A new ‘flex-lease’ approach to rental housing is emerging in the UK which promises to reward buy-to-let investors with high premiums and lower risks.
The idea, which started in the US, allocates 10-20% of a residential building to short-term rentals and the rest to long-term rentals. Developer Sonder has already opened blocks in central London including on Great Peter Street in Westminster (pictured) but also Glasgow and Edinburgh, and it’s becoming a growing sector.
The new hybrid approach allows a residential building to capitalise on peak pricing periods in a way that long-term residential rentals can’t, according to Matthew Pohlman (pictured), a partner at Goodwin’s Real Estate Industry Group.
“A key factor influencing this increased investor interest in short-term rentals is the ability to drive stronger, more robust margins relative to units leased on a long-term basis,” he says.
“Covid has accelerated a trend where guests are looking for more ‘in-room’ amenities – like kitchenettes and workspaces – to support longer stays in the destinations they are travelling to.”
In the US, short-term rental operator Viagem is partnering with real estate investment companies to manage a percentage of units in their property portfolios.
Revenue is then shared between the owner and the operator. The apartments offer self-check-in, fast wi-fi and workspaces in prime urban locations.
Viagem manages 40 units of a 230-unit block in Myrtle Beach, advertising the apartments via its own platforms and handling the day-to-day operations.
In the first six months, the company recorded a 98% premium above regular rents, despite the destination’s high seasonal nature. Viagem says it has seen many people using short-term stays after relocating, as well as those who use it as a stepping stone before committing to longer term stays. With the rise of remote workers, there is expected to be a greater convergence between the two types of accommodation.
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