Build to Rent Investment | Current & Future Prospects
The Build to Rent (BTR) sector has seen significant investment in the past decade, with an increase from £1 billion in 2015 to over £3.78 billion in 2020.
This growth has helped to drive the expansion of the private rented sector (PRS) in the UK, which has now reached 19% of all households.
BTR’s Recent Past
Over the last few years, several large-scale Build to Rent developments in London have been completed, such as Elephant Park and 10 George Street. According to the British Property Federation, there are over 70,785 BTR units currently completed in the UK.
From the success of past projects, Build to Rent investments are now seen as a safe bet for investors looking to get a return on their money.
Why BTR has proven popular in the UK:
BTR offers investors long-term reliable income.
BTR interest rates and bond yields remain low.
Despite the pandemic, BTR monthly rental collections exceeded 95% in 2020.
Interest in BTR continues to climb. In total, 33% of new capital investment came from new investors.
Current Status
The current pipeline for BTR development in London stands at over 150,000 units, with over 50,000 of these schemes already under construction.
This is a significant figure and one that shows the strength of demand for BTR properties and the confidence that Build to Rent developers have in the market.
There is also continued, and increasing support from government institutions as the need for affordable housing increases and the price of property continues to climb.
Future Prospects
The current pipeline and momentum for BTR development suggest that the sector is set for continued growth in the coming years.
This is supported by the fact that a number of large institutional investors, pension schemes and high-net-worth individuals have recently entered the market.
Over the next few years, it is expected that over 20,000 BTR units will be introduced to the market annually. By 2025, the total estimated investment committed to professionally managed units in the BTR market is forecast to reach GBP 74 billion.
Can the momentum be sustained?
There are a number of factors that could support the continued expansion of the BTR sector in London.
Firstly, the city’s population is projected to grow by 2.1 million over the next decade, which will create additional demand for rental accommodation.
Secondly, the UK government has introduced a number of measures to support the growth of the PRS, such as the introduction of the Decent Homes Standard, abolition of section 21 on "no fault" evictions, and the development of simpler tenancy models.
Finally, a number of large-scale regeneration projects are currently underway in London. These are likely to create significant demand for BTR properties.
Where are the best locations for Build to Rent schemes in London?
There are a number of factors that should be considered when assessing the potential for BTR development in a particular location.
The location should have good transport links to allow residents to access employment opportunities and other amenities easily.
The area should have a sufficient supply of land available for development. The price of property also shouldn’t exceed £700 per sq ft for it to be viable. There needs to be a good balance between the community's average income and the scheme's affordability.
The local authority should support Build to Rent developments and have a robust planning policy.
The location should have a strong demand for rental accommodation from a mix of tenants, including families, young professionals and students.
Make sure you talk with an experienced BTR operator to ensure you’re investing in the right project.
Benefits of working with professional BTR operators
When considering investing in a BTR development, it is essential to partner with a professional BTR operator who know what they are doing.
An experienced operator will have a good understanding of the local market and be able to identify the best locations for BTR development.
In addition, a professional operator will be able to deliver high-quality properties that meet the needs of tenants and generate strong rental returns.
BTR Operator Services usually include:
Rental Agency Services for Tenants
Capital Markets Consultancy
Operational and Management Services
Research Consultancy
Development Consultancy
Valuation
Build to Rent Investments Booming- Are You Ready?
The Build to Rent sector offers a number of benefits for both investors and tenants.
For Build to Rent investors, new developments offer the potential for strong rental returns and capital appreciation.
For tenants, BTR properties provide high-quality, flexible and affordable accommodation in prime locations.
The sector is currently undergoing rapid expansion and is set to continue growing in the coming years. This makes now an ideal time to consider investing in a BTR development.
