Watch: UK rental market trends and the rise of coliving HMOs

Williams Johnson (00:04.398)

So my name is Williams Johnson. I’m the co-founder and CEO of B-Hive Living. I have been investing in property since 2017. That’s when I co-founded Behind the Living together with my wife, Silvia Gratieri. And since then, we have been on quite a journey, which I’m gonna share some of this journey with you today. Today my talk is gonna be about how to future-proof your HMO business. I think we’re all sensing that the market is

the market is changing, particularly the UK market. And the recipe for success is no longer the same what it was maybe a year, two years or five years ago. And what it means for us as professionals, and I don’t think I need to be here, do I? Okay, great, I can walk. And what it means for us as professionals of this field, and investors and operators, is that we need to evolve a bit.

We need to be thinking how can we adapt our business to the changes that are coming and be thinking. And so this talk is going to be what to prepare for and how to do it. So.

Williams Johnson (01:23.51)

So the UK market landscape is changing a lot. So since 2000, we have seen the rental market in the UK has doubled. And what we have seen with that is that private renting is growing much faster than home ownership. And to illustrate that, one of the key figures we can point out is the fact that in the last 10 years, home mortgage

have decreased by 3%.

Private renting has grown by a whopping 20%. So it’s a quite major discrepancy there. But what is interesting about this is that in the midst of all these changes, single rent housing has been the segment of the market that has grown the most. And what I mean by that is that we have 80 million people in the UK that are tenants now. These are people living alone.

And that’s great news for most of us in this room that work in housing. But that brings opportunities, but also brings some challenges. Challenges that can be overcome in terms of opportunities. And that’s some of the things that we’re going to be talking about today.

Williams Johnson (02:45.121)

So one of these major changes is that what we have seen is that millennial and Gen Z tenants are now the largest consumers of rental housing in the UK. And these guys will shape and change the marketplace, particularly for rental housing, in a way that has never been done before. And they will do that not only as consumers, but also as entrepreneurs.

And that’s something that hasn’t been talking about, but that’s something that’s happening already. Actually, the largest company in the world of shared housing. It’s controlled and has been created by two millennials. And in the space of five years, they are the biggest players in the West, Europe, and now increasingly in Asia. So these guys, mean business.

So for those that are familiar with some of these brands in here, you do know what I’m talking about. This is the most innovative and the most entrepreneurial generation in history. And for each and every company they have created, what these guys have been able to do was to change the trajectory of the sectors in which they operated. And they will do the same with the rental market. And as I said, this is already happening.

And why should you care? And the reason why should you care? Because they are gonna be who your HMO business depends on to survive and thrive in the future, but they also will be probably your competition too. So they will demand more quality, flexibility, and different traits from your business that have not been asked before. And that’s why you need to know.

then very well so you can prepare for it.

Williams Johnson (04:45.15)

Now, this inflation of the UK rental market has also meant that the UK has become a target for institutional investors from all over the world. So in fact, the UK is right now the second largest market for institutional-grade investors in EUDISX in the world after the US. But not many people talk about it.

And what we are, the result in practical terms, what it means is that you are seeing a much more sophisticated product, rental product in the marketplace, but also we are seeing a much more sophisticated competition. So what it means for us, have to up our game. Okay? And this competition, what we see is in the shape of building to rent assets, in the shape of institutional grade co-living assets, and in the shape

of service department institutional grade assets. At the moment, a lot of this change and these assets that have been created in London, but increasingly there are very large portfolios being created across the regions. And that’s going to affect a lot of you.

But despite the government’s incentives to really incentivize institutional investment in the UK, less than 1 % of today’s private renting, the private housing portfolio, less than 1 % is owned by institutions. And what it means for us that we are still the biggest game in town when comes to private housing in stock.

We are the biggest providers of it. And there is a power that comes with it. But we must leverage. And at the same time, but I would say at the same time, it’s not time to be complacent. Change is coming fast. Because before, instead of when you think a small HMO investor is able to put maybe eight bedrooms in a place like Oxford, Cambridge, or Whiteford, these guys can bring

Williams Johnson (07:00.94)

350 in one year. And that makes a huge difference to a market of that size.

Williams Johnson (07:14.71)

I must get this right.

