Strategic Lease Up
As part of Allsop's lease up approach we always research the local market to better understand where we can seek to take advantage of local trends but also so we can fully understand the market drivers and adjust our approach to lease up and marketing appropriately.
Birmingham is one of the youngest cities in the UK. Having reviewed various datasets we have produced the graphics below outlining the 5 universities in Birmingham. It is clear that the majority of the University graduates from these locations are remaining within the region (both after 1 year and importantly after 5). This retention will undoubtedly be driving the PRS and BtR market at key calendar points as they move from undergraduate centric accommodation into PRS/BtR. Indeed if you click on the graphics they will also provide you with a heat map demonstrating retention is over 50%.
We believe this insight provides Lampworks with an opportunity to target a host of different initiatives with a view to leasing the building.
The graphics below demonstrate the median salaries earned by the various university graduates, which are in turn then broken down by region. Interestingly if you click on each graphic (which shows salaries 1 year after graduation and 5 years after graduation) you're then able to see a more detailed dataset which also shows upper quartile earners. By way of example upper quartile rents 5 years after graduation at Aston University are £47,400 whilst median rents are £35,000. If applying as two sharers these individuals would represent a combined income of £82,000 and would comfortably pass referencing on a unit costing £2700pcm.
Also of interest is that salaries are lower compared to some other regional hubs and we expect it is this plentiful educated workforce, combined with competitive salary rates which has resulted in the likes of Goldman Sachs and PWC to establish significant regional hubs in the city of Birmingham. It is vital Lampworks is well placed to take advantage of this.
Rental Projections
Allsop are also able to project rental growth for the city through the work conducted by our research team on prevailing salary growth conditions. We have been able to establish that there is a lag between wage inflation and rental growth and whilst we can see salary growth has likely hit its peak we expect rental growth to continue for the foreseeable future. This combined with growing population means the fundamentals for a competitive rental market are undeniable.
Corporate Targets
As referenced above the ever-growing list of muti-national organisations moving or establishing their offices in Birmingham is huge. The 9 opportunities listed below are by no means finite, but we wish to use them as examples of the various initiatives that are possible in order to both achieve stabilisation but also widen the tenure type and ultimately control the expiry profile of the scheme.
Obviously all of these firms have employees that we can target through SEO and PPC advertising much like any other potential AST tenant. However the ability to target them for relocation opportunities is also a valid avenue as people move from one corporate office to another. Additionally we are aware a number of firms, especially the likes of Goldman Sachs, PWC and KPMG are all operating in a highly competitive talent pool. They will wish to differentiate themselves from their competition and the ability to help their intake settle into a new city and even help them find accommodation is valuable. We have seen this work well with Deloitte in London and see no reason why we couldn't achieve success in Birmingham.
Open days specifically targeted either via the University for upcoming graduates or through the employers themselves is a highly effective way to get potential viewers to site. Additional benefits such as zero deposit options for any staff within these businesses is a USP that reduces the friction for a prospect making the move to your building and also assists the employer in attracting newly qualified individuals. The risk of zero deposit is small with insurance backed products available but also staff within these businesses protect their credit ratings closely considering the environment they are employed in.
Allsop are also conscious that some of these firms have large graduate intakes and we would propose to host a "get to know you event" whereby prospects can meet other graduates on the same intake in order to assess whether they wish to share an apartment together.
There is also the wider corporate relationship where accommodation might be required on a short stay basis but over an extended period for a handful of senior staff. Again Allsop's intention is to establish these relationships through our Head office Mobilisation function working collaboratively with the on site team.
Letting and Leasing
Our approach to lettings and leasing is to make the process for applicants easy, transparent, convenient and enjoyable. We know the process, legislation and compliance ‘inside out’ and have the benefit of experience and ability to focus on the service element.
We facilitate all mediums of customer contact – virtual, face to face, email or over the phone. In line with consumer trends, we are moving more toward virtual services, however we value one on one customer interaction above all else. We like to get to know our customers and ensure they are well informed.
As mentioned earlier, we have invested in our Yardi platform, which we believe is a service differentiator over many, as a letting mechanism, and feedback from applicants has been very positive with 95% of online applications received being accepted and proceeding to move in.
The lettings and leasing process has several key elements and below highlights areas of particular focus and our approach.
Vetting
- We provide extensive amounts of information to residents to help customers understand the letting process including a detailed and branded residents handbook, requirements for references, financial commitment and what to expect
- We believe in a robust referencing process to manage risk and adhere to strict referencing criteria which we prefer to be above industry standard measures. Our experience tells us this stringent process results in low possession claims and minimal voids periods
- Criteria is tailored to client requirements, each development and project, and we generally advise criteria to be based on market rents and salary bands
- Visa and passport checks – The Immigration Act dictates that agents should now check for visa validity for the first day of any tenancy giving any PR the ‘right to rent’ – we prefer visas to span the entire length of the tenancy
- We generally use UK Tenant Data and Let Alliance for national / international referencing, however can and have used other suppliers
Letting
- We work with clients to create bespoke tenancy conditions and processes including tenancy length, break clauses, pre tenancy conditions, incremental rental increases for tenancies longer than 12 months, termination notices and guidance on possession proceedings
- We recommend longer term tenancies, where possible12-36 months and would caution the issue of licences over ASTs, except where an appropriate use is involved i.e. carparking lease
- We encourage robust processes for renewals and agreeing uplifts in rent; the process involves early contact with the resident, seeking advice and instruction from our client and / or agreeing parameters in advance. Renewal processes are driven through electronic document signing.
- We support transparent and fair increases (ie CPI plus uplift %) adding weight to being fair and honest and enhancing reputation
- We carry out extensive market research to ensure accurate pricing which in turn minimises voids and maximises returns
- We believe in maximising rents, however we also believe that higher occupancy in a shorter timeframe is more lucrative – you can never make up lost revenue due to vacancy, it is dead time
- Generally we prefer to set and agree rent tolerance levels in the vicinity of 3-5% so we are able to efficiently process and agree lets with applicants
- We believe long term relationship building equals long term tenancies, a low churn rate, high retention and ultimately a better financial performance and hence our ethos is to encourage our staff to get to know their residents and develop genuine ties where people care about each other
- We accommodate and encourage inter portfolio moves / support life changes – we are after all, creating a sense of community and people help each other in communities