What Are Tenant Retention Rates?
Tenant retention rates essentially measure the number of tenants that choose to renew their lease and extend their stay at a rental property. By measuring tenant retention rates, you can determine how successful your development is in holding onto tenants in the long-term, which is an important measure of success for any rental property but especially relevant for BTR developments.
A higher tenant retention rate is often indicative of tenant satisfaction, with tenants being comfortable to remain in their current accommodation by renewing their lease. On the other hand, poor tenant retention suggests that there could be issues within the development which are pushing tenants away, such as quality, poor value for money, lack of maintenance, community unrest or simple being outperformed by competitors in the BTR market.
Current Tenant Retention Rates
At the time of writing, tenant retention rates for PRS properties sits 48%, meaning that year-on-year approximately 48 out of 100 tenants will choose to renew their lease. On the other hand, BTR retention rates sit at 53% according to the British Property Federation and UKAA, which is slightly higher than its PRS counterpart. It should be noted that BTR tenancies can in some cases can take three years until they face renewal, whereas PRS tenancies are typically renewed every 6 to 12 months, meaning that although BTR retention rates are only marginally higher, the tenancy lengths are far more extensive. It’s also worth knowing that the Renters Reform Bill may look to make all tenancies periodic which may have a far reaching impact but for the moment at least, it seems as if the BTR sector is thriving in providing a high-quality rental alternative to the private rental sector which keeps tenants coming back for more.
BTR versus PRS
BTR developments should and often do attract more long-term renters. After all, BTR units do not come with some of the insecurities that PRS units do, with tenants in PRS properties having the overriding worry that their landlord may choose to sell the property or move back in themselves. BTR units typically offer much better long-term tenancy security, and they can be a great option for those looking for a long-term housing solution without committing themselves to a property purchase. Ultimately BTR, especially when done well, is a lifestyle choice for many, adopting a permanent rental model rather than investing in owned property, which only increases the need for perceived high value community engagement and amenity models. Tenants often choose BTR over PRS as a result of the community initiatives and amenities that are associated with BTR developments – which offer a better neighbourly community, greater value for money with unrivalled amenity access, and optimal convenience for those with busy lives.
Why is retention important?
Customer acquisition
Customer acquisition is far more expensive than customer retention, with some research suggesting that acquiring a new customer can be up to five times more expensive than retaining existing ones. We’ll all recognise the associated costs with acquisition, from marketing, onboarding and agency costs as well as staff and time costs that accrue when searching for new tenants. It is therefore far more financially to increase retention rates as much as possible, appealing to target existing tenants as opposed to sourcing entirely new ones.
Community stability
One of the core differences of BTR when compared to PRS is the emphasis placed on communities. With tenants being encouraged to share communal amenities, and all inhabitants being renters rather than a mixture of leaseholders and tenants, there is a greater sense of equity and togetherness that is fostered by BTR developments. People are the core of any community and whilst it can be daunting for a new tenant to join an existing community the familiarity and stability of the same people (good people of course!) are absolutely crucial to building a community frequent comings and goings of tenants can be detrimental to a community and the perception of your development. Low retention rates could be detrimental to the relationships between tenants and, as a result, the essence of the community you are looking to create.
Desirability
Public perception of any BTR development is important in fostering a sense of exclusivity and desirability that makes prospective tenants want to rent with you, and existing tenants want to stay. Weak tenant retention and the inevitable availability of units that it brings, can jeopardize this sense of desirability by indicating to existing and prospective tenants that living in your development simply isn’t worthwhile, and could even be detrimental to your reputation as a developer.
Why Do Tenants Leave?
Although it is difficult to determine the specific reasons why tenants wish to leave their rental property, and many can be for completely innocuous reason like relocation, work, family or partnership there are a few pervasive issues that can contribute to a tenant terminating their tenancy and handing in their notice. Although some tenants choose to vacate their property for personal reasons that are unrelated to the state of their BTR scheme, many choose to leave due to:
- poor maintenance throughout the development;
- concerns that they are not getting value for money;
- interest in a competitor development;
- ability to purchase a property;
- discontent with neighbours or broader neighbourhood
How To Improve Retention Rates?
