Build to Rent – A market summary

11 May 2021

Build to Rent (“BtR”) is a rapidly evolving sector in the UK Residential property market.  BtR is designed to deliver purpose built residential properties, either Multi-Family (apartments) or Single-Family (houses) to the market, helping to address the housing crisis and deliver social and economic benefits to local communities.

Traditionally, the private rented sector (“PRS”) has been a disparate market with 98% of stock currently held by private landlords or smaller corporate entities. This broad base of ownership means there is a wide range of stock, some of which is well managed and maintained but some of it is also sub-standard and poorly managed and maintained. Changes in how rental income is taxed alongside growing competition in the BtR space has meant the private landlord sector is reducing. According to research by Savills, some 35,000 private landlords exited the sector in the first 11 months of 2020.

The BtR sector, with its institutional managers delivering purpose-built stock and offering enhanced services to tenants alongside more amenity (think gyms, co-working, co-leisure space) should mean a broader range of choice is available for tenants and the national roll-out of BtR projects should increase housing supply as time goes by.

It’s also important to note a change in rental demographics. Traditionally a preserve of the younger market (under 25), there has been material growth in the 25-34 and 34-44 age sectors with a preference for suburban (single family) homes as age increases especially in the 35-44 and 45-54 catergories.

 

 Suburban Build To Rent Graph

 

With a growth in individuals and families in rented accommodation, we have seen a continued growth in investment into BtR.  The graph below shows 2020 will see the higher level of investment in nearly a decade and that is despite a global pandemic!

 

 

 

 

 

According to Savills, the UK’s BtR stock now includes:

  • 53,750 completed homes;
  • 37,000 homes under construction;
  • A future pipeline currently stands at 89,000 homes, (including those in the pre-application stage);
  • The total size of the sector is 180,000 homes (once built out);
  • In 2020 there has been an increase in stock of 30% in London and 24% outside of the capital (compared to 2019).

 

How can Peritus help you in the BtR sector?

Peritus can offer a number of different options to developers seeking access to the BtR market. A number of BtR investors do not want to develop the sites themselves but will be prepared to offer ‘forward funding’ options to developers seeking finance.  Forward funding options could include:

  • Forward Purchase – We can assist you in sourcing an investor who will ‘forward purchase’ your whole scheme. Typically, the investor will exchange contracts with say a 10% deposit and you will be required to source development finance to deliver the scheme. Peritus has access to a wide range of BtR investors for schemes typically £10m + in GDV and can also help you secure your development finance.
  • Forward Funding – We can assist you in sourcing an investor who will ‘forward fund’ your development. Typically, the investor will purchase the development site and you will be appointed to act as the Development Manager for a Development Management (“DM”) fee and a fixed profit share on completion. In this structure, the investor will also fund the development costs.
  • Development Funding – We can assist you in sourcing competitive development finance to deliver your BtR property.
  • Investment Funding – We can assist you in sourcing longer term investment finance at highly competitive margins to allow you to hold your BtR investment over time.

 

Recent Track Record

We sourced:

  • a forward purchase of 55 single-family units in Bedfordshire;
  • a forward purchase of 68 apartments in Northamptonshire;
  • over £20m in development finance for 104 houses in Bedfordshire;
  • a forward funding partner for a 200-unit development on the South Coast; and,
  • a land loan on a development site for a large number of units in Essex.