Investor appetite driving UK BTR investment

New research from Knight Frank reported investment into the UK’s Build to Rent market topped £2bn in the first half of 2021.

Birmingham, UK - Knight Frank | BTR News
Birmingham, UK.

With a significant uptick in new entrants and existing investors looking to deploy more investment into the Build to Rent market over the last 18 months, rising demand is clear for income-producing residential assets. More than 60% of the capital deployed in the first half 2021 originated outside of the UK.

New data from Knight Frank’s investment tracker shows a 79.8% increase in investment volumes compared to the same time in 2020 – and during a period which included the first Covid-19 national lockdown. The investment tracker showed that £2.35bn of capital was invested in the Build to Rent sector in the first half of 2021 – which equated to £1.27bn in Q1 and an additional £1.08bn in Q2. The figures track both on and off market deals and exclude land sales and refinancing.

The strength of the first half of 2021 puts the sector on track to surpass the record £3.7bn invested in 2020. The majority of Q2’s investment was from forward funding new Build to Rent developments – with nine deals during that period.

Regionally, 70% of funds committed in the first half of 2021 were for schemes outside London, reflecting investor confidence in regional markets – and a rise in the number of development opportunities outside the capital. Knight Frank’s development database suggests that 58% of all pipeline schemes of 75 or more units – which are under construction or in planning – will be delivered in regional markets.

After London, Birmingham attracted the most investment by value. In January 2021, L&G announced funding for Hockley Mills and in June 2021, Watkin Jones received planning for its Makers’ Yard scheme – both in the centre of Birmingham.

Figures also point to a trend of rising activity in Tier 2 cities including Derby, Leicester and Southampton. In May 2021, Grainger agreed to forward fund a scheme in Derby, and Hammerson submitted planning to transform a former Debenhams store in Leicester into a Build to Rent scheme.

With a strong pipeline of Build to Rent schemes due to launch in the coming months, or already under offer, investment volumes are expected to set a new record in 2021.