Profitability, closely linked to good social and environmental practices.
Profitability in the real estate business is increasingly linked to good practices in the area of social responsibility. Implementing improvements in the areas of sustainability, social sensitivity and good corporate governance (ESG) clearly has an impact on the attractiveness of properties, as well as their value. In the context of building construction, ESG considerations can include factors such as the building’s energy efficiency and carbon footprint, the materials used in construction, the building’s accessibility for people of diversity, and the company’s labor practices and governance structure. Incorporating ESG considerations into building design and construction can help promote sustainable development and reduce negative impacts on the environment and society. Aware that it cannot be otherwise and that we are facing a very obvious reality, at B Capital Partnes we are committed to responsible investment management. We have been working with our clients for some time now so that the buildings we manage can obtain a good ESG rating. Our in-house facility management team is a partner at Breeam. Today there are different ways to determine the level of sustainability of a building. There are different types of certificates such as BREEAM, LEED, DGNB, etc., as well as ratings such as GRESB, which allow us to know how sustainable a building is and its impact on our economy regardless of whether it is owned by a company or an individual. The Breeam Building Research Establishment’s Environmental Assessment Method certificate allows us to know the relationship of a building with the environment. This certificate was developed by the BRE Global organization in the United Kingdom and began to be developed in 1988, but it was not until the 1990s that it came into use. Initially, the Breeam certificate was used for commercial and residential properties. Over time its use has been extended to new types of buildings.
B Capital Partners, present at The District show and at the National Congress of Real Estate Servicing
Barcelona and Madrid recently brought together the real estate industry. It was within the framework of two major events: The District and the National Congress of Real Estate Servicing. And how could it be otherwise, B Capital Partners actively participated through some of its professionals who attended both appointments.
The District in Barcelona brought together more than 7,000 professionals with the aim of analyzing the behavior of capital today and advancing investment trends for 2023. The District was structured along three main axes: the development of capital market structures, the value of meeting ESG (Environmental, Social and Governance) criteria and the transformation experienced by Residential, Office, Logistics, Hospitality, Retail and alternative assets, such as student residences, senior ‘living’ or the ‘build to rent’. In addition, the application of new technologies in real estate projects also had its leading role in the event.
The District was attended by investment funds, sovereign wealth funds, commercial banks, alternative sources of financing, large landowners, administrations, operators, developers, brokers, marketing agencies, consultants and property managers.
Meanwhile, the 4th National Congress of Real Estate Servicing was held in Madrid, an event that is already an icon for dealing with the perspectives on the evolution of the market, the development of new business models and the main challenges that asset management has ahead. Throughout the two days that the congress lasted, the topics that most interest the sector were discussed, such as: the macroeconomic situation and the underwriting of portfolios in Spain, public-private collaboration for effective housing management in Spain, the real estate sector as a refuge value for accumulated post-pandemic savings, in addition to various specialized topics in real estate, rental, promotion and sale of real estate, land management and investment opportunities in NPL Secured portfolios.
Build to rent has been the hot new concept for months now. Whilst much of that is no doubt due to the pandemic, there is no denying that this new approach to part of the real estate business is catching on. Although many Spaniards still dream of owning a home one day, the tough job environment coupled with the long-term financial commitment makes that difficult. As a result, the rental option is gaining ground. And this is where build to rent is making a niche for itself.
Build to rent consists of constructing new properties specifically for renters; it is a new way of understanding the business. The developer builds the homes as a turnkey project, which is then handed over in its entirety to the investor, who may or may not finance the operation. The investor then exploits it directly or hires a rental property manager. Meanwhile, tenants get access to a new-build home, with extra services, for as long as they wish and at competitive prices.
Outlook for Spain
Initial estimates by experts suggested that, starting in 2022, around 8,500 build-to-rent buildings would be constructed each year. This number could gradually increase to around 80,000 by 2028, although these figures will surely be affected by the impact on the market of the future Spanish Housing Act. Only time will tell.
What is certain is that build to rent is only just getting off the ground in Spain, meaning the number of projects and homes can be expected to increase substantially in the coming years. There is plenty of room for growth in the sector. In Spain, only 18% of the population lives in rental properties, well below the European average. All told, an estimated 1,800,000 more rental homes may be needed to meet the demand.
What makes build to rent different?
The build-to-rent formula can undoubtedly be of great interest to all stakeholders. As noted, for people seeking access to housing, it can be an ideal solution. Developers need to weigh several key factors, including the added challenges of operating costs, vacancy rates, time to rent, and service management.
One of the keys to success for a build-to-rent development is for it to project a quality brand image to potential renters. In other words, the property needs to have a quality brand, and customers need to perceive it. Other keys include creating a loyalty plan to build lasting relationships with tenants in order to maximise lease duration, reduce vacancy rates and capitalise on cross-selling opportunities. Investors and managers also need to take non-payment into account. This means having a good scoring system in order to select the right applicants to reduce risks. Another challenge posed by build to rent is the impossibility of selling off-plan. From day one, a large number of vacant properties need to be filled.
The speed of construction and quality standards must be adapted to a product whose appeal lies in its design, amenities and professional management service. At B Capital Partners, we leverage our understanding of developer and operator business models to help create better projects. Knowing the future target also allows us to make decisions as future asset, property and facility managers and design customised loyalty plans.
Although the types of build-to-rent properties may be similar to those built for sale, their layout and connection to communal leisure and work spaces vary considerably. The interior design, amenities and associated services are often what define the brand that operates them. Use of the ground floor for communal purposes and the creation of rooftop spaces are the main draws of these developments.
Market studies make it possible to better select the amenities that spark the most interest and add value to the development. They also tell us which services these spaces should be equipped with to enhance the customer experience.
Services: a distinctive feature
In addition to all the features of the building itself, in the management of rental buildings operated by specialised investors, tenant services are key to boosting tenant loyalty in the form of longer stays that reduce turnover. Operators thus maintain communication channels with tenants and have specialised departments to handle any incidents that might arise, such as malfunctions, payments or maintenance issues. Any problem has to be solved quickly. The tenant experience in buildings under the management of professional operators is much more positive than that of traditional rentals from private landlords or classic managers.