The popularity of purpose-built rental stock continues to flourish across the UK, but the biggest market for it is still in the capital.
New analysis released by Knight Frank in its London Residential Development report for H2 2019 has revealed further growth in the “investment-grade private rental sector (PRS)” in London, with demand from international institutional investors growing strongly.
In the first half of this year, build-to-rent developments – which are constructed for the sole purpose of being rented out to private tenants – of 100 or more units accounted for almost a third (28%) of construction starts. This is up from 21% in 2015, demonstrating how the build-to-rent sector is still gaining traction with no sign of it slowing down. Developers as well as investors are striving to meet the growing demands of tenants, whose needs are changing as they expect more amenities and better quality accommodation options – all of which can be found with build-to-rent.
International investment in build-to-rent
Institutional investors from North America, Asia, the Netherlands, Israel, the Middle East and Australia are all getting increasingly involved in the space, according to Knight Frank, while figures from RCA show that in the year to July 2019, more than £800m was invested into 100+ unit developments in the build-to-rent sector in Greater London. During the first six months of this year, 6,816 units were approved in developments of this size, which is a more than 20% year-on-year increase.
Knight Frank’s yield guide shows investors can achieve 3.5-3.75% in Zone 2 prime, 3.75% in Zone 3-4 prime, and 4% in Greater London prime.
Top spots for build-to-rent
Last month, separate research from JLL revealed that London was one of five cities in the UK that had made it into the top 20 European cities for build-to-rent investment, with the capital claiming fourth place with more than €2bn invested there in 2018.
The other UK cities competing in the purpose-built rental accommodation space were Manchester, Leeds, Birmingham and Brighton, all of which have soaring levels of construction activity and build-to-rent projects taking place to meet the growing demands of tenants in the cities. As the number of renters is forecast to surpass homeowners in the future in the UK, the importance of the build-to-rent sector will continue to grow.
BuyAssociation works with a number of developers who offer a range of build-to-rent investment opportunities across the UK. Go to our investments page to see some of our projects or get in touch for more information.