In 2017, Britain saw record-breaking investment within the build-to-rent sector, with the total amount exceeding £2 billion. With the amount of investment increasing by 22% and reaching £2.4 billion, approximately 41% came from investors in Canada and the United States, according to a residential capital report from the real estate consultancy CBRE.
There has been a clear move from prime to fringe locations, and sales of build-to-rental land increased significantly throughout last year. The report shows that build-to-rent is no longer an up-and-coming market but one that is here to stay.
The large growth in commercial investment has resulted in a significant increase in volume capital looking for build-to-rent investments, notably from US investors who are already familiar with the multifamily model from their native market.
40% of transactions were recorded in the final months of 2017 and were underpinned by strong activity, resulting in 59% of capital being used in London. Large deals included build-to-rent operator Grainger agreeing to three deals, which equated to a total of £86 million in Sheffield, Manchester, and Birmingham. Further investment from L&G resulted in Birmingham alone securing £81 million worth of investments in the final quarter of the year. One of London’s largest deals of the year was CPPIB’s investment of £250 million in Lendlease’s Elephant & Castle Project.
With just over 19,000 build-to-rent units having now been completed in the UK, investment is starting to convert into a housing alternative that is being favoured by tenants & commercial investors. The response to the market, paired with a better understanding of build-to-rent investment, has attracted the attention of new operators and investors from across the globe, which is resulting in more money being dedicated to build-to-rent than previously seen.
2017 also saw the rise of bigger investment into middle-tier specification units, which is reflected in the demand for the product and took the spotlight away from the prime end of the market. This shift in activity from the major cities to smaller fringe locations shows that build-to-rent is no longer a newly emerging market and is up and running with success.
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