Build-to-rent continues to dominate

October 16, 2019

The popularity of purpose-built rental stock continues to flourish across the UK, but the biggest market for it is still in the capital.

New analysis released by Knight Frank in its London Residential Development report for H2 2019 has revealed further growth in the “investment-grade private rental sector (PRS)” in London, with demand from international institutional investors growing strongly.

In the first half of this year, build-to-rent developments – which are constructed for the sole purpose of being rented out to private tenants – of 100 or more units accounted for almost a third (28%) of construction starts. This is up from 21% in 2015, demonstrating how the build-to-rent sector is still gaining traction with no sign of it slowing down. Developers as well as investors are striving to meet the growing demands of tenants, whose needs are changing as they expect more amenities and better quality accommodation options – all of which can be found with build-to-rent.

International investment in build-to-rent

Institutional investors from North America, Asia, the Netherlands, Israel, the Middle East and Australia are all getting increasingly involved in the space, according to Knight Frank, while figures from RCA show that in the year to July 2019, more than £800m was invested into 100+ unit developments in the build-to-rent sector in Greater London. During the first six months of this year, 6,816 units were approved in developments of this size, which is a more than 20% year-on-year increase.

Knight Frank’s yield guide shows investors can achieve 3.5-3.75% in Zone 2 prime, 3.75% in Zone 3-4 prime, and 4% in Greater London prime.

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