Why Flexible Operating Models Are The Future For Residential Landlords
A deep dive on how flexible living operators are redefining residential asset management
Throughout 2023, we’ve continued to witness the challenges faced by residential developers delivering new homes for sale in the private market. With no real respite from stubbornly high construction costs, increased cost of finance, general inflationary woes, and a suppressed sales market, viability continues to be tested and developers’ exits are becoming more and more restricted.
Bulk purchasers making ‘buyer’s market’ offers at unpalatable discounts also don’t help today’s build-to-sell developer, so what’s the alternative?
Hold – refinance – let – manage – stabilise – exit. Sounds simple, but often isn’t. Particularly for developers whose skills, experience, and interests lie in site acquisition and project delivery, not running an operating company.
Employing the services of a lettings and management agent has typically been the solution for the ‘accidental landlord’ but the relationship can come with limitations and challenges. For tenants, there is often little differentiation in both offering and contract flexibility (typically 12-month minimums) and for the developer-turned-landlord, little to no skin in the game from an agent can lead to longer void periods and possible rent dilapidations.
Furthermore, with buildings themselves needing to be managed as well as the tenants, additional management partners must be introduced into the equation.
In recent years, residential landlords have been beguiled by a wave of new short-term stay operators with lofty Airbnb rates and razor thin margins. However, the ‘hotelification’ of apartment buildings without proper change of use is attracting more and more scrutiny from councils and local authorities and in turn, more and more caveats and break clauses are appearing in operators’ agreements, rendering it an unpredictable and unreliable route for investors who themselves value a good night’s sleep.
The emergence of turn-key flexible living operators provides an interesting alternative to traditional lettings and management (and very non-traditional management), appealing to time-poor SME developers and institutions alike.
In 2019, the Gravity Co management platform was founded to create a global housing brand with a clear mission of improving the lives of today’s rental generation via a flexible, tech-enabled, community-centred living experience. Its model has been shaped to manage both tenant and building, offering developers and landlords a full-service partnership approach.
The Gravity Co model can be plugged into all types of residential asset; purpose-built co-living, large scale HMOs, build-to-rent, as well as traditional build-to-sell schemes with limited to no amenities or communal space.
Three of their buildings are such build-to-sell schemes, all of which generate a substantial rent premium vs ASTs and have maintained full occupancy since their launches. The most recent addition to the portfolio in Reading saw Gravity Co step in three weeks before the development reached completion. Within two weeks, Gravity Co’s design team furnished each of the 53 apartments and within eight weeks, the in-house sales and marketing team had fully let the building resulting in 94% year-1 occupancy.
Gravity Co’s summer 2021 addition in Hounslow Central, West London, saw the company take over a 97-unit residential scheme that was underperforming at 40% occupancy. Following a shift in design, image and offering, under the Gravity Co brand the building has become one of the best performing assets in the portfolio, with a 97% occupancy level and 7% ahead of its net operating income budget.
These successes are the result of the enhanced tenant experience that has been thoughtfully crafted by the brand that champions a flexible and versatile offering, including;
Flexible contracts; members estimate their length of stay when moving in but can provide one month’s notice at any time.
Bills and utilities inclusive; predictability of outgoings and a hassle-free, single, monthly rent payment.
A community centred experience; events, technology and local partnerships fostering social engagement and community-led living.
It results in an appealing proposition for young professionals, those in a new city for the first time, digital nomads, and students alike. It’s a style of living which reflects the nature of modern life and they’re prepared to pay a premium for it.
Gravity Co take a similarly flexible approach to working with developers and real estate partners, operating under fixed leases, management contracts, and turnover rent structures, tailoring their offering to the requirements of the landlord.
With a fast-growing London portfolio and a pipeline of projects in Madrid, Barcelona, Paris, Milan, and Porto opening in the coming 24 months, Gravity Co are searching for best-in-class developers and investors to create a global living experience like no other. If you would like to find out more, and be part of this exciting journey, contact us today.
Gravity Co have been awarded the 'Operator of the Year' award at the 2023 Colivig Awards. This will be the second year they have won the award, following thier 2022 win. Read the full article here.