Why now is the time to improve the performance of operational BTR assets.

by Caspar Courage, Director of Rental and Later Living

A tough market has made the recent past a challenging time for new development in the BTR sector. Confidence is growing for a boost in activity next year, but what should operators and investors be doing in the meantime to make sure their existing assets are in the best place they can be?

In their November 2024 BTR report, Cushman & Wakefield state that 20% less new BTR homes are currently under construction, compared to the same time last year, whilst new BTR planning applications have fallen by 12% over the same period. This slow-down reflects the current, challenging development market. High build costs, interest rates, and building safety challenges, have left developers needing yields to improve by as much as 1.5% to make new schemes stack up at all, in some locations.

The outlook is improving though, with slowing cost inflation and incremental interest rate reductions leaving many predicting an uplift in activity by Q1-Q2 2025.

In the meantime, operators and investors should be focused on improving the performance of their existing operational assets.

As the UK BTR sector matures, once-cutting-edge developments are now longer in the tooth, and competing with young upstarts. At the same time, operational portfolios have organically grown to diverse portfolios across different regions, with a huge variety of operational structures and strategies.

So how can investors benchmark the performance of their assets, and understand how to maximise their returns?

At SAY, we are passionate about using data to deliver insights, and we work with investors and operators across the living sectors to improve asset performance. We believe targeted operational audits, alongside insights-led operational benchmarking are critical to understanding the performance of assets and ensuring management teams are delivering for investors.

A recent audit and benchmarking exercise for a SAY client identified a variance of almost £3,000 between the cost-per-unit figures of two of their London developments; portfolio-wide maintenance costs much higher than competitors; and missed opportunities to utilise incentives to minimise voids.

 The maturity of the UK BTR sector means that steady state schemes are coming to market and many third-party management agreements are also approaching renewal. Investors will be considering whether they can drive performance through new partnerships; but it is always worth starting by diving into the data, to truly understand how asset performance stacks up against competitors, and how returns can be maximised.    

These are just some of the questions that we help our clients to answer.

The SAY team have extensive experience in operational management of living-sector portfolios, and a significant pool of actual cost data for operational schemes across the UK.

When auditing a client’s rental assets, we use this data to benchmark performance against comparable schemes. By consolidating and standardising cost data, we can compare operational expenses line-by-line and by category, identifying areas for improvement.

Our team’s specialist experience allows us to support the data with insights and advice; helping operators and investors understand actionable steps to deliver improvements, and drive efficiencies.

Our benchmark reports take each individual element of cost and expenditure within a scheme or portfolio and benchmark it against the market. How do your marketing costs compare with competitors? Are you spending too much money on your void units? Is your IT and systems budget commensurate with the scale of your portfolio?

With an increasingly competitive BTR market, each line on an operational expenditure model can have a significant impact on returns. SAY can help you understand opportunities for improvement, and then how to implement positive change.

An audit doesn’t extend only to cost efficiency though. And at SAY we know that protecting investor clients also requires an understanding of compliance, and ensuring that assets are managed in accordance with the law, and best practice. That is why we are trusted by large institutional investors to carry out compliance audits across their portfolios.

For your assets, have the necessary health and safety requirements been completed? Have you carried out all necessary tenant referencing checks, and anti-money laundering checks? Are the deposit protection arrangements compliant? Often, these questions are only asked when an investor brings an asset to the market; but understanding your portfolio’s compliance position should be a critical consideration for all investors and operators. We have built a specialist compliance audit process to help you do just that.

Despite the challenging market; BTR investment continues to break records year on year, suggesting an exciting 2025 for the sector. Whilst construction volumes remain slower though, investors must turn their attention to the performance of existing assets; to make sure their portfolios are in good shape for the growth ahead.

To learn more about how we can assist with the operational performance of your BTR assets, email caspar@sayproperty.co.uk