Build to Rent sector reaches 100,000-home milestone

The Build to Rent sector reaches 100,000-home milestone, with 542 schemes delivered, let and managed by professional operators.

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According to property consultancy firm Savills, the Build to Rent sector has hit a significant achievement. There are now 100,000 operational Build to Rent homes in the UK.

Approximately 90,000 of these have a combined value of £35bn and are in urban apartment blocks. London is the largest city across the country accounting for a majority of the overall number, which is split across the inner and outer boroughs.

The Build to Rent market has shown a shift from small to large institutional landlords, with the number of homes joining this trend anticipated to rise. Savills found that reaching only 10% institutional ownership would add another 480,000 homes to institutional portfolios.

Throughout the last five years, Savills found that other major cities are gaining investor interest and confidence within the regions. Before this, most of the early capital deployed into the sector targeted schemes that were not originally planned for the private rented sector (PRS).

Most recently, PRS investors took over as owner and operator for a total of 261 schemes. However, nearly two-thirds of this came before 2018. Since 2018, 64% of schemes have been purpose-built which indicates that investors are getting involved much earlier in funding these schemes to influence the design, layout, specification and facilities of the rental apartments.

Despite the progress made, growth achieved and industry wide praise for the Build to Rent sector, it still only represents 2% of the overall PRS. However, it is a market that has gained huge traction over the last decade, with its popularity only set to increase.

Key attractions of the Build to Rent sector for investors

  • Rent levels have outperformed the wider PRS, reflective of the higher quality of stock and professional management approach.
  • Rental growth of 3.2% p.a. over the past 20 years compared to earnings growth of 3.1%. This close correlation is especially attractive to institutional investors and points to sustainable rental growth over the long term.
  • Savills forecasts show rents outperforming house prices over the next two years – supporting investment values.
  • In 2023, 50% of investment in Build to Rent was from new entrants to the market, up from 20% in 2018. Savills highlights that the investor profile is changing as the market matures and attracts a wider pool of global capital.
  • Housing should be viewed as infrastructure investment according to Savills, as the cost of debt remains a barrier to core capital, but could be overcome if housing was considered an infrastructure product. Rented housing (affordable and private) is especially useful to infrastructure funds that deliver many homes in other countries.
  • 110,000 homes in the Build to Rent planning pipeline, which is the largest pipeline seen and indicates that the sector will start to grow more quickly than in the past. If it grows like the student sector did previously, Savills highlights that it will start to double in size every couple of years.
  • Greater Build to Rent scale will arguably be easier over the next decade because the groundwork has been done in terms of planning, development funding, development viability, partnership structures and portfolio management.
  • £300bn is the investment needed to meet future household growth across the PRS. A large part of this investment will need to be in urban Build to Rent apartments.