Build-to-Rent is starting to gather steam outside London, as the capital is viewed as a mature market for the sector, analysis from debt advisory and investments firm Excellion Capital shows.
As of Q4 2024 (latest available), London alone is home to 54,352 completed Build-to-Rent homes, marking an annual increase of +14.5% compared to Q4 2023.
However the rest of the country is catching up, as the number of completed regional Build-to-Rent (BTR) homes increased by +19.1% over the same period of time, giving the nation an overall supply increase of +17.1%.
Build-to-Rent is rapidly eclipsing Build-to-Sell (BTS) as the most promising area of property for investors to be focussing on, Excellion Capital said.
Robert Sadler, vice president of real estate at Excellion Capital, said: “It is our view that property investors should now be thinking about pivoting away from Build-to-Sell and towards Build-to-Rent, particularly outside of London.
“This is a sector that is growing at astonishing pace. London has been a useful proof of concept for both the demand for BTR homes and the returns available to investors, so now it’s spreading across the whole country, not least our secondary cities such as Manchester, Newcastle, and Birmingham.
“Investors should also be aware that some lenders are now showing greater enthusiasm for BTR over BTS. In fact, some of them are focussing purely and exclusively on BTR due to concerns about the exit from BTS developments.”
Over the past five years alone (Q4 2019 – Q4 2024), the number of BTR homes across the nation has increased by 173% to total an estimated 123,539 completed units.
In 2022, an estimated 10,300 units were completed across the UK, increasing to roughly 18,000 in 2023 and another 18,000 in 2024.
However, even with this rapid growth, the BTR sector still only accounts for an estimated 2.2% of the UK’s total private rented stock.
Sadler added: “Since rates have risen sharply, many developers have struggled to repay development loans on BTS developments as a result of slow sales and reduced selling prices. As such, developers have been forced to take on development exit loans or retain units for rent.
“On the other hand, buyers of stabilised BTR developments tend to be large institutions which represents an extremely attractive exit for developers.
“So, with high market demand, strong yields, greater availability of finance, and the opportunity for a clean exit, we very much expect to see more and more developers showing preference for BTR over BTS.
“While interest rates remain relatively high, developers should be thinking about and planning for new projects later in the year when rates are expected to fall and cost inflation to settle. Additionally, the nation’s continually strong rental demand will put upward pressure on rents, which will help to offset elevated development costs.”
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