Knight Frank launches its Build to Rent Market Update for Q2 2023

Knight Frank has revealed in its latest market update that investment into Build to Rent in Q2 2023 hit almost £1bn.

Placefirst's Wolverhampton canalside development. Image credit: Placefirst | BTR News
Placefirst's Wolverhampton canalside development. Image credit: Placefirst.

Property consultancy firm Knight Frank has recently launched its latest Build to Rent Market Update for Q2 2023. The update reveals that investment into the UK’s Build to Rent market hit £959,800m in the second quarter of the year – taking investment for H1 to just over £2bn. This represents a 7% increase in transaction volumes in H1 2022, when investment reached £1.9bn.

The number of funding or stabilised deals was 8% lower year-on-year in Q2 2023, but the average deal value was up by 5% at nearly £70m. Larger lot sizes supported a 13% increase in investment volumes compared with Q2 2022.

“Greater hesitancy in the market has been caused by the current economic uncertainty and the high cost of debt, which has resulted in some investors temporarily pressing pause. That being said, investment has remained very robust, with many new entrants coming into the market who are buoyed by the sector’s strong, counter-cyclical nature. This has been supported by an uptick in single-family housing deals while supply shortages continue to support strong rental growth.”

Guy Stebbings, Joint Head of Build to Rent, Knight Frank 

More than 81% of investment in Q2 2023 was via forward fund or forward commitment structures, with the remaining 19% to stabilised operational assets. Single-family housing (SFH) accounted for 30% of investment, taking H1 total investment into the sector to £733,600m – nearly double the figure for full year 2022.

“Investment into the Build to Rent sector has proven resilient this year. The sector continues to be a promising investment opportunity, with robust demand and limited supply across the rental market more generally supporting both occupancy in operational schemes and lease up in new ones.”

Oliver Knight, Head of Residential Development Research, Knight Frank

According to Knight Frank, UK investors have been the most active in terms of spend so far this year, accounting for 69% of total investment – up from a longer-term trend between 2020 and 2022 of 45%. Alongside this, North American investors were the second most active at 23% of total investment so far this year, followed by capital from Asia Pacific and Europe.

Knight Frank indicates that activity has been concentrated on regional markets in the first half of 2023. Deals outside of London accounted for 90% of total spend in H2, according to the report, with regional activity being led by Birmingham, Belfast and Leeds.

“The expansion or creation of scalable platform opportunities remains a key focus for many investors.  Sponsor track record, ESG credentials and fire safety are a prerequisite with strong rental growth and its impact on returns underpinning investor appetite.”

Emma Winning, Head of Equity Advisory, Knight Frank