BNP Paribas’ Q1 2024 BTR, SFH and co-living update

As the rental sectors continue to grow, BNP Paribas shares insights into the Build to Rent, SFH and co-living sectors in Q1 2024.

Vistry Group and Sigma to deliver 5,000 SFH Build to Rent homes | BTR News
Vistry Group and Sigma to deliver 5,000 SFH Build to Rent homes.

Financial services company BNP Paribas has released its ‘UK Living Market Update Q1 2024’ that analyses the Build to Rent, single-family housing (SFH) and co-living sectors.

BNP Paribas found that the growth of these living sectors is dependent on the timing and extent of Bank Rate cuts, which will drive market momentum. However, the weight of capital that has indicated it will target these sectors is significant and therefore it is anticipated that market activity will improve as the year progresses, despite its slow start.

There were some indications that the rental market had settled in Q1 2024, but the affordability challenges in the ten-housing market and a reduction in stock continued to ensure strong demand for homes to rent, BNP Paribas highlight. The RICS Residential Survey in February showed tenant demand increasing and a reduction in landlord instructions.

The ONS Rental Index, which reflects price changes for existing tenancies and new lettings, continued to report increasing rental growth in the 12 months to March 2024 at 9.2% year-on-year. In London, Birmingham and Manchester, rental growth over the same period reached 11.2%, 14.1% and 12.3% respectively. Overall, the ONS shows that the UK private rented sector has recorded 21% rental growth since March 2020.

The tightness in the labour market and resulting wage growth is likely to be one factor that continues to underpin this growth, according to BNP Paribas. However, the shortfall of housing supply has been another significant structural driver of these high levels of rental growth, and this looks unlikely to improve in the short or medium term.

Build to Rent, single-family and co-living investment volumes | BNP Paribas | BTR News
Build to Rent, single-family and co-living investment volumes.

Investment activity totalled c.€1.4bn across Build to Rent, SFH and co-living in Q1 2024. A significant proportion of this was attributed to SFH and co-living whilst Build to Rent had a slower few months, reflecting the continued challenges from high construction and financing costs.

BNP Paribas highlight notable activities, including KKR’s acquisition of two Build to Rent schemes from Quintain at Wembley Park for an estimated £250m, and US-based investor Pembroke made its debut into European residential with the purchase of The Lark at Nine Elms.

In SFH, an agreement between Vistry Group and Sigma Capital to deliver 5,000 new homes under the Simple Life Homes brand was agreed. Alongside this, Casa by Moda acquired 100 single-family homes in Doncaster from Albermale Homes, and Packaged Living and Aviva agreed a £60m forward funding of 174 homes in a deal with Taylor Wimpey and Dorchester Group at the Prince Philip Park development in Hampshire.

Also, in Q1 2024, Gatehouse IM and Carlyle acquired 174 homes across four sites in Coventry, Stoke and Dudley from Persimmon for £85m and acquired 50 homes from Vistry Group in Gloucester.

In co-living, one of the largest deals of the quarter took place. Blackrock and Outpost Management JV agreed a £170m forward funding acquisition with Tide Construction for The Castle in North Acton – which includes 462 co-living apartments.

The London co-living market also saw Hub and Bridges Fund Management agree a €88m forward funding deal with City Developments Limited (CDL), to deliver the Yardhouse scheme which includes 209 co-living apartments. Outside of London, Greystar and Student Roost achieved planning consent for a scheme in Bristol, which includes 249 co-living apartments.