The property market has undergone significant change in the last five years. In addition toCovid as a major impetus for social change and changing investment priorities, we have also seen more gradually changing lifestyles, demographic evolution and economic change impacting on the rental sector.
But perhaps the most interesting – and the most lucrative – of all recent change in the residential property sector is ‘hotelification’.
The evolution of ‘hotelification’ is clearest in the Build to Rent (BTR) sector – a sector whichhas seen substantial growth in the past decade. The most recent research from the British Property Federation (BPF) shows that completed stock grew by 23% between Q3 2023 and Q3 2024.
Partly the success of BTR is due to the fact that it is far from just bricks and mortar: BTR communities are thriving, community-focused environments in which service is not limited to property maintenance but extends to a range of lifestyle add-ons: concierge services, co-working spaces, meeting rooms, gyms, roof-top running tracks, communal lounges, cinemas, events, a ‘library of things’. Even baby-sitting, dog-walking services and pet spas are available to tenants of today’s BTR schemes – be that the traditional urban co-living schemes or its suburban counterpart, the BTR suburban community.
The term ‘hotelification’ is frequently used in the context of BTR, referring to high-end residential spaces with the facilities and services of a hotel. The service-driven approach enhances tenant satisfaction, improves retention rates, and ensures a steady rental income stream. It also diversifies revenue potential. Many developments generate supplementary income through parking fees, short-term leases, and paid access to premium services, creating a financial cushion that mitigates risk in fluctuating market conditions.
One of the best measures of occupier satisfaction – and therefore investment potential is in HomeViews’ Build to Rent report. The 2024 findings shed some light on the emergence of hotelification. The percentage of BTR listings featuring amenities has increased over the past three years. Service features, such as ‘professional management’, remain the most commonly mentioned in listings. Areas where residents can interact as part of the community or book for social occasions (shared workspaces, games rooms and private dining rooms) have seen significant jumps in prevalence in the past year.
So from the investors’ point of view, it’s clear that this service-led approach to property development is more than an investment in bricks and mortar: it’s a multi-faceted, diversifiedinvestment with a variety of income streams. Unlike single-unit properties, BTR developments generate income across multiple units and additional revenue streams.
For those considering selling existing portfolios to BTR investors, the sector’s appetite for scale is advantageous. Institutional buyers are actively seeking portfolios that can be adapted or repositioned for BTR use. Blocks of flats, student accommodation, and even repurposed commercial properties are prime candidates. Sellers can capitalize on strong demand, often achieving higher premiums than they might in traditional open-market sales.
For those considering making an investment, the BTR sector in the UK is burgeoning, but with considerable capacity. The BPF figures tell us that, with over 120,000 completed unitsand 273,700 in the pipeline, the sector is growing at speed.
But at the same time, of the considerable 5 million households (one fifth of all households)that live in rented homes, but only 90,000 live currently live in BTR.
Government policies are also shifting in BTR’s favour. While the emerging Renters’ Rights Bill is causing concern in some quarters, BTR naturally aligns with the government’s intention that the rental sector should be ‘professionalised’.
The UK’s BTR market is in relative infancy compared to more established sectors in the US and Europe, where high proportions of families rent in suburban communities and mixed-use developments. In Switzerland, for example, 60% of families rent, while in America, suburban BTR accounts for 70% of the rental market, catering to families and renters desiring more space and amenities.
Accordingly, UK investors both have the opportunity to learn from the success of other markets, along with the ‘early mover’ advantage when it comes to finding suitable sites or properties.
Hotelification is what sets BTR apart: by focusing on community, service, and long-term sustainability, it enables a multifaced investment, in a single portfolio.
The property market isn’t immune from economic headwinds, but BTR’s resilience and flexibility provides some assurance at times of change.
