Savills reports £1.26bn Q2 2023 BTR investment

Savills has released its latest report on the Build to Rent market in the UK, which finds highest Q2 investment at £1.26bn.

Legal & General's Whitehall Riverside Build to Rent scheme in Leeds | BTR News
Legal & General's Whitehall Riverside Build to Rent scheme in Leeds.

The latest report from real estate advisors Savills indicates that April-June this year saw the highest Q2 investment transaction volume ever recorded, at £1.26bn. Q2 2023 saw 18 deals transacting, a marked improvement on a subdued Q1.

The company states that half-year investment volumes for the sector now stands at £2.1bn, lower than at the same point in 2022, but higher than all preceding years. The underlying fundamentals of the sector remain strong and continue to attract investment.

£1.26bn of investment in Q2 2023, a marked improvement on Q1 2023 | BTR News
£1.26bn of investment in Q2 2023, a marked improvement on Q1 2023.

Multifamily units make up 58% of Build to Rent volumes this year, with major transactions including the forward funding of Lower Essex Square in Birmingham between Apsley House Capital/Galliard Homes and OutPost Management/Blackrock.

L&G also completed on two major regional transactions including a funding deal for Whitehall Riverside in Leeds with Glenbrook; and the entrance of Australia’s Aware Super fund, who purchased a stake in Get Living – this transaction has not been included in the overall investment volumes.

“As the demand for housing continues to outpace supply in the rental market, attention is now focused on Build to Rent to bridge the gap and the sector is taking an increasing share of new housing delivery. Build to Rent has huge growth potential as investors target inflation-linked returns and the strong performance of operational assets is proving the business model. It’s no surprise developers are increasingly looking to Build to Rent to support housing supply and that the delivery of a variety of Build to Rent products is catering for tenants’ needs, across a range of budgets.” 

Polly Simpson, Head of Multifamily Development in the Operational Capital Markets Division, Savills

Build to Rent rents grew by 10.4% in the year to May 2023, as the country’s supply-demand dynamics remained imbalanced, especially as many buy-to-let private landlords are continuing to exit the market.

Investment has been secured for the development of 6,000 new homes since the start of the year. The UK’s Build to Rent stock now stands at 88,100 completed homes, with a further 53,500 homes under construction. There are also 111,800 homes in the planning pipeline, including those in the pre-application stage. The total size of the sector is currently 253,400 homes.

Starts in London remained subdued in Q2 2023, as the heightened cost of debt has impacted the viability of many cash-intensive projects. Regional markets saw 3,157 starts, rebounding after a modest Q1, supported by an increase in single-family housing starts.