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Build to Rent continues to attract considerable investment, research finds

In a further sign of its growing strength as a market, more than £2 billion was invested into the UK’s Build to Rent sector in the first three quarters of 2019, according to the latest research from global real estate firm CBRE.

Build to Rent, known as multifamily housing in the US and parts of Europe, is a rapidly growing asset class in the UK, with investment volumes growing considerably each year. In total, the investment into the UK Build to Rent sector over the last five years has now reached £10.6 billion, CBRE’s tracking reveals. 

This investment picked up in the third quarter of 2019, with the £743 million of investment more than double the £359.4 million recorded in the previous quarter. Forward funding transactions accounted for the bulk of activity by transaction type in Q3 (£630 million), split between London and regional cities.

There were also a number of notable firsts in Q3, with Mitsubishi Estate London – the UK arm of one of the largest developers in Japan - making their debut Build to Rent acquisition in the UK, agreeing the £150 million forward funding of a Galliard Group development in Nine Elms.

Build to Rent continues to attract considerable investment, research finds

Away from the capital, Invesco made its first investment in Birmingham, exchanging contracts with The High Street Group – an entrepreneurial group of companies based in Newcastle upon Tyne - to provide £98 million to fund 484 apartments in the city centre.

The Build to Rent market also remains stable, with no marked shifts in yield between Q2 and Q3 2019, while prime net yields continue to range from 3.25% to 4.25%.

According to CBRE’s research, there is strong momentum going into the final quarter, with approximately £650 million of transactions under offer, including just over half (£335 million) located in prime regional centres.

What’s more, investment in the Build to Rent sector is also contributing to the delivery of new housing. The latest British Property Federation figures suggest there were 1,967 new construction starts in Q3, up from the 727 recorded in the last quarter. Additionally, 2,617 homes were completed, an increase of 32% year-on-year.

Helen Gray, senior director and head of multifamily advisory at CBRE UK, said the demand for a professionally managed, bespoke rental product continues to grow, from both investors and renters themselves.

“Investors are attracted to the secure, long-term income profile and the diversification play of multifamily housing, all of which is all underpinned by the strong supply and demand fundamentals of the UK housing market,” she added. “The transactions in Q3 illustrate investors are continuing to focus on London and regional cities, which is closely aligned to where the renter demand is.”

She said that, for renters, there is now a much greater appreciation for the lifestyle offer of Build to Rent – with a willingness to pay extra for convenience, as well as a sense of community.

“People’s lifestyle preferences are changing at a faster rate than materials can depreciate, which means our challenge is hyper-focused around how we create a built product that can evolve and retain its relevance and attractiveness over the long-term,” she concluded.

You can download the full report here: https://www.cbre.com/report-download?PUBID=1196debe-122d-4d01-96a1-05631ef0b451

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