Williams Johnson (07:20.556)

So it’s very important to know what this new generation of renters want and what do they crave for. Like in any sector, the key to success, and I spent 13 years of my life building a global professional service company, which I took to 48 countries around the world. And I sold that back in 2016 before deciding to create this one. And the key to success then was the same as it is now.

It’s understand who your consumer is and delivering and creating a product that aligns with them. And for the rental sectors, it’s the same. So it’s very important right now that we look at what’s going on in the life of these guys and create a product that aligns with it. So let’s look for a moment to it. So first of all, the high cost of living.

that we all have been suffering in the UK affects them as well. So affordability is a key priority for them. The second thing is that’s very unique to this generation. They prefer access to a product than ownership. Now, if you tell this to the generation of my parents or my grandmother, say, no, ownership, obviously I want to own my property.

But for a lot of them, renting is a choice, and it’s a choice that they embrace because it means that they can afford better quality.

Yeah, so quality is quite important for them. Then the other thing is that on average these guys are gonna have 11 jobs in their lifetime. And they’re gonna have very dynamic lives. So 85 % of our residents behind living, they are expats. More than 20 % of them come from Asia. So these are people coming from Asia, New York, coming from different parts of the world to come and work here.

Williams Johnson (09:22.899)

And then two years later, six months later, they go to Germany. And then they go to another place again. So contractual flexibility is really, really important for them.

Then the other thing is that social media and the business of modern life has made these guys really be at the same time that they are incredibly gifted in terms of entrepreneurship, they are also the most lonely generation ever. And our stats point to this. 49 % of young adults in the UK are considered themselves lonely. So what it means is that social experiences

are really, important. But when you think of the rental market, you think, okay, I’m renting a room, so how does social experience fit into it? I’m gonna tell you about in a minute. And finally, these guys are the guys that grown up the internet. So it’s natural for them to have an inclination for tech-enabled solutions. They like technology, they’re grown-ups, they don’t know any other thing. And the other thing that’s more important for you is they rely heavily

on online reviews to take decisions. They are much more likely to trust a review from a stranger online than the word of a friend. And that’s fact.

Williams Johnson (10:51.348)

So in a nutshell…

Williams Johnson (10:56.276)

So what do these guys want? It’s a rental product and experience that suits their lifestyle, that suit their needs, and suit their traits as individuals. And it’s to us as entrepreneurs to sass that out, okay, and create that.

So let’s go into this. When you look at…

the most prevalent rental products in the market right now, and the most prevalent investment strategies, it’s very easy for you to see the disconnect between what tenants want and what’s being made available to them.

But in the past, they didn’t have choice. But with these thousands and thousands of institutional-grade products coming to market, now they have choice. So what? We’ve got Apple again. So luckily, some of us have already realized this. And many of them are in this room already and have started to evolve their HMO products and rental products to align with this new and evolving context.

and started to deliver something that aligns with the wishes and wants of this new generation.

Williams Johnson (12:24.68)

And that’s called co-living HMOs.

Williams Johnson (12:29.706)

Now, for a lot of people what I have seen, these people say, oh, co-living HMOs, they are sort of glorified HMOs. And I see a lot of misinterpretation and misconception around what this is. And it’s part of what I to clear today, because this existence is very tangible. And that is a very simple reason why behind-the-livings hugely oversimplified in terms of the amount of people wanting our products and the supply that we have.

It’s because these products, and it’s not only Behaiv, there are many others here that are doing this. And the reason for that is because it’s the very simple reason that we’re believing something that the tenants want, that the consumer want. And that makes sense to everyone, should make sense for everyone. Okay?

But let me explain how a co-living HMO differs from a traditional HMO.

So a traditional HMO, like a collivial HMO, it’s a property rented by the room by unrelated people. But that’s where the similarity ends. Because then we have a product that’s design led. And what I mean by that is furnishing, fit, and equipment.

that are really high grade and would be comparable to a third, so to a three star hotel or a high grade service apartment, okay? Then you have service orientation. And what do I mean by that? It’s not simply about having all bills included. In a co-living HMO, what you have is like events, have exclusive discounts, you have people being able to access cleaning packets and many other things.

