UK's BTR sector sees record levels of investment

Global property consultancy Knight Frank has revealed that the UK’s Build to Rent (BTR) market received record levels of investment in the first two quarters of 2021.

The firm has released new figures today which show that, in the first half of this year, GBP2.35 billion of capital was invested into the UK’s BTR sector – over GBP1.27 billion in Q1 and an additional GBP1.08 billion in Q2.
This represents a 79.8 per cent increase in investment volumes compared with at same point of 2020 – a period which included the first national lockdown.
Over GBP3.5 billion of capital was invested in 2020. Knight Frank predicts that 2021 will be a record year, with investment expected to surpass last year.
The majority of investment in Q2 2021 was the forward-funding new development, with nine such deals completing over the course of the quarter.
Nick Pleydell-Bouverie, Head of Residential Capital Markets at Knight Frank, says: “Over the past 18 months, we’ve seen a significant uptick in both appetite from existing investors looking to deploy further capital into the BTR space, as well as a range of new domestic and international investors looking to enter the market.”
“During the Covid-19 pandemic, the rental performance of the sector remained extremely resilient, with average monthly rent collection rates remaining above 96 per cent so far in 2021. Alongside its resilience, what is really driving investor demand is the granularity of the income and scale of the opportunity.”
Pleydell-Bouverie says: “In addition to increasing investment into flatted rental schemes and co-living, we have also seen significant growth in demand for rental housing over the past 12 months.
“With existing investors looking to expand their portfolios, and new entrants diversifying from traditional commercial real estate, we will likely see sustained demand that will result in investment reaching new record levels over the next few years.”
Over the course of H1 2021, a flurry of high-profile deals have taken place in the sector, which has contributed to the record volumes of activity.
At the beginning of the year, Legal & General announced that it was funding a major new Build to Rent development in Leeds city centre. Advised by Knight Frank, Legal & General committed almost GBP60 million to partner with Richardson and Ask Real Estate in delivering the 500-unit Tower Works development in the city’s South Bank regeneration area.
Shortly after, with advice from Knight Frank, Grainger purchased a 231-home Build to Rent scheme in Bristol for GBP63.1 million. Milwrights Place was acquired from Fiera and Cubex Land, and represents Bristol’s first purpose-built PRS development.
In another major play for Grainger a few months later, the professional landlord acquired a GBP57 million housing development in Newcastle from Moorfield Group. Again advised by Knight Frank, Graigner’s acquisition of The Forge will help deliver 283 rental apartments above ground floor commercial space in the city.
Oliver Knight, Head of Residential Development Research at Knight Frank adds: “The sector’s strong regional presence is rapidly growing. Some 70 per cent of funds committed in the first half of 2021 were for schemes outside of London – reflecting investor confidence in the fundamentals which underpin those regional markets, as well as an increase in the number of development opportunities being brought forward outside of the capital. Lifestyle changes, as well as a desire for more space, has been a feature of the rental market over the last 12 months and has directly driven demand.”