Single-family housing (SFH) Build to Rent investment hits a record high in Q1 2023, according to new data released by JLL. This is despite a slowdown in the wider living sector. Investment in the sector reach almost £600m, topping the total for 2022 – and accounted for over a quarter of all living investment at the start of 2023.
Total living investment was £2.1bn in Q1 2023, down 48% compared to Q12022 and 27% below the five-year average. £597m was invested in SFH Build to Rent in Q1 2023, up 166% on the five-year average.
Combining the healthcare (£447m) and student housing (£135m) sectors, SFH saw more activity. Although healthcare dipped 45% on the five-year average, Build to Rent, bolstered by single-family activity, was up 14% at £1.5bn – or 73% of all living investment.
Investors funded close to 2,400 single-family homes, 1,500 of which were new homes. This compared to 816 in Q1 2022. In total, over 8,000 homes and beds across the living sector secured funding last quarter – down from 29,000 in Q1 2022.
There were two significant SFH portfolios that traded in Q1 2023 – Project Domus, the 918-home Goldman Sachs portfolio in the North West, which was acquired by PGIM Real Estate for £175m, and Sigma Capital who acquired 11 sites across six regions from Countryside, for £205m.
“Single-family is in the right place at the right time. On the one hand, pressures on housing affordability are intensifying the need for rental homes at a time of low supply in the sector. On the other, investors are reining in their interest in city centre rental as they grapple with high construction and debt costs and the potential impact of mandatory second staircases in tower blocks.
“These converging trends have redirected investor focus to suburban family rental, a sector that can deliver much-needed income-producing assets with comparative speed and ease.”Karl Tomusk, associate Director for Living Research, JLL
Excluding corporate mergers and acquisitions, the average Build to Rent deal size was £90m – above the five-year average of £75m. Excluding M&A, single-family also received more funding than multifamily for the first time on record, accounting for 55% of total Build to Rent investment.
“As new and existing purchasers continue to invest with conviction into the single-family market, investment volumes have outpaced traditional multifamily volumes during Q1 of this year despite wider market headwinds.
“With traditional housing market sales slowing on the back of Help to Buy expiring and uncertainty regarding rising interest rates, single-family housing is a key pillar to support the delivery of new homes across the UK.”Jack Bergin, Director for Living Capital Markets, JLL
Build to Rent benefited from several major multifamily deals in Q1 2023. These include NFU Mutual, Harrison Street and Apache Capital’s joint venture funding Moda Living’s £302m Great Charles Street scheme in Birmingham – the joint venture also received £188m from Precede Capital, and Australian superannuation fund Aware Super, who acquired Qatari Diar’s 22% stake in Get Living.
Both deals were first reported at the end of the quarter, reflecting a return of activity after a slower start to the year.