Forget fancy gyms and rooftop gardens – investors are ditching the bells and whistles and focusing on the basics with a new breed of Build to Rent (BTR) schemes.

Simple is the New Luxury

According to property experts Cushman & Wakefield, investors are flocking to “amenity-lite” BTR schemes, particularly in urban areas. These are the type of developments offering decent living spaces at reasonable prices, without all the fancy extras.

A recent survey by Cushman & Wakefield revealed that 53% of investors chose this type of BTR as their first preference, with another 25% ranking it as their second choice.

Lessons from Across the Pond

The US BTR market offers some valuable insights into the success of amenity-lite properties. While US renters tend to spend less of their income on rent than their UK counterparts, they’re also more willing to pay a premium for heavily amenitised schemes.

However, research shows that US tenants actually prefer “Class B and C” multifamily properties – those that are older, more affordable, and often have fewer amenities.

The Power of Affordability

Why the shift towards basic? It’s all about affordability and tenant retention. The lower the rent, the more likely tenants are to stay put, reducing turnover costs for landlords. This is exactly what’s happening in the US:

• Class A schemes (high-end, with lots of amenities) have the lowest retention rates – just 51% in the first half of 2024.
• Class B schemes (older but well-maintained, with reasonable rents) have a retention rate of 54%.
• Class C schemes (older, basic, and very affordable) have the highest retention rate – 60%.

These numbers tell a clear story: affordability drives tenant loyalty.

A UK Opportunity

In the UK, 82% of renters earn £39,000 or less, with 24% falling within the £20,000-£29,000 income bracket. This means there’s a huge demand for affordable housing options.

Cushman & Wakefield believes that the UK BTR market should learn from the US experience and embrace the amenity-lite model. This would provide a more affordable option for a wider range of renters, helping to address the ongoing housing crisis.

The Bottom Line for Investors

Investors are wise to take note of the growing popularity of amenity-lite BTR schemes. These developments offer strong potential for tenant retention, lower operational costs, and a wider target audience – all leading to better returns on investment. The key is to offer comfortable and functional living spaces at a price point that resonates with the majority of renters.