The concept of build-to-rent has been around for about a decade in the UK – and it has evolved significantly in that time.
The build-to-rent market is seen as a potential answer to the current problem of a high volume of renters versus the lack of rental properties.
Origins of build-to-rent
The build-to-rent concept started in the US and came to London in 2012. Its focus was to meet the demand for high quality rental homes for those who preferred to rent or couldn’t afford to become a homeowner.
A high proportion of tenants in build-to-rent properties are young professionals wanting a higher standard of living from their rental accommodation. Build-to-rents were designed to appeal to this market by including shared facilities such as gyms, swimming pools and communal areas for socialising.
Tenants are happy to pay more for professional management services and a higher quality of amenities. Apartments are finished to a high spec and include smart appliances that can connect and be controlled from a central hub.
Build-to-rent in the capital
London has probably received the highest proportion of build-to-rent investment. That trend continues as there are currently 83,000 homes in the build-to-rent pipeline.
Recently Canada’s QuadReal Property Group purchased Realstar’s £750m build-to rent portfolio that included 1335 units. New developments are appearing in places like Wimbledon and Wembley.
But as the build-to-rent market matures, build-to-rent developments are spreading across the county – particularly in cities where regeneration is underway.
Build to rent hotspots
Major cities all over the country are benefiting from build-to-rent investment – and it now makes up 7% of all new build homes in the UK and is seeing £4.7 billion in annual investment.
The East Midlands is a particular hotspot and has 11 developments across the region, offering 2900 homes. Nottingham, Leicester, and Derby all have build-to-rent developments in the pipeline over the next three years.
The trend is generally being seen in areas with urban centres. One of the biggest projects is Merlin Wharf in Leicester. Situated on the River Soar, the development promises 384 units for rent. Another large development in the city is Wellington House which aims to offer 160 high-quality rental units.
There is clearly a demand for this type of property in Leicester, as the average letting time for a build-to-rent property in the city is 30 days, which is the same as in London.
However, it’s predicted that future build-to-rent hotspots won’t be confined to city centres – investment is moving out into the suburbs where demand is just as strong.
The future of build-to-rent
Previously, high quality build-to-rent units were aimed at young professionals. But that focus is shifting.
As investment in build-to-rent moves from cities into suburbs, the profile of tenants changes. Two new developments in the East Midlands are firmly aimed at families. Ingram Park in Boston and The Old Brewery in Mansfield will consist of houses for families to rent.
This expansion and diversification of the build-to-rent market offers significant opportunities for property investors across the UK. With the chronic shortage of rental properties currently available, this is going to be a market that sees considerable growth over the coming years.