Build-to-rent: The shift towards larger-scale developments

 

The total number of build-to-rent homes has increased by nearly a fifth in the past year as there’s been a rise in larger developments. What’s ahead for the growing sector?

In the UK, the build-to-rent sector has grown exponentially throughout recent years, and it continues to gain momentum. Long-term demand for rental properties means the sector’s prospects remain positive.

Looking at the number of projects currently under construction and those in the planning pipeline suggests that the build-to-rent sector will see sustained growth in the short to medium-term.

The numbers behind BTR

Recently released data revealed 72,668 build-to-rent homes have been delivered across the UK. This is up from 60,965 from a year ago, equating to a 19% increase. An up-to-date analysis of the sector was conducted at the end of the first quarter of 2022 by the British Property Federation in partnership with Savills.

A total of 46,304 build-to-rent homes are currently under construction. This is an increase of 14% in the last 12 months. The number of units in the planning pipeline is also 11% higher year-on-year.

Ian Fletcher, director of real estate policy at the British Property Federation, says: “Our analysis for the first quarter of the year underlines just how rapidly the UK Build-to-Rent sector is expanding.

“Completed homes increasing by a fifth in a single year is a significant leap and suggests the sector is making a strong contribution to UK housing delivery.”

Build-to-rent developments are evolving

While the build-to-rent sector took hold in London first, the tables are turning as other rental markets are growing, particularly in regional cities. There has been growth in suburban areas as well.

Over the past 12 months, completions in the build-to-rent sector have been evenly spread out between London and regional cities with 5,802 and 5,901 homes respectively.

At the same time, there has been a shift towards larger-scale developments. This will help bring forward much-needed high-quality homes.

Completed schemes have delivered an average of 140 units per development. However, the developments that are currently under construction are averaging 243 homes and projects in planning are averaging 308 units.

“One thing to watch in coming quarters will be turbulence caused by build cost inflation, however, the sector’s planning pipeline continues to grow, and we are seeing a shift towards larger-scale development as investors recognise the acute shortage of high-quality homes in many cities and the need to intensify land use in and around densely populated areas,” Fletcher adds.

Rental demand remains strong

The private rented sector continues to grow and is even at the most competitive level on record. With tenant demand continuing to outpace the level of rental properties in many areas across the UK, the build-to-rent sector can help fill some of the gap left by traditional buy-to-let.

As people are becoming homeowners later than ever, many young professionals in particular, in addition to middle-aged ones, value the lifestyle and flexibility that renting can offer.

Build-to-rent developments in particular are created with long-term tenants in mind. These developments are typically well-connected and come with additional amenities, such as more communal spaces, shared outside space, workspaces, gyms and concierges.

Guy Whittaker, associate of residential research at Savills, comments: “It is clear that Build-to-Rent is already making an important contribution to national housing delivery.

“Expansion into new locations can help address the shortages of rental stock seen up and down the country, while the growth of single-family housing provision, an area of chronic undersupply, is the next stage of growth for the sector.

“New rental supply in both urban and suburban markets have the potential to sustain housing delivery volumes once Help to Buy comes to an end on 31 March 2023 and to be a vital source of high-quality housing.”

BuyAssociation works with a range of developers in the build-to-rent space. If you’re looking for your next property, get in touch. You can also browse some of our available investment opportunities here.

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Build-to-rent: The shift towards larger-scale developments

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