Days of buy, wait and sell look increasingly numbered

Neil Young wrote this article for React News, June 2020

Some of the best ideas in real estate today tap into the hotelisation trend

GUEST WRITER Neil Young is investment chair at consultancy firm Young. He was previously chief executive at Get Living, a pioneer in build to rent, and started his career working in the hospitality industry with Tui and British Airways.

Not many people, especially in real estate, get the chance to be a pioneer in a sector (build to rent) and be chief executive of the market leader (Get Living). I feel very fortunate that for the last decade or so I’ve done this and been able to innovate, challenge the norm and be a little contrary along the way.

I’m not one to just settle, so once again am looking for innovation. I’ve reset up my business Young to deliver placemade returns by creating asset backed investment partnerships in places where people live, stay or spend time. We are on the lookout for new businesses to partner with.

I’ve allowed myself the luxury of time to meet people, talk about ideas and try and find the next big thing(s). Real estate can get a bad press, but I find peers so open, keen to share and wanting to help.

Within a sector, whatever sector, you will always find there are those who are trying to protect their fiefdoms. They may say they want change, but really they are happy with the status quo. Back in 2009 when we talked to institutions about BTR, many felt they needed to look at it but in reality were against entering the sector. What I have found recently is many ideas I’m discussing are coming from people from outside the real estate sector. This is especially true of tech.

New ideas

There is an opportunity to improve the quality of HMOs for students

There are many entrepreneurs trying to ‘do an Uber’ to the lettings sector. Can the complete process be solved in an app? With a fresh perspective, I think they have a chance to really challenge the sector – including the big portals. However, there are parts of the process – especially property management – which make it difficult. I am convinced we will see this sector revolutionised, but who will succeed?

I’m a big believer in the hotelisation of real estate. I’ve been promoting this for years. The days of buying an asset, waiting, then selling at a profit may not be dead, but they are limited. However, why not buy assets, give a really great experience to its customers, create a brand, then either sell or hold for the long term? I think we will see more propco / opco arrangements. Different funds will be attracted to the different returns – but why not work together?

One venture I’m exploring is student accommodation. We’ve seen Purpose Built Student Accommodation grow over the last few decades, with improved products and service. However, I’m focused on individual houses (Houses of Multiple Occupation – HMOs) for 5-6 students. Why can’t they be well presented with great service? Why should so many students’ first experience of real estate be so poor?

Importance of local

Co-working is likely to become more common in the suburbs

Covid-19 has really brought to the fore the importance of local – the walkable neighbourhood. Residents have seen the value in their local retail, public realm and community. Even as lockdown is eased people are choosing to stay local rather going to the city centres. I believe this will continue. I therefore do not subscribe to the death of the high street. Yes, it will change (see co-working point below) but we are an innovative lot and fresh ideas will emerge.

The local nature will also help the co-working offer. There has been a lot of talk about people enjoying working from home. Personally, I think that it is more about working away from the office. Saving on commuting (both time and money) and leading to better mental health. I therefore think there will be interest in more services in local neighbourhoods – this includes co-working, of which I’ve always been a fan. I think this sector will refine and cater to its audience in a more local manner.

Despite this point regarding co-working, I do not think that the office sector is finished. There are some great designers out there who are already looking at the function of the office. I see traditional offices learning from hospitality and deciding how to offer their staff the best working arrangements. Staff want flexibility and sociability.

So, my journey at Young is still in the early stages. I’m excited by the ideas that we are discussing in the living sector. We are enjoying future gazing. As I’ve always said, if you can keep the customer happy then the returns will follow.