UK Build to Rent investment exceeds £1.1bn in Q1 2023

New data reveals that UK Build to Rent investment exceeds £1.1bn in Q1 2023, as rental demand soars and investor appetite remains.

Podium link at the UNCLE Leeds scheme. The Build to Rent scheme received forward funding investment in Q1 2023 | BTR News
Podium link at the UNCLE Leeds scheme. The Build to Rent scheme received forward funding investment in Q1 2023.

Initial data reveals that investment into UK Build to Rent in Q1 2023 exceeded £1.1bn – demonstrating investor appetite for opportunities across the sector. Rental demand sours amid first time buyer affordability challenges, which have been further exacerbated by the likes of the removal of Help-to-Buy and the recent rises in mortgage rates.

The analysis – conducted by BNP Paribas Real Estate – shows that the Build to Rent sector recorded this strong recovery following total volumes in 2022 equating to around £4.3bn – hitting an investment record for its fourth consecutive year.

Notable Build to Rent investment deals in Q1 2023 include the PGIM purchase of the Goldman Sachs portfolio for single-family homes in Manchester and Liverpool for £190m, the Harrison Street, NFU Mutual and Apache forward funding on Moda’s Great Charles Street for £302m, and Realstar’s £108m forward funding deal for Phase 2 of UNCLE Leeds.

“Whilst other sectors have noted a more obvious slowdown in investment activity, the Build to Rent sector has recorded a significant uptick of recent, particularly across both regional cities and in new territories such as single-family housing. Investors paused for breath after the turbulence as a result of Liz Truss’s leadership and the worsening economic conditions, but we can see resilience and strong rental growth has resulted in a strong start to the year, in line with comparative quarters where economic conditions were more positive.”

Rebecca Shafran, Senior Associate Director, Alternative Markets Research

Of the £1.1bn invested, BNP Paribas Real Estate estimates that around 75% to 80% of investment activity was outside of London – around major regional cities such as Manchester and Birmingham, and into single-family housing in suburban areas.

The company is also seeing an increased appetite for London and London commuter belt development opportunities, as new investors seek out lower risk locations. 

“Investment interest and allocation of capital remains strong across the entire living sector, led by Build to Rent, student accommodation and single-family housing. New investors have also entered the market in the last 12 months with a lower cost of capital, increasing demand for investment opportunities and we anticipate a stark increase in transactions towards the end of the year, particularly across London, commuter belt and key regional cities. However, as it stands, higher interest rates are impacting investor levered returns, resulting in a shift of some investors towards higher yielding or value-add living sector investments.”

Andrew Screen, head of residential capital markets at BNP Paribas Real Estate

Evidencing shifting housing requirements, Strutt & Parker’s latest Housing Futures survey of 2,000 people from across the UK provides insights into what consumers want from their next home and how they would like to live in the future.

The survey found that 67% said sustainability of their future home was important to them when decision making. Of this 67%, around a third (31%) would compromise on the size of rooms, and 30% on the number of bedrooms to have a more sustainable home. Commute, at 38%, was highlighted as the most negotiable aspect.