch station for coming on board for season four. We're grateful for your support as well, and we will welcome you all back for season five in september.