Developer Southern Grove enters the build-to-rent and co-living sectors
Developer Southern Grove reveals today that it is expanding into the build-to-rent (BTR) and co-living sectors, eyeing significant opportunities even as the country fights its way out of the pandemic.
The company sees huge promise in these sectors over the next decade, which is why it has chosen this moment to diversify by launching Evolution, a premium Co-Living division, and Mast, its new high-end BTR arm.
Southern Grove — widely known for its residential projects and a series of large student accommodation schemes delivered through its Future Generation brand — is already building a pipeline of projects to expand its focus across these high-growth areas.
Co-Living is similar to much student accommodation in that residents get all-inclusive bills, private bedrooms and shared living areas. Evolution will aim to be a market leader in this space, offering superior accommodation with high-end finishes and a focus on health and wellbeing. Its schemes will boast chic interiors and a mixture of amenities that will vary by location but is likely to include gyms, bars, private dining and even cinema rooms.
Concierge services are also common in this sector and workspaces are typically incorporated too, making these developments perfect for a post-pandemic society that will increasingly be working from home. For consumers, it is more economical than renting an entire flat and can help those aspiring to buy to build up their deposit.
BTR brand Mast will also replicate the high-end approach to design and build quality that Southern Grove takes across its developments.
Both sectors serve a generation of tenants who are renting for longer, and both Evolution and Mast represent natural extensions to the company’s work in the PBSA sector. Future Generation is already well established and has delivered 550 beds so far with a further 1,600 completing next summer.
The British Property Federation has previously predicted that the UK’s BTR sector could be valued at £75bn by 2025, while the co-living sector is still at a relatively early stage.
Southern Grove’s high-quality in-house team lends itself to these projects because the operation of co-living and BTR schemes is very similar to PBSA. All are income-producing assets, and all have a strong focus on wellbeing, community, co-working and social cohesion. Co-Living and BTR accommodation are also natural next steps for students leaving university. They are an affordable and enjoyable half-way house for those who are just starting out in their careers and not quite ready to get on the housing ladder themselves.
It is often more difficult to get planning permission for BTR and co-living schemes because they are more complex. However, Southern Grove recognises that local planning authorities are becoming much more aware of the amount of amenity space, desk space and outside space proposed by applications, as they are concerned about the quality of life of residents caught in any future pandemic. The schemes that Evolution and Mast will deliver will all satisfy these requirements.
A number of sites have already been identified around the UK that will deliver around 1,000 units under each of the two new divisions for 2021 and 2022, with further announcements to follow in the New Year. They will be design-led under the direction of Southern Grove’s head of hospitality Tim Barrett, who has vast expertise in hospitality, having previously worked for Marriott and Radisson Hotels. Southern Grove will also consider incorporating Sky Lounges in many of the new projects, which have become a signature of some of its PBSA developments.
Chairman Andrew Southern doesn’t predict any negative fallout from the pandemic that would hamper the company’s natural expansion. Residential property prices are at record highs and demand for new housing has never been higher. First-time buyers are largely still dependent on the Bank of Mum and Dad, as well as the Help To Buy scheme, however the latter is being dramatically scaled back at the end of March next year. From this point on, while it will still be available to FTBs, regional price caps will apply. Many FTBs still face extreme hardship trying to raise a deposit for a property purchase and many will turn to co-living and BTR for a solution.
Andrew Southern, chairman of Southern Grove, said: “This is an extremely exciting moment for me personally and the company. Entering the BTR and co-living sectors means Southern Grove will have a presence across all the main residential property classes, and a new focus on two of the fastest growing products in the market.
“These two sectors are widely expected to outperform other asset classes over the next few years and we are determined to replicate the success we have enjoyed in the student accommodation sector, where we have supplied a disruptive high-end product and a value proposition that ensures our revenue is protected across economic cycles.
“BTR has proved an attractive way of investing in the UK in recent years and demand continues to grow as attitudes change. It’s no longer always the case that those who rent have no other choice. For many, it is a lifestyle decision or a choice based on life and family planning.
“Co-living, too, is increasing in popularity. While it is a model that has been around for a while in the student accommodation sector, where we are strong, it is only more recently that it has started to enter the mainstream. Co-living provides a higher level of comfort and greater social interaction at relatively low cost. It will also make it easier for those residents who aspire to own their own home to save up for a deposit.”