Williams Johnson (14:20.328)

So it takes the product way beyond what it is now. And then you have a tech-enabled product. And what I mean by that, it’s using technology not only the optimization of the business, but also in a way that you can engage the consumer and provide convenience. And I will provide a tangible example of that in a few minutes. And then finally, and if you have to forget everything I have said, I want you to remember.

that UCX is the most important thing, the community experience. This is if you want to be part of this evolution, okay? And what UCX means, it’s strategy, tools, and technology that’s designed to influence every stage of the customer journey of…

of the tenant, from inquiry through to onboarding, through to the way they request for maintenance requests, through inventory, and through checkout. So we use a lot of that and we have more than 146 touch points that we have optimized in order for this to happen.

So what qualifies to talk about this? So we are behind living, we have been for 80 years creating technology products, properties, and strategies to empower people to lead a more connected, health-fulfilling lifestyle. So some of are some of the correlations of our brand. So why did we do this? When my wife and I started to invest, we realized we just felt that for too often in the property context.

the tenants were being overlooked. And we came from professional service and my wife was a global branding manager. And I say, for us, the tenants and the consumers everything. So why property is not the center of the operation? And that’s why we decided to create the business what it is. So for us, we’re not selling rooms, we are selling an experience, a life-enhanced experience. And that’s translating very different outcomes for both the tenants.

Williams Johnson (16:41.65)

and our business. For that we have won a whole bunch of accolades, so we won the best user experience in the UK two years ago and the best one in the world last year. Beating many of the institutional grade assets that you may have seen that we are competing with. So here’s an example of what we do. So we know that communication is one of the efficient communications, one of the most sought after traits by tenants in relation to agents, operators and

and investors. Yet most people rely on mail and email and many other things. So what we did, we created an app that allows residents from the beginning to create to find commonality. They can see the hubs that they have. can see, actually they write that bio which they have here. They can see where they come from, the background. The second thing they can do is they can discover what’s going on in the community. They can see which events are going on, who has a birthday.

what people are doing if they are running a marathon together, all sorts of things they can find there. The other thing, they can book events, they can book services in real time, they can find out about the property, and every aspect of the tenants is there. So what we wanted for that was to declutter the communication between the tenants and our team. And the reason for that is simple. I don’t want my team doing paperwork. I want them invest in the experience of the tenant, because that’s the value is. And I’ll show you why.

Williams Johnson (18:12.266)

So a lot of people ask us, why do you do these Williams? Why do your team spend so much time on this? And here’s some of the reasons. The first is product differentiation, which make us more competitive, which means that we can achieve high retention rates and high occupancy rates. So last year, occupancy rate is 99.4%. And bear in mind that we don’t do only long term rents. We do one month to three months rent. Our retention rate is 68%.

And the reason for that, have some tangible information here for you. This was a survey not done by us, across Europe, looking at to the degree in which people finding community to be important to the rental sector. And guess what? The UK tenant is the one that have the highest perception of the importance of community in the rental sector.

And there is a very simple reason for this because they can see the tangible impact it can have on their lives. It makes them feel safer. It makes them feel that they can find other people and they can trust other people. So there is all these very tangible results. There is no wishy washy thing here. The other thing is that it impacts the bottom line.

Williams Johnson (19:30.59)

How it impacts the bottom line? It creates a differentiation. But also we achieve much higher pricing points than other people. And the reason we do is because you can see that’s the degree in which UK tenants, they’re willing to pay more in rent for some of the amenities we provide. And the reason they do for that because it’s valuable for them. And what it means for us as investors, which means we achieve higher market rents and we achieve much, much higher.

market valuations. Okay, so we receive some ridiculous market valuation for our assets as a result of that. Now what it does for our competitiveness, not only in terms, if you look at the spectrum of rental products that exist in the UK, used to the institutional grade assets there, high-end, high tech, we see a lot of the traditional HMOs here in the low tech, low end, and the reason for that is a lot of them have been

built a long time ago, so that’s the simple reason for that. But what we see is that behind the living are able to position ourselves right there, and what it means in practical terms, our price per square meter is comparable to these guys for a fraction of the cost. We invest 300K in profit, they invest 200 million in the portfolio, but we achieve similar or higher pricing points than them, and our experience is comparable, so much so that we beat most of them.

And what I mean is what our competitiveness with all the user classes. So what we have seen is that people that usually stay in hotels, they won’t stay with us. People stay in cyber departments, they won’t stay with us because of what they are mainly to provide. Again, it’s an evolution of the product.

