Living investment hits £6.8bn in H1 as big deals dominate

JLL tracks rise in £100m+ deals as investors scale-up projects, with Build to Rent rising 32% against H1 2021.

Watkin Jones' Sherlock Street Build to Rent development in Birmingham, which received £136m forward funding investment from Get Living | JLL | BTR News
Watkin Jones' Sherlock Street Build to Rent development in Birmingham, which received £136m forward funding investment from Get Living.

Investment into living assets hit £6.8bn in H1 2022 – as funds continued to chase big-ticket deals. JLL reports that the first half of the year saw £3.6bn investment in Build to Rent, student and healthcare deals topping the £100m mark – accounting for 55% of spend over the period.

Overall, JLL tracked £2.8bn in Build to Rent deals, £2.6bn in student accommodation and 1.4bn in healthcare during H1, including M&A and development deals, together funding around 40,000 homes. The total living investment is a 5% rise on the first half of 2021, putting the sector on track for another record year.

There have been 45 deals over £100m over the last 12 months compared to 30 deals over the previous period, and 21 deals two years ago. Around 33% of capital committed in 2022 was in deals of between £100m to £200m. This is the highest level on record after these larger deals fell during the pandemic in favour of £200 m+ portfolio deals and M&A, and traditionally smaller deals prior to that.

Cortland, Get Living, Grainger and Heimstaden Bostad all agreed funding deals over £100m. The average multifamily single asset forward funding or investment deal size has grown to £74m in 2022, compared to £50m in 2016.

“Investment in Build to Rent last quarter has built on the momentum observed earlier this year. Domestic investors specifically have been a key contributor to activity in the second quarter.

“The fundamentals for investing in living assets remain strong, with a widespread, structural lack of supply and growing demand in cities, which will support investment throughout the year.”

Jack Bergin, Associate for Living Capital Markets, JLL

Build to Rent climbs as buyers double down

Build to Rent has led the change in terms of growth, rising 32% against H1 2021. This was driven by established Build to Rent funders -rather than new buyers. Repeat buyers accounted for all Q2 2022 investment, which hiked their investment by 77% in H1 2022 compared to H1 2021.

Where forward funding has traditionally accounted for the majority of Build to Rent spend, so far in 2022, it has accounted for 45% of investment (or 56% including long income deals). This compares to 78% of deals as forward funding in 2019 prior to the pandemic.

“The prominence of mid-to-large deals over £100m shows sustainable growth for living investment, compared to the previous trend of smaller schemes and very large big-ticket deals around the pandemic.

“Seasoned Build to Rent investors are targeting larger assets, both in London and the regions. They are doing this via a variety of investment types, meaning the sector is also becoming less reliant on funding development and less exposed to rising inflation in the construction industry.”

Emma Rosser, research associate, JLL