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What's Happening With the Build-to-Rent Revolution?

15 March 2021 Simon Banks Read time: 3 min
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Simon Banks

Build-to-Rent keeps getting bigger and bigger, and it’s set to double in size by 2025. The sector is becoming increasingly attractive to investors looking for stable returns and a genuine alternative to the traditional way of renting and commercial assets. 

Just ask many involved in the industry about the future of purpose-built rental accommodation in the UK, and the word “Build-to-Rent” will be on all of their lips. With 150,000-plus units either completed, under construction or greenlit, the revolution to change the rental market is well underway. 

In this article, we’re bringing you the lowdown on what’s currently happening with Build-to-Rent and what the future holds. So read on to find out what’s happening with the Build-to-Rent revolution. 

£146bn in assets

By 2025, the Build-to-Rent sector is set to double in size with an estimated worth of an astonishing £146bn, according to reports from Knight Frank. It will provide housing to modern-day professional renters, single-family households, students and senior citizens. 

Build-to-Rent investment reached new heights mid-2108, with a growing number of investors realising its potential. Since then, huge financial institutions like Lloyds Bank and Legal & General have entered the Build-to-Rent fold, citing its potential for growth as the reason for investing. 

The Covid effect

Like all other industries, Covid has, understandably, had its impact on Build-to-Rent construction. 2020 started well with over one billion pounds of capital committed to the sector. However, in the light of the first lockdowns, much of the development slowed. 

And yet, the sector’s resilience is clear to see, with it becoming one of the most pandemic-proof asset classes. The large housing shortage in the UK is one reason why it’s continuing to pick up the pace even during a worldwide pandemic. The need for homes and a growing population means renter-exclusive properties continue to receive high demand. 

New cities emerge

London and Manchester have acted as the Build-to-Rent hotbed since its appearance in the UK back in 2015. London alone accounts for 52% of developments. Manchester is a close second, with areas in the city centre and Salford particularly popular for Build-to-Rent homes. 

However, an increasing number of cities are becoming appealing locations to investors. Birmingham has seen a Build-to-Rent boom, which is even more understandable when you consider the fact that it’s the UK’s second-largest private rental market behind London. Liverpool, Cardiff and commuter towns like Stevenage and Milton Keynes have also become Build-to-Rent hotspots. 

Surging investor demand

When Build-to-Rent is the new plaything for investors, you know it’s on the right track. There isn’t much doubt that it will become the de facto way to rent a home, but a recent surge of investment has only bred more confidence. 

According to research from the British Property Federation, completions nationwide were up by 23 per cent in 2020, and exponential growth is expected. Many analysts expect 2021 to be the year when Build-to-Rent realises its full value.

Dan Batterton of Legal & General says, “You’ll see [existing, fully operational] schemes get traded this year,” says Batterton. “That will show what the true value is on the open market”. Low inflation and low-interest rates have pension funds looking for assets that deliver a study income, and Build-to-Rent is driving a stronger yield than many other forms of commercial property. 

Improved service for renters

Build-to-Rent’s appeal is in its renter-first approach, with homes designed solely for the purpose of renting. This has led to high optimism regarding the growth of the sector, especially as a quarter of the UK population will be private renters by the end of 2021.

In London, the numbers are even larger: by 2025, it’s expected that a whopping 60% of the London property market will consist of private renters. The potential for Build-to-Rent to account for half of the UK rental market is strong.

As investors move away from commercial properties, which have an uncertain future in the wake of Covid, Build-to-Rent is the practical option. While it’s good news for investors, it’s also a positive landscape for renters who will have more options for high-quality housing in homes designed for them. 

Viva la revolution

Build-to-Rent is an attractive proposition for everyone involved, from the investors to the operators and, most importantly, the renters. Expect to see an increase in Build-to-Rent and homes renting faster as everyone reaps the benefits of living in a Build-to-Rent community. 

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