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Build to Rent Spreads its Wings

Initially a London phenomenon, it is now spreading across the UK. Peter Hemple reports

Research released at the end of July by CBRE revealed that the total institutional investment into UK build to rent was 20% higher in the first half of 2019 than the same period of 2018, reaching almost £1.4bn. CBRE’s UK Residential Investment MarketView for Q2 2019 found that there was £359m of institutional investment into the UK private rented sector in Q2, which was lower – as expected – than the record volumes seen in Q1.

Investment in Q2 reflected a mixture of forward-funding deals and direct land purchases, with London still the major destination for investment, accounting for two-thirds of total investment volume, at £233m. The prime regional city centres of the UK brought in a further £120m of investment in the second quarter of the year, with a land purchase in Scotland making up the balance.

According to the report, at the start of Q3 there were just over £500m in transactions under offer, with these deals evenly split between London and the rest of the UK, signalling that more investors are now looking outside of the capital, compared to recent years.

Regarding the total number of units added in Q2, the British Property Federation (BPF) says that an additional 2,909 build to rent homes were either completed or added to the pipeline, up 2% on the growth in Q1 2019, and up 17% compared to Q2 2018. The BPF says that there are currently 143,000 build to rent units either completed or planned across the country. This includes more than 32,000 completed (up 32% on a year earlier), over 36,000 under construction and almost 75,000 with planning permission (up 20% on a year earlier). Around 75,000 of these units are focused on London, with 68,000 outside of the capital.

“Since the strong start to the year, the second quarter of 2019 has seen some adjustment, but there was a good showing for the first half of 2019 overall, with yields remaining stable across the board,” Kate Brennan,  director of valuation or advisory services at CBRE, said. She added: “We may now have reached a point where land prices are reaching viable levels from a build to rent perspective. Indeed, L&G (Legal & General) announced this quarter that it has exchanged contracts on two adjacent sites in Wandsworth. These sites will combine to deliver their largest scheme to date, providing around 1,000 homes and 85,000 sq ft of commercial space.”

Brennan also said there have been new entrants to the market recently, adding: “Mitsubishi Estate London will forward fund part of the former Royal Mail sorting office in Nine Elms. This marks their first foray into UK build to rent. There was also the announcement that Grainger will deliver around 3,000 new homes across the capital, including up to 400 units at Nine Elms tube station, on behalf of Transport for London.”

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