UK BTR investment hits £1.7bn in H1 2022

New residential investment figures released by Knight Frank show BTR investment hits £1.7bn in H1 2022, with forecasts of £4.8bn by the end of the year.

PLATFORM_'s Edinburgh Build to Rent development. Heimstaden agreed a £125m investment to fund and acquire the scheme in H1 2022 Knight Frank | BTR News
PLATFORM_'s Edinburgh Build to Rent development. Heimstaden agreed a £125m investment to fund and acquire the scheme in H1 2022.

In the two years since the onset of Covid-19, the amount of investment committed to UK Build to Rent totalled just shy of £9bn. According to the latest residential investment figures released by global property consultancy Knight Frank, institutional investment into the UK Build to Rent sector totalled £1.7bn in the first half of 2022 (H1 2022). 

In Q2 2021, £1bn investment was committed in the sector compared to £762m committed in Q2 2022. However, the Q2 2022 investment figure is still 31% above the long-term quarterly average. Overall H1 2022 investment was 25% higher than the long-term average.

“The numbers, which track both on and off market deals, point to the ongoing resilience and strong investment appeal of the sector – even in the face of continued build cost inflation and a more challenging economic backdrop. The incredibly robust income offered by Build to Rent and strong rental growth across the sector are continuing to attract significant new capital to the market”.

Nick Pleydell-Bouverie, Head of Residential Investment, Knight Frank 

The average investment deal size for Q2 2022 was over £75m – up from an average of £64m per transaction in Q1. Pleydell-Bouverienoted: “Increasing lot sizes reflect an ongoing search for scale among new and existing entrants to the market.”

Key deals transacted in the second quarter include Grainger’s acquisition of Redcliff Quarter in Bristol for £128m, Get Living’s forward fund of Maker’s Yard in Birmingham for £136m and Heimstaden’s £125m forward sale in Edinburgh – the latter showing the continuing flow of international investment into the UK market.

Positive momentum is expected to continue this year, with a further £3.1bn worth of deals likely to complete by the end of 2022. Knight Frank forecasts that yearly investment could hit £4.8bn by the end of the year.

Rental growth across the UK has continued to pick-up through 2022 with numerous indicators suggesting rental growth is at a multi-year high across the UK. According to Knight Frank, London has performed exceptionally well, with data pointing towards a 20%+ rental growth increase in prime markets.

“Strong rental performance across the UK is also being driven by an ever-deepening mismatch between supply and demand. As has been the case since early 2020, the RICS lettings survey points to a significant gap between new tenant enquiries and landlord instructions, an imbalance which is likely to keep upward pressure on rents in the short to medium term. At the same time, short-term inflationary pressures will, inevitably, act as a moderating force on larger rises as household finances are stretched.”

Lizzie Breckner, an Associate in the Residential Research team, Knight Frank