Build to Rent (BTR), a fast-growing sub-sector aiming to provide high-quality rental homes tailored directly to tenants, only became a thing in the UK following the London 2012 Olympics.
That’s when BTR pioneer Get Living transformed the Olympic village, where athletes had bedded down, into hip and shiny new rental homes.
Since then, it has grown considerably with increased exposure, government investment, significant pension funds, and other institutional investors getting involved in the sector – moving from niche to something much more mainstream.
That said, it still represents only around 2-3% of the private rented marketplace – which is still heavily dominated by private buy-to-let landlords.
Its growth, though, is expected to soar in the coming years. Here, we take a look at the latest.
BTR Value set to breach £100 Billion by 2028
According to recently released findings from global property consultancy Knight Frank, the value of the UK’s BTR sector has increased to £56 billion, up rapidly (by 60%) from £35 billion in 2019.
The figures are based on the firm’s examination of current operational BTR stock and stock under construction.
Meanwhile, based on analysis of the existing BTR pipeline, Knight Frank has predicted that the figure will almost double in size to £102 billion by 2028, a leap of 82%.
The most recent set of data about BTR’s growth was included in the agency’s yearly Multihousing Report 2022/23. It found that £3.2 billion of capital had been invested in the sector during the first three quarters of 2022, with a further £650 million still expected to trade before the end of this year.
As a result, the full-year investment would hit £3.8 billion, a 31% increase on the 2016-2020 long-term average.
Knight Frank’s analysis found that the majority of investment in 2022 (65%, or £2.15 billion) is still coming from pension and insurance firms, with the remaining 35% of capital committed by a mixture of propcos, REITs, and private equity firms.
There have also been overseas investments into this fast-emerging market, with North America leading the way regarding foreign capital being invested in the UK BTR sector. Knight Frank estimated that North America – where the equivalent of BTR, multi-family, is massive – made up 28% of the overall capital invested. Following closely behind was Europe, accounting for 23% of overseas investment, while Asia Pacific investors accounted for just 2%. Not far off half (42%) of capital was invested by UK companies.
The Knight Frank research came hot on the heels of research carried out by the British Property Federation (BPF) and Savills, which forecast that the number of completed BTR homes could increase five-fold to reach 380,000 by 2032. If this happened, the sector would be worth some £170 billion.
The projections, in partnership with Get Living and M&G, suggest that by 2032, 8% of UK homes for rent will be purpose-built, up from only 1.5% at present.
The research also suggests a ‘continued evolution’ in the market, with growth in the number of single-family homes. They are expected to make up almost a fifth (18%) of BTR stock ten years from now, compared to only 12% today.
It’s important to note that the BTR sector has faced criticism for being exclusive and unaffordable, aimed chiefly at wealthy young professionals. Still, those in favour point to the various amenities and extras in a BTR home – such as bills included – that make it accessible for many. Supporters also suggest demographics of the BTR movement are broader than people assume.
How big is the sector currently?
Helpfully, the BPF – along with Savills and data specialists Molior – plots a quarterly BTR map which provides an excellent guide to the sector’s current status.
According to its Q3 2022 map, there are now 237,362 BTR homes in the UK, including both London and the regions. Of these, 73,739 are complete, 47,764 are under construction and 115,859 are in the planning stages.
In London, there are currently a total of 96,585 units, while outside London, there are 140,777 units. The capital is still the dominant party regarding BTR homes, but other major cities such as Birmingham, Manchester (and its environs), Liverpool, Leeds, and Bristol have an increasing number.
There has also been considerable growth, particularly since the pandemic, in the number of suburban BTR homes on offer, which has spread BTR to more than just the centres of major cities and big towns. This particular sub-sub-sector is expected to continue to experience high growth.
BTR was once a primarily London affair, but in recent years growth on a regional basis has been outstripping the capital.
BTR expecting large growth over the coming years - What agents need to know
In its report, Knight Frank highlighted the UK’s high-growth markets with the potential to be BTR hotspots over the next few years.
It analysed population growth projections over the next ten years, the number of people under 35, employment growth forecasts up to 2040, and BTR market penetration. This enabled it to pinpoint the towns and cities which have strong demand drivers but, at the same time, small pipelines, therefore presenting a robust case for development.
The firm named the following emerging growth markets: Norwich, Peterborough, Cambridge, Ipswich, Stevenage, Chelmsford, Watford, Oxford, Windsor, Maidenhead, Bracknell Forest, Leatherhead, Woking, Tunbridge Wells, Portsmouth, and Exeter.