Investors will target £27.7 bn (€33 bn) of equity at the Build To Rent (BTR) sector in the UK over the next five years, according to new research from CBRE.
CBRE's Build to Rent Barometer suggests that a quarter of this capital is domestic, whilst almost half originates from North America. The main constraint for investors continues to be a lack of available stock with the ratio of deployable equity to marketed stock currently at 14:1.
'In 2016 Multi-family was a $250 bn debt and equity market in the US,' commented Peter Burns, managing director transactions, UK development and residential capital markets at CBRE. 'Institutional investors from overseas destinations, like North America, are looking for new markets to deploy their capital. As such we have launched our Build to Rent Barometer to monitor both domestic and global Investor interest in Build To Rent across the UK.'
Burns added: 'There is limited standing stock in the UK which has led to increased interest from investors looking to acquire either platforms or development opportunities released by housebuilders who see this new sector as a great way to accelerate delivery of stock.'
Interest has risen, according to the research, from international institutions. Whilst London has traditionally been the focus of their attention, the UK’s regional cities are becoming increasingly prominent as US funds begin to explore the market and demonstrate their willingness to move higher up the risk curve in regional cities that offer a strong investment case.
Regions under the spotlight
Whilst London previously offered the majority of build to rent development units, the 70,000 strong pipeline of units that are either complete or under construction is now evenly split between the capital and the UK regions.
Domestic investors such as Legal & General (L&G) are playing their part. L&G’s total investment capability for the BTR sector currently stands at circa £1 bn (€1.2 bn), having raised capital from major pension funds for an open-ended BTR fund, as well as a £600 mln (€712 mln) JV investment by Legal & General Capital and PGGM. This week, L&G announced its latest site acquisition in Leeds.
The UK is set to be a huge benefactor if developers can achieve the scale required to meet the growing demand, the report concludes.
