The purpose-built student accommodation (PBSA), Build to Rent and co-living sectors are witnessing an explosion in the use of flex renting strategies, as they evolve beyond traditional leasing practices, new research from property management software Lavanda reveals today.
Flex rental strategies enable owners and operators to maximise occupancy and revenue by adjusting rental terms, prices and lease lengths based on demand, tenant needs and market conditions.
Historically, operators, asset managers and investors have been reluctant to deviate from their core business models due to perceived risk, a lack of expertise and inflexible technology.
This meant student accommodation, for example, was only ever occupied by students. It left operators in a no-man’s land of vacant units and depressed yields whenever the market moved against them, financing costs rose or demand softened.
However an ongoing shift in rental demand post-pandemic, alongside evolving property management technology and tools, is challenging the status quo. Today, ‘flex operations’ allow operators to be more agile and cater to different types of occupiers as demand fluctuates, taking advantage of short or medium-term rental demand to:
- Give renters a wider choice of accommodation options within the same building.
- Fill voids, particularly during the summer months in the case of student accommodation.
- Stabilise assets in the lease-up phase.
- Create all-weather risk profiles within single assets.
- Better navigate complex planning constraints and unlock deals.
The Lavanda Flex Report 2024 breaks new ground with remarkable findings, surveying owners and operators of more than 1.3 million units across the student, Build to Rent and co-living sectors.
In the student accommodation sector, Flex is already a major contributor to NOI, with short-stay programmes in the summer months providing an important secondary revenue stream when students are away. In total, operators of 88% of European student accommodation units surveyed leveraged short-stays to some extent last year, with 22% seeing at least 20% NOI contribution.
With 100% of student accommodation operators surveyed in Lavanda’s study expecting to exploit short-stays to some degree in 2024, the research highlights the relative maturity of the sector’s shift to adopting Flex rental strategies. Roughly half (47%) of student accommodation operators surveyed increased their short-stay activity in 2023, with 43% expecting to increase their current level of activity in 2024.
Operators responsible for 70% of PBSA beds surveyed also expect the development of ‘Flex buildings’ to accelerate in 2024 — typically blended asset types (i.e. some combination of PBSA, Build to Rent and dedicated short stay accommodation units) designed to tap into a broader rental demographic by offering fully flexible leases.
“As rental demand and accommodation preferences continue to evolve rapidly post-pandemic, and with technology increasingly shaping the future of the built world, we’re hugely excited to launch The Global Flex Report 2024.
“The report sets out to chart the impact of short and medium term renting upon the investment and the operating strategies underpinning the global apartment industry, surveying owners and operators of 1.3 million student accommodation, BTR and co-living units across Europe and the US.
“The goal of the report is to inform all industry stakeholders, from residential investors, operators and analysts to journalists and policy makers, so that they can more easily track and understand some of the key trends underpinning the living sector. These include the pace of adoption of emerging Flex operating strategies, the emergence of a new Flex asset class and the key technologies and innovations that will power it in the future.
“The pace of adoption highlighted in this report is incredibly exciting. The shift to Flex strategies is accelerating across the residential sector to the benefit of renters, whilst at the same time creating more agile, more resilient all-weather assets.”
Fred Lerche-Lerchenborg, CEO of Lavanda