Community
To improve retention rates, it is important to focus on the unique selling points of your BTR development that most likely attracted your tenants in the first place. Many tenants are drawn to the community aspect of BTR developments that fuse the ideas of the individual private domicile and the broader neighbourhood feel. If you stop providing ample opportunities for your BTR community to meet and interact at social events and in communal spaces, the strength of your community will start to wane, and tenants may feel discouraged that their BTR lifestyle isn’t meeting their expectations. Similarly if you’ve heavily focused on amenity spaces such as a gym, pool, cinema room or similar but don’t maintain the facility you can expect that your tenants may look elsewhere for better amenties. Many BTR developers make the error of focusing on community initiatives early on in the lifecycle of their development, and failing to keep up with this as time goes on. It is therefore important to actively offer social events, clubs and platforms for socialisation in the long-term.
Amenities
Tenants value amenities, especially when they offer optimal convenience. Ultra convenient amenities make tenants feel as if they are getting more for their money, and can simplify their lives by offering comprehensive services on their doorstep. Tenants have certain expectations that they wish to be met when renting through a BTR scheme, as they anticipate more premium ‘Grade A’ developments to have extravagant amenities such as cinema rooms, pools and events spaces. However, less luxury developments are still expected to have an array of amenities as standard, with approximately 96% of UK BTR schemes having a concierge, 80% having outdoor space, and 43% having a gym and residents lounge. To improve your tenant retention rates, it is important that you meet and exceed the expectations of your tenants by providing them with the convenient amenities that can rival your competitors.
On site team
The vast majority of BTR schemes benefit from a concierge service which is on hand to provide maintenance assistance, security and parcel acceptance services to tenants around the clock. Similarly, many developments benefit from communal cleaning and maintenance services without having to pay a hefty service charge. Making tenants aware of these services, and how the on-site team contribute to the smooth running of the broader BTR development, will assist you in demonstrating the value of these convenient services and improving tenant retention. It’s also important to get your personalities right within any on-site concierge, as they often act as a the bridge between tenant and developer and can be crucial to creating a positive feel.
Value
Value is important in tenant retention, especially in today’s cost of living crisis where tenants want to ensure that their rent is going as far as possible. If your tenants believe that they can obtain better value for money in another development, this could cause them to terminate their tenancy, which is why it is important for you to actively convey the value in your BTR development and its amenities. Tools like interactive screens and digital display boards can be a great option to subtly continue to convey value to your residents.
Impressive facilities and the upkeep of modern amenities can also convey value to your tenants – you may already be including access to workspaces, gyms, on-site parking and concierge services to your residents. It may also be worth investing in money saving perks for tenants such as ‘bills included’ options and included broadband to cut the cost of living, which is an ongoing concern for many tenants across the UK. Demonstrating that your BTR development has the facilities and perks to save tenants money in both the long and short term could be the tipping point that encourages them to renew their lease.
Demonstrating value is also important if many of your tenants are choosing to leave your development to make their first property purchase. It’s a tricky one as it’s a natural journey but considering how you nurture and inform your residents properly can be vital to a lost resident and a long term one, especially as BTR offers the same level of security for tenants as home ownership, making it a perfect option for those who are dubious about committing to their first property purchase.
Improve Your Tenant Retention Strategy With VICI
Tenant retention is the key to faster returns on your investment, greater tenant satisfaction and a stable BTR community, which is why VICI optimise our BTR services at every level to ensure that tenant retention is front and centre. From reaching your ideal tenants with targeted marketing, to creating a premium onboarding experience, and engaging with your tenants to make them feel heard, VICI know the value of strong retention levels. For more information on how VICI can boost your tenant retention strategy and add value to your BTR development, contact us using the form below, or click here to explore the VICI BTR hub.
