The build-to-rent sector has become well established across the UK as this kind of investment continues to thrive. What makes build-to-rent so attractive for both landlords and tenants?
In recent years, the build-to-rent sector has seen significant growth in the UK. The sector is providing a solution to the increasing demand for high-quality rental properties that better reflect the needs of modern tenants.
The sector has remained particularly resilient throughout the COVID-19 pandemic as build-to-rent has become alluring for both landlords and tenants. New research from Savills reveals what tenants are looking for in build-to-rent and the investment and development currently happening in the sector.
What are tenants looking for?
The majority of build-to-rent households are between 26 and 40 years old. Core and secondary cities attract slightly younger renters with over half aged under 30 years old. Co-sharing is also more common in the UK’s core cities and London.
This impacts what tenants are looking for in a rental’s layout and the amenities on offer within the development. Extra workspace is important to consider for young professional co-sharers. This will be especially important with the recent rise in remote working.
Build-to-rent can offer tenants more than traditional buy-to-let properties. Many of these developments come with attractive amenities, such as gyms, cinemas and co-working spaces. Additionally, these homes have more of a focus on shared spaces and a strong community feel.
The predominant demographic in areas outside of the capital are what is considered “central pulse” households. Savills says this means these tenants “value convenience and favour apartments in vibrant locations that place them close to both their jobs and nightlife”.
This will likely make this kind of purpose-built accommodation particularly appealing as lockdown restrictions are lifting. City centre living is increasing in demand as many renters are moving back to urban areas as more professionals and businesses are returning to the office and as more socialising is allowed.
Investment in build-to-rent
With the number of people living in privately rented properties continuing to rise, in addition to age of those renters, the build-to-rent industry is largely adapting to the changing trends. Investment has been increasing in the sector, even throughout coronavirus.
Throughout 2020, there was record investment in the sector. And during the first quarter of 2021, more than £1.23bn was invested in UK build-to-rent developments. This fast start to the year is the highest amount of investment for any first quarter on record. This strong investment will likely continue throughout the rest of of 2021.
Developments in the sector
The UK build-to-rent stock includes 57,700 completed homes. An additional 36,000 homes are currently under construction. And 94,700 homes are in the future pipeline, including those at the pre-application stage. This would bring the total size of the sector to 188,500 units.
Throughout the past year, the number of homes with consent increased by 27% to 45,000 homes. In Q1 2021, 25 schemes with capacity of 7,000 homes obtained full planning permission in the UK. This amounts to the highest number of full planning permissions gained in a single quarter.
Over the past 12 months, 10,600 homes completed. This figure is in line with the three-year average for the UK. However, new starts aren’t keeping pace with completions. This has led to a contraction in the construction pipeline, which is a trend also seen across the residential development sector due to the COVID-19 pandemic and current economic landscape.
Once the economic picture improves, Savills projects that new starts will increase again and the construction pipeline will start growing, especially with the number of recently consented projects. Additional investment will likely come to the growing build-to-rent sector throughout the coming years.