The UK’s BTR sector has been experiencing rapid growth and expansion, despite being in its early years. This is in part, thanks to the support from the UK government and investments from foreign and local investors.
This early trust in BTR is no fluke, and much like the US Multifamily model, it is acyclical in nature. This provides a form of guarantee for investors. That it’s stable as a long-term investment – even in the face of long-term economic cycles.
Although untested by the harsh economic changes at the time, the sector encountered the unexpected with the advent of COVID-19. The pandemic destabilised the global economy as every nation grappled with ways to curb the spread of the virus. Putting most economic activities on hold for months due to lockdowns and stay at home directives.
Regardless of this change, the Build to Rent sector was able to maintain its stability and stay afloat. Having proven to be a sturdy long-term investment, BTR has caught the attention of more global investors. There has been a significant influx of new investments in the sector since Q3, 2020.
Let’s examine what research and experts have stated in recent weeks about the strength and stability of the BTR sector.
Strength and Recovery of the BTR Market
Generally, the BTR sector experienced a slowdown in asset development and investment during Q2. Understandably so, due to the impact of COVID-19 that peaked during the second quarter. But, a strong rebound was expected in Q3. And, the sector indeed recovered with record stats. Savills, recorded a 70% increase in investment volume compared to that of the second quarter.
The investment volume of the third quarter has been said to be the highest quarterly investment in the sector ever. With over £1.8bn of capital deployed. Savills also estimate the current investment volume in Q3, to match the total volume deployed for the year 2019. With Q4 still left to go ― we are looking at record high numbers despite significant setbacks. The Build to Rent sector keeps on showing positive signs of overcoming uncertainties.
New Investors Update
Whilst existing investors are heavily committed to investing in the growth of BTR (with about £900m worth of forward-funding). The third-quarter has witnessed the influx of new capital from global property investors deploying significant capital. And, many more investors interested in investing capital in the UK Build to Rent sector for the first time.
In August, property investor and developer Oxford Group and Delancey Real Estate’s joint company Delancey Oxford Residential (DOOR), secured the investment from two new investors, Allianz and Local Pensions Partnership. Investing £260m and £150m respectively. The investment is set to fund Get Living’s existing pipeline development – catapulting their position in the BTR market.
AXA, a major global investor in rental residential assets first showed interest in the UK BTR sector in 2014. The firm is finally taking its first plunge into the UK BTR market. This was finalised in Q3 when AXA purchased Dolphin Square in London for £850m. One of the largest deals for a single UK residential asset yet.
Also, the recent joint venture between Sigma Capital and Swedish Firm EQT Real Estate was finalised in Q3 and is estimated to be worth £1bn. This partnership is targeted to initially provide 3,000 Build to Rent Units across London.
Pipeline Updates
According to the Knight Frank & HomeViews Multi-housing report, the current number of Build to Rent units completed or near completion stands at 46,178, with 43,554 units still under construction. Also, planning permission has been granted for a further 40,796 units. Planning permission was granted for 17 BTR schemes in Q3 alone. The 17 have a collective capacity of 4,800-unit.
This brings the total of Build to Rent units in the UK complete, under construction, and planning permissions, to 130,528. Build to Rent construction activities in the third quarter has recovered astonishingly well with an estimated 70% increase on the stats of the second quarter, as recorded by Savills.
Conclusion
The Build to Rent sector continues to thrive even in the face of global challenges. With the current figures, the sector is bound to use the impacts of the pandemic as a springboard. Helping it to attain a reputation as a strong and reliable long-term investment. This is evident with the influx of new global investors in the UK looking to place themselves in a key area within the promising sector.
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