20 Oct Rebound in build-to-rent investment
While most areas of property investment have experienced turbulence in recent months, the build-to-rent sector has proved to be robust.
According to a recent report from global real estate company, CBRE, investment may be lower this year than in 2019 due to the pandemic; however, growth is set to return in 2021, and over the next five years will outpace other sectors.
Huge pipeline investment in build-to-rent
At the beginning of this year, the build-to-rent sector was flying high with over £1 billion of investment in Q1. Then lockdown put a stop to activity, and as a result, there were only two transactions in Q2 totalling £83 million.
Despite this, build-to-rent plans have still managed to progress, and according to CBRE, there’s significant investment in the pipeline of over £1.4 billion worth of deals currently under offer. This is roughly equal to the investment pipeline at the end of 2019 that went on to produce £1 billion of investment in Q1 of 2020.
CBRE has been tracking UK build-to-rent investment, known as multifamily housing in other countries, since 2015.
“It’s little surprise that there was a sharp downturn in investment in Q2, as the lockdown halted activity. But this period has also highlighted the resilience of the multifamily sector. Rent collection rates have remained high, and historically rents have declined less and recovered quicker during downturns, giving investors some confidence to proceed,” commented Scott Cabot, associate director of research at CBRE. “With £1.4 billion of deals currently under offer, we anticipate a rebound in multifamily investment in the second half of 2020, and a return to growth in 2021.”
New deal just announced
This month, Legal & General exchanged contracts on a 346-home build-to-rent project in Candleriggs Square, Glasgow.
Worth approximately £1.9bn, the build-to-rent scheme is part of a mixed-use development that will include homes, offices, hotels, restaurants, amenities and landscaped open space. The build-to-rent part of the site will be a 17-storey tower with a mix of studio and one, two and three-bedroom properties as well as six duplex penthouse apartments.
Dan Batterton, head of build-to-rent at LGIM Real Assets, said: “Glasgow faces a significant undersupply of high-quality rental accommodation and, within the coming decade, will see its population increase as it continues to establish itself as one of the UK’s best cities to live and work. The site is located in a prime location and, alongside Legal & General’s Buchanan Wharf scheme, is the city’s only high-density build to rent product.”
Global build-to-rent firm looking to acquire properties
Meanwhile, Atlas Residential, a company specialising in build-to-rent developments has said it plans to spend $1bn across the US, China and the UK to build a global multifamily apartment portfolio.
In the UK, Atlas Residential has three sites with approximately 1000 units currently in operation or under construction and another 1500 planned. The company is looking at projects in Kent, Sussex, Middlesex and Lancashire and wants to acquire existing properties.
“From what we are seeing in the market, inexperienced UK multifamily operators will need to dispose of underperforming assets as they struggle to cope with a tightening market and in some cases sub-market over-supply,” said Kelvin Sutherland, managing director at Atlas UK.
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