UK living investment tops £10bn in Q3 2022

JLL tracks £3bn in UK living real estate investment in Q3 2022, with BTR accounting for almost half, putting living on course for a record year.

One of the acquired Build to Rent properties in the largest living deal in Q3 2022 - JLL | BTR News
One of the acquired Build to Rent properties in the largest living deal in Q3 2022.

Annual investment in UK living real estate has exceeded £10bn in Q3 2022, putting living on track for a record year, despite global geopolitical and economic volatility. Investors completed £3bn in Build to Rent, student and healthcare transactions in Q3, bringing the year-to-date investment total to £10.3bn, according to JLL. This is a 47% increase from the £2bn invested in Q3 2021, as investors seek scale through larger deals, reflecting bigger assets, portfolios and higher values.

Build to Rent quarterly investment has doubled year-on-year, rising to £1.8bn in Q3, compared to £0.9bn in the same period last year. There was a further £0.8bn in purpose-built student accommodation and £0.4bn in healthcare investment.

Investors across the combined living sectors funded 19,000 homes and beds in Q3 and 63,800 in over 200 deals in 2022. Further deals in legals and under offer would see this rise over the £13.8bn record of 2021.

Quartely UK Living investment (£bn) - JLL | BTR News

The rise in investment reflects a sizeable uptick Build to Rent deal size, as larger transactions see the sector rise to account for a larger proportion of total living investment – peaking at 60% of investment in Q3. The Build to Rent sector has accounted for almost half of living investment this year – at £4.9bn, on course to top last year’s £6bn. 

“Although these transactions precede the recent volatility seen in the broader funding markets, the fundamental demand for quality rental housing stock remains at unprecedented levels and this is reflected in investor appetite for the product.

“As we are likely to be entering another period of ‘pricing discovery’, the lack of quality supply and viability challenges, combined with the underlying occupational demand should provide investors with continued confidence of the resilience of the living sector and particularly as a hedge to broader inflationary pressures.”

Simon Scott, Lead Director for Living Capital Markets, JLL

Excluding land deals and corporate mergers and acquisitions, the average Build to Rent deal size has risen to £127m, up from £49m a year ago. In Q3, the largest living deal was Canada’s Alberta Investment Management’s (AIMCo) £283m purchase of Angelo Gordon’s portfolio of five Build to Rent schemes in Cardiff, Birmingham, Sheffield and Greater London. 

Other significant deals include Round Hill Capital’s £165m forward funding of the Fairfax in Manchester’s Piccadilly East. The purchase completed in August, with Round Hill Capital saying it aimed to ‘unlock further opportunities in the coming months and years’.

The growing wall of capital targeting the living sectors comes as economies across the globe struggle with high inflation and rising interest rates. The cost of financing puts pressure on investor margins and real estate transaction volumes.

“A persistent lack of supply of quality rental housing is an ongoing issue for the UK, highlighted by recent rental growth and students and renters struggling to find accommodation. Long term investors are looking behind the current market turbulence to provide homes for that growing tenant base.”

Emma Rosser, Associate Director for Research, JLL