Introduction
In a country where 20% of households live in private rented accommodation, the BPF has reported that only 62,000 rental properties have been built. This is with a further 39,500 dwellings under construction. Build to Rent investors are not developers, in spite of the eye-watering levels of capital being poured into this sector. On the flip side, the operational intensity of these assets is underestimated.
For investors, this means investing in building critical mass with the right product – how soon can they get to 10,000 homes under management? While there is capital waiting to be allocated, there is a dearth of quality products to invest in.
As Build to Rent is to grow significantly in the next five years, then either investors will proceed to take control and develop purpose-built assets themselves, or developers must recognize the scale of the opportunity and rise to the occasion of designing assets specifically for rent.
The UK is an investor’s uncharted universe ready to be explored!
The UK is an expanding investment opportunity for investors seeking new and more lucrative opportunities.
Investors turned their attention to Build to Rent markets where demand is growing and the alternatives sector was picking up even before the start of the pandemic due to its low vacancy rates and good rental growth.
The consumer, in this case, renters have historically been underserved in the housing business. The trend towards remote working, home offices and access to green space has also meant more and more people chose to live away from crowded towns and city centres to commuter-belt locations.
Renters across the UK, not just in the populous centres of the likes of London, Birmingham and Manchester, want access to high-quality residential properties that they would can to call home. The rental experience and sense of community in a Build to Rent development is the ultimate customer service offering.
The demand for this sector is far ahead of the product available. The challenge is on the supply side which is deficient in purpose-built, fully amenitised, professionally managed assets. Some investors have obviously moved up the risk curve to forward fund or forward commit to secure the product, but there are still real questions about how well some of that product is ultimately going to perform.
The BPF data from Q2 2021 shows there are almost 40,000 homes under construction and around 94,000 in planning. The BPF data from Q2 2021 shows there are almost 40,000 homes under construction and around 94,000 in planning.
What does the future hold?
There has been a definite shift in how people develop their residential sites in recent years. More and more, developers are seeing Build to Rent as a means of generating new streams of revenue and building up cash flow for their organisation
This is why it is essential that developers who want to enter into the Build to Rent sector make sure they know what they’re getting themselves in for. They need to make sure they develop a product that meets consumer demand and can secure the right relationships with investors looking for similar opportunities. Recently we have seen more and more developers opting for Build to Rent schemes, particularly when the economic forecasts are not looking good.
Despite the plethora of investors already showing interest in this sector, there is a long way to go before we see anything like the scale of Build to Rent in the US. For the investor community, they need to be more aware of how Build to Rent works and make sure their processes are robust enough for it. They also need to know that their investment is in a high-quality scheme that’s professionally managed and the developers are as accountable as they would be for any other property type.
Subscribe
Every Friday we send an email with that weeks published posts. Subscribe to our weekly newsletter to make sure you don’t miss a thing.
