UK BTR investment exceeds £1.1bn in Q1 as rental demand soars

News
12.04.2023

UK BTR investment exceeds £1.1bn in Q1 as rental demand soars

London, 12th April 2022 - BNP Paribas Real Estate initial data has revealed that investment into UK build-to-rent has exceeded £1.1bn so far in Q1 2023, demonstrating the investor appetite for opportunities across the sector as rental demand increases amid first time buyer affordability challenges, which have been further exacerbated by the likes of the removal of Help-to-Buy and the recent rises in mortgage rates.

The latest analysis indicates that the BTR sector recorded this strong recovery following total volumes in 2022 equating to around £4.3bn. The firm estimates that around 75 - 80% of this Q1 2023 investment activity was allocated outside of London around major regional cities such as Manchester and Birmingham, and into single family housing in suburban areas, however, is seeing increased appetite for London and London commuter belt development opportunities as new investors seek out lower risk locations. 

According to Zoopla, the annual % change in rents to Jan 2023 was 11.1% for the UK and 15.2% for London.

Rebecca Shafran, senior associate director, alternative markets research commented: “Whilst other sectors have noted a more obvious slowdown in investment activity, the BTR sector has recorded a significant uptick of recent, particularly across both regional cities and in new territories such as single family housing. Investors paused for breath after the turbulence as a result of Liz Truss’s leadership and the worsening economic conditions, but we can see resilience and strong rental growth has resulted in a strong start to the year, in line with comparative quarters where economic conditions were more positive.”

Andrew Screen, head of residential capital markets at BNP Paribas Real Estate added: “Investment interest and allocation of capital remains strong across the entire living sector, led by BTR, student accommodation and single family housing. New investors have also entered the market in the last 12 months with a lower cost of capital, increasing demand for investment opportunities and we anticipate a stark increase in transactions towards the end of the year, particularly across London, commuter belt and key regional cities. However, as it stands, higher interest rates are impacting investor levered returns, resulting in a shift of some investors towards higher yielding or value-add living sector investments.”

Evidencing shifting housing requirements, Strutt & Parker’s latest Housing Futures survey of 2,000 people from across the UK to provide insights into what consumers really want from their next home and how they would like to live in the future, found that 67% said sustainability of their future home was important to them when decision making. Of this 67%, around a third (31%) would compromise on the size of rooms, and 30% on the number of bedrooms in order to have a more sustainable home. Commute, at 38%, was highlighted as the most negotiable aspect.

Notable deals in Q1 2023 include the PGIM purchase of the Goldman Sachs portfolio for single family homes in Manchester and Liverpool for £190m, the Harrison Street, NFU Mutual and Apache forward funding on Moda’s Great Charles Street for £302m, and Realstar’s forward funding of Phase 2 of UNCLE, Leeds, for a reported £108m.

UK BTR investment exceeds £1.1bn in Q1 as rental demand soars