Build to Rent (BTR) is a growing trend in the UK. Put simply, it refers to homes that are built not for sale but for renting. Unlike traditional rental homes, BTR focuses on the availability of services: professional on-site management, shared spaces, work zones, and fitness centers.
Investment in BTR has been growing in the UK most notably because of increasing investments by both domestic and overseas companies and a recovering UK economy. According to a January 2020 report, more than 152,000 BTR units are in development in the UK, with about 40,000 of that total completed.
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To gain a fuller picture of what successes BTR developers have seen, and why BTR might be an attractive option for other real estate investors, we’re sharing how it started and where we think it’s heading.
How BTR Gained Momentum and Some Proven Benefits to Jumping on the Bandwagon
BTR was pioneered by a handful of companies in the UK about 10 years ago. Here are some of the big players who have helped progress this shift in commercial real estate.
L&Q (London and Quadrant) Shows How BTR Can Boost Income
L&Q is one of the largest and one of the first companies to enter the BTR market. By the end of 2019, they had approximately 3,000 completed BTR units and 4,000 units in various stages of construction, for a total of around 7,000 units. They are the biggest player in the UK BTR sector.
Although not a commercial business, as a Housing Association, they looked at BTR as a way of complimenting their social and affordable housing offer and boosting their income at a time of government cuts. For them, BTR is a way to increase the bottom line and act as a supplement to the social and affordable housing segments of their portfolio.
Sigma Capital Proves BTR Can Help Target Lower-Income Renters
Sigma Capital took a different approach to BTR. Through both private vehicles and a REIT created to own completed assets—PRS REIT, which has a market capitalisation of almost £500 million—Sigma continued to push this trend forward. Currently, Sigma has a portfolio of 7,173 units, with approximately 2,500 completed, 1,500 under construction and 3,000 in planning. It has a target of 20,000 units.
While many BTR developments are built to attract renters with a higher rental budget than what is considered “normal,” Sigma builds and then rents single-family developments that target the lower-income segment of the residential rental market.
Get Living Shows How BTR Can Repurpose Existing Developments
Get Living is one of the pioneers of the UK BTR sector. Set up by Delancey, it bought the Athletes’ Village on the London 2012 Olympic Park in Stratford and converted it to a rented residential scheme. For BTRs this proves you do not have to have new builds to make it work.
Get Living has since added other repurposed developments to its BTR portfolio through a combination of its own assets and investment-raised equity with schemes at the Elephant & Castle in South London, Manchester, Glasgow, and Leeds. Qatari Diar originally backed the platform. Now, other investors, including APG and Oxford Properties, have since bought stakes, and Get Living is looking to raise further equity. It has approximately 2,000 completed units, 1,500 under construction, and 3,500 in planning, for a total of about 7,000.
Quintain Shows How BTR Can Help Reinvent a Project
In 2015, Lone Star took private developer Quintain and made a radical decision, again making major pushes toward a rise in BTR. Currently, their 85-acre BTR scheme could have an end value of as much as £3 billion. At Wembley, 556 units have been completed, 2,196 are under construction, and there are plans for a further 3,000, making 5,752 in total.
They turned the 5,500-unit scheme the company was building for sale in Wembley and converted it almost entirely to BTR, instantly making Wembley Park the largest BTR scheme in the country.
Where BTR Is Heading
The number of newly completed Build to Rent homes has jumped by 42%, compared with the same period last year. That is around 20-25k units, and the British property federation predicts over 200k in the next two years.
According to Statista, “the number of build to rent homes under construction in the United Kingdom (UK) increased from approximately 31.3 thousand as of the fourth quarter 2017 to almost 36.4 thousand by the end of the fourth quarter 2019,” making this an investment trend that’s unlikely to go away soon.
Is this a trend we will see in the United States?
The short answer is yes. In fact, we’re already seeing this trend in New Mexico and Florida, with some investors looking to expand single-family BTRs into the Phoenix, Dallas, Boise, Denver, and Las Vegas rental markets, to name a few. Other residential real estate companies are looking to incorporate the BTR concept into their holdings across the country. ERC Investors, a small Tampa, Florida-based builder, has set a goal of raising $100 million to build more than 1,000 BTR homes statewide.
Companies like NexMetro market their brand as “Rents Like an Apartment. Lives Like a Home.” For demographics like professional millennials, who make up about one-third of NexMetro’s renters, BTR in the United States is the perfect way to bring in people who want a family home because they have outgrown apartment living.
Bottom line: For many investors, BTR is a way to adapt to current trends in real estate.
If you’re wondering how technology can help answer your BTR questions, projections, and streamlining the process, we’re here to help. Contact us to help you reach your real estate goals.