Williams Johnson (21:16.993)

So many of are going to be looking at, what Williams? What this all means? What it means is that an elevated, I hope I don’t have to convince you that an elevated HMO experience leads to higher rents. And if I haven’t convinced you up to this point, I would like just to note some of other things we have achieved. So we achieved rents that are 30 to 6 % higher than our peers in the same areas.

Our NPS score, which is the degree which our tenants recommend us, is 46 % higher, 47 % higher than the sector average. And that’s because 93 % of our residents feel deeply connected to the people they live with. 73 % of them believe we have a tangible impact on their well-being with three months of living with us.

Now

Williams Johnson (22:15.142)

I would love for those that want to embark on this journey to provide some tangible ways and some tangible examples of what we have done in order to do this because it doesn’t require a huge amount of investment. It’s really more of a sort of mindset that you need to have. And for us was very interesting because when we came into the proper world, the impression that we had was that there was a lot of people doing a bit in their business, likely were playing a tennis game, looking at the scorecard rather than the ball.

the ball. The ball is the consumer and the scorecard is the result. We redefine it to success for ourselves. So what is success for us is the joy, laughter, and the shared moments that our residents enjoy in our properties, in our experience. And because of that, we get the results. So the focus is not on the result. The focus is on the experience. So how do you do that?

First, you personalize your experience. And I think it may sound very easy, but there are some easy things you can do. You can create a welcome pack. And the key to that is anticipate needs. to find out a lot about people before they actually join your HMO. How do you do that? Social media. You can find out about your consumer much more than any other time in history. You can ask them to fill a form. There are all sorts of ways.

But then you use that information to wow them. You write a note about special moments. You know what they like, you know their hobbies. So use that strategically to create that wow moment. Recognize the special moments. You can provide them for value information about the destination, the place in which you operate. But that’s really interesting, and I think that’s probably gonna be new to some of you. When I ask people,

What customer do you focus? They say young professionals. What does that mean?

Williams Johnson (24:18.211)

Because there is a plethora of younger professionals, but which type of young professionals? So what it means here, you have to be really focused on niche markets. So be highly believing we focus on expert, but increasingly what I have seen is like, there are much higher yield and high growth market segments than young professionals, mature professionals. have seen a massive growth in young couples looking for our product.

But the biggest growth has been business travelers and digital nomads looking for us. So what are digital nomads? It’s someone that live and work and they travel and work at the same time. So last year we have an investment banker out the way from New York and he and spent three months with us. Guess what? They pay a much higher pricing point than a local person. But why on earth this guy came from New York? Here, he wasn’t looking for a room. He was looking for an experience. That’s the only reason.

And finally, leverage technology. Now, we have been leveraging technology and playing with technology for the last eight years. And I think that the simplest thing you can do is high grade internet because internet’s more important than water for professionals. It’s just what it is. But you need to find the right solution. And I’m sorry for those of that working virgin. The traditional players, not what it’s gonna cut here. You need to look for a specialist.

providers that want to deliver what want. Provide a keyless environment and provide also smart thermostats, but in a way that actually helps people to adapt their lifestyle to your product. For instance, in behavior what I have is each unit have a sensor that as the person comes in, switches on, as the person comes out, switches off. If you are in your work and you say, actually I want to arrive in 20 minutes in our room and I want you to be warm.

you can, with the app, switch that on. If you arrive in New York for a business trip and you forgot that on and our team didn’t catch, then you can switch off our day from New York. But the area that’s gonna be the biggest area of growth is AI. We have been playing a lot of AI and I think that’s gonna be amazing what AI can do. A lot of people’s pointed to the risks of AI, which is very valid, but there is a lot that can be done with this.

Williams Johnson (26:41.059)

So, change is inevitable and life will always bring change. But transformation is a choice. And it’s a choice that each and every one of you can do here.

And for those that choose.

to create a tenant-centric business, we have a gift for you. We recently decided to create this guide with the support of COHO to share a little bit of this strategy that we have been applying so that those that decided to follow suit and create this color revolution, you can find out about some of these strategies that we have. And also understand what

What’s UCI in the context of HMO? What the hell is that? So please download, enjoy this, use it, ask any questions, you can reach out to our team, okay? And finally, for those that want to partner, understand more, we love partnering with people. We learn a lot from people in each and every experience, and we work with both private investors and institutional-grade investors. So please feel free.

to come and work with us. Thank you.