Operational assets accounted for 61% of total investment in the build to rent sector according to Knight Frank’s latest UK market update for Q1 2026, with investors prioritising stabilised, income-producing stock.
However, it said only £679m was invested in the first quarter, across 12 transactions, marking the quietest first quarter since 2018. It followed a strong end to 2025 and is likely to be followed by a stronger Q2, despite ongoing macroeconomic uncertainty. Several large-scale transactions are currently under offer or progressing through legals.
Converting permissions into new starts remains challenging
Completed UK BTR stock now stands at 165,790 homes, representing a 27% year-on-year increase and a further 50,690 homes are currently under construction. There are a further 126,565 in the planning pipeline, although the company said that converting permissions into new starts remains challenging, particularly for urban high-rise schemes. As a result, the total number of BTR homes under construction fell by 10% year-on-year, reflecting broader development headwinds.
Oliver Knight, head of residential development and investment at Knight Frank, said: “There is a significant opportunity for investors to deliver best-in-class purpose-built assets for rent at a time when there is very little new supply being developed, while the ongoing supply shortage should support occupancy levels and rental growth.
“Indeed, with mortgage rates remaining elevated, first-time buyer activity is likely to be constrained, which could support further rental demand through the peak spring and summer lettings season.”
Guy Stebbings, head of build to rent agency at Knight Frank, said: “Although investment activity was more subdued in the first quarter compared with previous years, our findings demonstrate the continued appeal of stabilised income against a challenging economic backdrop. What we’re seeing is a clear preference for assets that offer immediate cash flow and lower execution risk, supporting liquidity for high‑quality operational stock.
Meanwhile, OakNorth’s fourth Sector Pulse report on the UK real estate market has also shown that investment in BTR remains strong, despite constrained delivery, according to the April edition of the report.
Compelling opportunities in regional cities
It identified the most compelling opportunities as being in regional cities such as Manchester, Birmingham and Leeds, where development economics are more favourable, as well as in supporting SME housebuilders and selectively backing BTR schemes with strong sponsors and clear paths to stabilised income.
The company said that investment rebounded through 2025 and finished the year ahead of 2024, helped by a strong final quarter and continued capital flows into rental housing. However, like Knight Frank, it identified that starts slowed sharply, especially in London.
Over the next six months, BTR should continue to attract capital, according to Oaknorth, with the investment case for BTR still supported by stretched homeownership affordability and deep rental demand, the company said.
