The build to rent (BTR) market has experienced a significant increase in activity and popularity over recent years.
A major factor driving this movement is the growing difficulties the UK population (particularly those in their 20’s and 30’s) is having with becoming homeowners. The term “generation rent” has become a common phrase following a significant decrease in people owning their own property.
PwC’s research shows that in 2000, almost 60% of Londoners owned the home they lived in (either outright or with a mortgage). However, PwC’s recent analysis shows that by 2025 this could be reversed, with only around 40% owning their home, and around 60% renting, mostly from private landlords.
This shift in the market presents a massive opportunity for the BTR sector and has resulted in a steep increase in activity. The total investment into the build to rent market reached just under £1.4 billion in the first half of 2019 with Q1 seeing record volumes. At the end of Q2, Savills reported the number of homes in planning exceeded 74,000, a 20% increase year on year.
With the demand only growing, it is not surprising there has been an increase in investor and developer interest with some key players including:
Quintain’s development of Wembley Park is one of the largest ‘build to rent’ development sites in the UK. During the development, to respond to the clear demand in the market, they announced that they would change the purpose of the remaining homes to become build to rent (totalling 5,000 homes).
Greystar, a global leader in rental housing, first invested in the UK build to rent market in 2013 when they quickly acquired, invested and developed a strong portfolio of assets. Last year, Greystar partnered with Henderson Park to develop two of the world’s tallest towers (a 44-storey and a 38-storey) in Croydon, responding to the increased demand for rented housing in the area.
Goldman Sachs issued its first UK build to rent development loan earlier this year for the 42-storey tower in Birmingham. The Wall Street giant has loaned £118m to Apache Capital Partners and Moda Living for the development – highlighting the opportunities across the UK’s regional cities, not just the capital!
Legal and General has a large and growing portfolio of over 4,600 homes across 13 schemes. The global asset manager has more than £1.7bn in capital committed across the UK for build to rent and £800m immediate pipeline in the next six months.
Last year, Invesco Real Estate funded EcoWorld London’s two build to rent sites in the capital, valued at almost £400m. The development will comprise of more than 1000 build to rent homes across two sites in Kew and Barking. In addition, earlier this year (September 2019), Invesco completed a £98m forward-funding deal as it expands its Birmingham BTR portfolio!
Build to rent is a hot sector for property investment and development. ‘Generation rent’ has driven this sector to outperform previous years activity and analysis suggests the trend is here to stay!