BTR update – subdued Q3 but strong pipeline points to Q4 boom, says CBRE

The UK’s fast-growing Build to Rent (BTR) sector recorded a total of £374 million of investment in Q3 2021, according to provisional data from CBRE.

This represents a 76% fall on the same period last year, which saw unusually high levels of investment as a result of some significant deals including Phase 2 of Lewisham Gateway and AXA IM’s acquisition of Dolphin Square.

Q3’s performance brings the year-to-date total to £1.92 billion, some 28% down on the first nine months of last year. In spite of more subdued levels of activity so far this year, CBRE says the transaction pipeline remains exceptionally strong with £2.9 billion of transactions under offer.

‘Prime Regional Centres’ accounted for the highest proportion of investment in Q3, representing 48% of the total. Notable transactions included the £73 million forward-funding of The Castings in Manchester by CDL, as well as Bearing’s acquisition of The Trilogy, Manchester for £53.5 million. 

Legal & General, one of the biggest players in the market, also forward-funded Hove Gardens in Hove for £76.5 million, which will provide 216 homes for rent once complete.

Peter Burns, executive director of UK Residential Capital Markets at CBRE, said: “The slowdown in investment activity seen in Q3 reflects the continued restrictions to travel as a result of the pandemic, which have been a particular barrier for international capital."

“This has been coupled with labour and material shortages, which have delayed transactions. Despite these challenges, investor sentiment remains very strong, we have seen competitive bidding for assets across the board and the occupational market is robust. As such, we are anticipating a strong final quarter of the year.”

How many BTR units are there in the UK?

According to the British Property Federation’s quarterly BTR Map, which is produced by Savills for the BPF and draws on data from Molior to plot the schemes across the UK aimed at the institutional investment market, there are currently 195,598 BTR homes in the UK, including both London and the regions, of which 62,274 are complete, 39,524 under construction and 93,800 in planning.

In London, there are a total of 84,682 units, while outside of London there are 110,916 units.

BTR schemes have started to pop up in all parts of the UK, but remain concentrated in and around major cities such as London, Birmingham, Manchester, Liverpool, Leeds, Glasgow and Edinburgh, with a growing number in Southampton, Bristol and Cardiff.