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Build to Rent boom – report shows investment soaring across Europe

Investment in European multifamily (Build to Rent) markets throughout 2019 reached a near all-time high, according to JLL’s latest market insight.

In Europe, like America, bespoke buildings designed specifically for renters, with various perks, add-ons and amenities, are generally known as multifamily homes – and have been a long-established rental model on the Continent. By contrast, it’s a relatively new trend in the UK, only really catching on in the last seven or eight years and known as Build to Rent rather than multifamily.

Although the report covers Europe-wide multifamily investment, we will refer to the sector as Build to Rent for the sake of clarity and consistency.

What did the report say?

JLL’s latest findings showed that the volume of new Build to Rent homes across the region represented the second strongest year on record for the sector. Germany, Ireland, Poland and Sweden attracted the strongest investor interest, closely followed by the UK.

Although investment across Europe fell by 7% from 2018 (€58.5 billion; £48.7 billion), the report found that the resilience of this market in the region outshone expectations given the lack of large-scale opportunities that came to the market last year.

“European multifamily (BTR) assets continue to attract interest from investors seeking stable cash flow,” Matthew Richards, chief executive of EMEA Capital Markets at JLL, said. “Mature markets such as Germany and the Nordics performed extremely well, especially against a backdrop of regulatory intervention by legislators. Emerging multifamily (BTR) destinations, such as Ireland and Poland, have also seen more meaningful allocations of capital.”

In the Nordics, where investment volumes increased by 7% to €12.8 billion (£10.6 billion) in 2019, activity has been driven by the strong performance of Sweden. Volumes rose by more than 40% in the region’s largest market for Build to Rent investment, with Sweden further strengthened by forward deals and heightened mergers and acquisitions activity.

Meanwhile, in Germany, where the idea of renting for the long-term is viewed as entirely unexceptional, investment in Build to Rent reached €20 billion (£16.6 billion), up 8 % on 2018.

This beat forecasts by €2 billion and represented the second highest total for market activity, with only 2015 performing better. What’s more, Build to Rent investment in Germany has now achieved growth for the fourth consecutive year.

Unsurprisingly, investor confidence in German Build to Rent remains high, despite increasing market uncertainty. While strong demand still exists from institutional investors, there is also regulatory uncertainty owing to the political discussions about rent caps or expropriation.

These joint concerns brought about more portfolio shifts in the second half of 2019, creating stronger momentum on the investment market.

JLL’s report also showed that other European markets continued to draw in capital throughout last year, with Ireland and Poland both recording noticeable growth in total investment, up by 141% and 30% respectively year-on-year.

In the UK, Build to Rent continued to be one of the most sought-after asset classes, attracting €5.9 billion (more than £4.9 billion) of investment in 2019. This came despite caution being exercised as investors waited on the sidelines for the outcome of the general election and the troubled Brexit bill.

Philip Wedge-Bernal, EMEA Living Research & Strategy Associate at JLL, said: “The growth and resilience of ‘Living’ assets has been a draw for investors amidst times of uncertainty. Long-term shifts in demography, such as shrinking household sizes and longer, healthier lives, are combining with continued urbanisation to create a chronic undersupply of appropriate homes across cities.”

He added: “The UK market is likely to recover somewhat in the first half of this year, following a tumultuous 2019. The Conservative victory and the formal departure of the UK from the European Union are likely to bring improved investor confidence in UK multifamily (BTR) for 2020 and we expect a greater pool of international investors to look at the UK as an attractive place to deploy capital.”

To keep up to speed with the number of Build to Rent homes in the UK, the BPF Build to Rent Map of the UK is an excellent resource, updated quarterly.

According to the latest figures, there are now 152,071 Build to Rent homes in the UK, of which 40,181 are complete, 35,415 under construction and 75,475 in planning. In London, there are a total of 76,408 units, while outside London there are 75,663 units, with the North West a particular hotbed for this type of home.

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