The UK Build to Rent (BtR) sector has experienced a rather slow start to 2024. Investment in BtR developments has decreased, with just 10 deals completing in the first quarter, accumulating to a value of £555 million. This marks the slowest first quarter since 2014, according to the latest report from Savill’s, a stark contrast to the bustling activity seen at the end of 2023. The majority of this investment was centered in London, particularly spotlighted by two significant transactions at Wembley Park, where KKR acquired 490 apartments.
Regional Variations
Investment outside of London was notably subdued, reflecting a temporary slowdown in the market, especially in regional Multifamily and Single Family sectors. This downturn can be partly attributed to the high activity in the latter part of the previous year, which was the second highest final quarter on record.
Development Dynamics
On the development front, there’s a mixed but optimistic scenario unfolding. The number of completed BtR homes has reached a high not seen since 2021, with a 17% increase compared to Q1 2023, totaling 101,875 completed homes. This rise in completions, despite a slowdown in new starts, points to developers focusing more on finishing existing projects rather than launching new ones.
Construction and Planning Stages
Currently, the UK boasts 54,814 homes under construction and an impressive 108,917 homes in the planning pipeline, including those at the pre-application stage. This signals a strong future potential for the market, though new starts are at their lowest since 2016. It’s crucial for the sector to secure new sites to maintain a healthy long-term delivery pipeline, especially as detailed permissions are at record highs but applications are down by 31% compared to last year.
Rental Market Dynamics
BtR developments are not just about providing new housing options; they’re attracting tenants for varied reasons. The median travel distance for BtR movers is significantly larger at 5.8 miles compared to 3 miles for the general Private Rented Sector (PRS) and 4.2 miles for new build Buy to Let (BtL). This suggests that BtR’s appeal extends beyond its newness, offering features like greater stability, higher standards of accommodation, and enhanced energy efficiency.
The Appeal in Amenities
BtR properties typically offer more than just a place to live. They include amenities like shared spaces, professional customer service available 24/7 via digital apps, and a community-focused environment supported by social events and social media. Such features are proving highly effective in drawing tenants from a wider area, especially in core cities which serve as major employment hubs.
Serving the Local Community
Despite the broad catchment area, over half of BtR tenants still originate from the same or a neighboring local authority. This indicates that while BtR developments do attract residents from further afield, they also play a vital role in serving the local housing needs. In regions like Inner London, a significant portion of BtR tenants are young professionals aged between 26 and 40, highlighting the sector’s support for the workforce in urban centers.
Addressing Supply and Demand
The BtR sector faces the ongoing challenge of balancing the high demand with an adequate supply of rental homes. As the market seeks equilibrium, the focus will need to remain on enhancing the delivery pipeline to ensure a steady flow of new developments. This will not only help cater to the increasing demand but also contribute to stabilising the housing market in various regions across the UK.
In summary, while the first quarter of 2024 has seen a slowdown in investment and starts, the strong performance in completions and the high level of homes in planning stages suggest that the Build to Rent market is setting the stage for a robust future. As it continues to evolve, BtR is poised to play a pivotal role in meeting the UK’s housing needs, drawing in tenants with its unique offerings and supporting local communities.