The Build to Rent Market
Overview
The UK Build to Rent (BTR) sector continues to see transactional activity, despite continued challenges across the development and investment climate.
This activity is a further display of confidence in the resilience of the BTR market. The current investment landscape continues to be characterised by a proactive approach from investors and developers to find an investment solution for development opportunities in a challenging environment. This is supplemented with an increasing but still modest number of operational assets coming to the market, particularly first-generation schemes.
Viability for development, particularly in multi-family (MF) remains difficult in a sector that, although showing some maturity, is still very much in the development stage.
Who is Active / Headline Deals
There remains a healthy volume of market activity. Realstar & QuadReal JV have recently acqquired Allegro from LaSalle IM, as a 630 unit MF scheme in Birmingham which has been fully operational since 2019. PLATFORM and Invesco sold a portfolio of five BTR MF schemes in the South East, to LRC Group for £120M. Lloyds Living has agreed to forward fund a 264 unit MF scheme in Stevenage, being delivered by Hill Group. Starlight Investments has forward purchased Flax Place, Leeds, a 300 unit MF scheme being developed by Torsion Group. In the single-family (SF) arena Placefirst and housebuilder Strata have agreed a partnership to deliver 500 SFH homes by 2028. Invesco has agreed to forward fund 99 SFH units in Chelmsford with Hopkins Homes and Greykite has brought a £60M portfolio from Persimmon Homes in partnership with Gatehouse Investment Management.
Direction of Travel
We continue to expect investors prioritising progressed, best quality multi-family assets with strong, experienced development partners. Yields will be robust for best-in-class schemes, with secondary locations more challenging due to (but improving) viability constraints. As inflation continues to stabilise and order books reduce, contractor pricing should be more conducive for development. We expect a higher number of start of sites this year than 2024.
Single Family has seen a number of high profile entrants in the past six months and we expect the capital looking to enter the space to grow significantly in 2025.
In London and strong south-east locations, funding MF NIYs range from 4.00% to 4.50%, with major regional centres at 4.50% to 4.75%. Secondary locations are in the region of 4.75% to 5.00%. Single Family funding NIYs are around 4.25% in the south-east and 4.50% in the prime regions.