The Rise of Build To Rent

Market Reports 10 Aug 2022
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BTR is an increasingly popular market within the private rented sector

Number of homes in the BTR pipeline in London alone

83,000

Build to Rent (BTR), an emerging market within the private rented sector (PRS), is a relatively new concept: it offers purpose-built professionally managed residential development schemes designed with the sole intention of appealing to the rental market, as opposed to long-term ownership. In most cases, these schemes usually offer longer tenancy terms and are typically built and managed by institutional investors and property companies.

 

Originating in the US, the concept was first introduced in the UK in 2012 as a solution to the rise in renting and to the private rental sector’s traditional poor reputation and low quality. Since then, we have witnessed a significant and steady growth in this segment of the market. As of last September, there were 83,000 homes in the BTR pipeline in London alone[i], as growing numbers of people seek quality, well-managed rental housing at affordable prices. This trend is not surprising since BTR schemes offer both long term returns for the investor, and generally higher security and overall quality of rental accommodation for the tenant. Research published by Knight Frank last year shows investments in the BTR market hit £2.35 billion in the first half of 2021 - over £1.27 billion in Q1 and an additional £1.08 billion in Q2. This represents an 80% increase in investment volumes compared with at same period in 2020 and is a figure that is expected to be greatly surpassed this year[ii].

Furthermore, the BTR market has shown surprising resilience throughout the pandemic and holds potential to meet resident needs for home-working environments and outdoor space. With the shift in priorities following the pandemic, the pressure to meet housing demand and with ongoing soaring house prices[iii], demand for BRT has been understandably on the rise. Another very interesting trend within the BTR market growth is its strong regional spread. According to Knight Frank, some 70% of the funds committed to BTR in the first half of last year were for schemes outside of London[iv], reflecting investor confidence in the fundamentals which underpin those regional markets, as well as an increase in the number of development opportunities being brought forward outside London. Knight Frank estimated by the middle of last year that 58% of all pipeline schemes of 75 units or more (either under construction or with planning) will be delivered in regional markets. This trend is both interesting and very much aligned with our view of the UK regional market. At Blend, we have been and continue to fund development schemes across the regions and have very supportive views on markets such as Manchester and Birmingham, especially amid the government’s Levelling-Up agenda.

 

Blend is an active development finance and bridging lender across the UK regions. We support SME property developers and small construction companies who are building residential and mixed-use schemes across the UK, with a particular focus on innovative, energy-efficient, and ESG-compliant schemes. Investment in BTR very much aligns with our short- and long-term view of the market. Therefore, we actively support developers who are active in that market. If you are a property developer looking to fund a BTR scheme, get in touch with a member of our expert lending team so that we can assess your funding needs and help fund your scheme.

Blend is a specialist development finance lender providing investors with a full stack service from loan origination and underwriting to transaction execution and portfolio management. For more information, please visit www.blendnetwork.com or email Melissa Turnbull, Operations Manager, at [email protected]

Your capital is at risk and lending through an electronic platform is not covered by the Financial Services Compensation Scheme.

Past performance is not an indicator of future returns.

BLEND Loan Network Limited is authorised and regulated by the Financial Conduct Authority (Reg No: 913456).

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