Property developers and investors are cashing in on the booming Build-to-Rent (BTR) market, with £3.2 billion poured into the sector already this year, according to a new report by property consultancy Knight Frank.
The report, which provides a snapshot of the BTR market in the third quarter of 2024, reveals that investment hit £640 million in Q3 alone. This brings the total investment for the year to date to a staggering £3.2 billion, a significant 20% jump compared to the same period last year.
Investors Eye Up Multifamily Developments
The report highlights that multifamily developments are attracting the lion’s share of investment, accounting for a considerable 65% of all transactions in Q3. Single-family assets made up the remaining 35%.
Interestingly, there’s a growing appetite for acquiring already operational BTR schemes, with 35% of capital deployed in Q3 going towards these stabilised assets. This is a significant leap from the 20% recorded in the first half of the year, indicating a shift in investor strategy.
Rental Growth Moderates
While investment is soaring, rental growth in the BTR sector is showing signs of stabilisation. Knight Frank’s BTR Rental Index reveals that annual rental growth has eased to around 3% in markets outside of London. The capital itself is experiencing slightly lower growth.
Lizzie Breckner, Head of Build to Rent Research at Knight Frank, explains: “This moderation follows years of record-high growth and reflects a more sustainable long-term relationship between rents and earnings growth.”
A Flurry of Deals and Recapitalisations
Beyond the headline investment figures, the BTR market is buzzing with activity. Knight Frank observed a surge in recapitalisations and equity raises during Q3, indicating strong investor confidence in the sector’s long-term prospects.
One notable deal saw Ares and Lone Star commit £755 million in preferred equity to Wembley Park, a transaction advised by Knight Frank.
Record-Breaking Year for BTR Completions
The report also reveals that over 18,000 BTR homes have been completed so far this year, putting the sector on track to surpass the record 19,000 homes built in 2023.
Regions Drive BTR Growth
Regional markets are playing a pivotal role in the expansion of the BTR sector, with 67% of completions in 2024 occurring outside of London. Manchester and Birmingham are leading the charge, demonstrating the increasing appeal of BTR beyond the capital.
A Sector Ripe for Investment
With a total of 122,238 completed BTR homes across the UK, and a pipeline of 58,951 under construction and 101,729 with full planning permission, the sector is set for continued growth.
Jonny Stevenson, Head of Build to Rent Forward Funding at Knight Frank, comments: “The £3.2bn transacted year to date underscores the long-term attractiveness of Build to Rent as an asset class. The sector continues to be regarded as resilient and scalable, offering strong opportunities for growth in both urban and suburban settings.”
The latest figures from Knight Frank paint a compelling picture of the UK’s BTR market. With record levels of investment, a robust pipeline of new homes, and a moderating rental market, the sector presents an attractive opportunity for investors.