Could 2021 Be the Year of Build-to-Rent in London and Beyond?

Despite a year of uncertainty, construction delays, rising costs and other difficulties, build-to-rent investment has continued. In fact, 2020 saw the build-to-rent market flourish – with a 23% increase in completed build to rent homes across the UK. So, could 2021 be the year to invest in a rental development?

skyline with skyscrapers

Build-to-Rent in 2020

Recent research from the British Property Federation shows something surprising. The build-to-rent sector not only held steady in 2020 – it grew. The number of completed build-to-rent homes increased by 23% in Q4 2020 to a total of 53,750, compared to 43,598 in Q4 2019. The figures show this trend is set to continue, too, as there were also 22% more projects in the planning process than the previous year, and 5% more under construction.

Build-to-Rent Investment

Current figures show that build-to-rent developments are appealing to both tenants and investors. In fact, analysis from Savills revealed Q3 in 2020 is so far the sector’s strongest ever single quarter, with £1.84bn invested.

Even with the severe delays and disruption caused by lockdown restrictions, the build-to-rent sector saw £3,097m of investment between January and September 2020. This is 4.6% higher than the total investment across 2019.

With rental accommodation remaining a popular and vital part of the property landscape, there is room for even further growth in the build-to-rent market.

“The figures back up the underlying sentiment that build-to-rent continues to be one of the key drivers in housebuilding in the UK.”

Harry Hodell, Pure Structured Finance

Where is Best for Build-to-Rent?

With the sector in such a strong position, you may be wondering which location is best for your build-to-rent development. There are in fact several hotspots in the UK, but it will come as no surprise that London has the largest number of build-to-rent developments. In fact, around half of the UK’s build-to-rent homes are located in London.

The capital remained the prime location in 2020, with completed build-to-rent London developments rising by 26% in Q4, compared to the previous year – a larger increase than the national average.

Outside of London, build-to-rent is particularly strong in the north-west of England. Here, there were 32,395 homes complete, under construction or in planning in 2020 – the largest number besides the capital. The north-west region also saw the largest rise in build-to-rent developments at the end of Q4, with a 31% increase from 2019.

Birmingham is another city where rental developments continue to thrive. Build-to-rent in Birmingham accounts for approximately one third of the 5,000 residential units being built. Additionally, as Birmingham is one of the youngest European cities (with nearly 40% of residents under the age of 25), purpose-built rental accommodation is in high demand.

So, when it comes to deciding the best location for a build-to-rent development, there are several attractive options. However, we would always recommend sitting down and chatting with a local estate agent or property expert before investing to ensure demand is high and an area isn’t overly saturated with this type of property.

Find Build-to-Rent Finance for Your Dream Development

Here at Pure Structured Finance, we have strong relationships with lenders and a wealth of industry experience. Trust our dedicated team to find the right development finance for your built-to-rent project.

Give us a call on 02080 579 178 to speak to one of our experts, or request a callback.

 

Article By Tom Lee

June 17th, 2021

Tom is one of the founding members of the company and has been a part of the Pure Group since 2013 playing an integral part of the business’s growth and direction.

He had over 10 years of experience in the real estate financial sector prior to joining Pure with a major bank. Tom has a wealth of experience providing debt advisory on large, complex deal structures for developers and investors across all asset classes, throughout the UK and parts of Europe.

He has built a strong network across the property and finance sector, which enables him to provide a total package solution to his clients and contacts, with whom he has built long standing relationships.

See more articles by Tom