Build to Rent booming in cities and beyond

Whilst debate rages over longer-term solutions to the shortage of homes, a plentiful supply of new construction work is set to come from Build to Rent (BtR) housing contracts in the short and medium term.

A recent report from Savills noted that despite high interest rates, last year saw £4.5 billion invested in BtR in the UK; the second-highest annual total on record and only fractionally down on the previous year. The BtR concept has become firmly established beyond its roots in the North West – particularly in Liverpool and Manchester – to areas in the Midlands and the South East where land prices are higher.

Last year around four-fifths of investment deals in the sector involved funding for the construction of new homes; over 12,000 units in all, worth over £3.65 billion.

Good growth prospects

Moreover, growth prospects in the sector remain good. According to Savills, 60,000 homes per year will need to be delivered for private rent if the government is to reach its target of 300,000 new homes per annum.

London is set to see the greatest increase in demand for BtR homes. The report says an extra 210,000 private rented sector households are projected in the capital by 2031. This bodes well for new construction as it implies a ‘significant further investment’ beyond the 40,000 BtR homes which are already in the capital’s existing planning pipeline.

In keeping with this trend, the February issue of the Glenigan Construction Review shows that London was the most active region for detailed housing planning approvals in the three months to January, worth £4.7 billion, up 5% on a year earlier and accounting for a 26% share of the sector.

One major project in the capital with a significant BtR element which received planning permission recently and where work is set to start this summer is Telford Homes’ £100 million Chapel Place Development in Redbridge. It involves some 860 flats along with student accommodation and commercial space (Project ID: 15403753).

Suburban and edge-of-town schemes

One key trend to emerge is the extension of BtR schemes beyond London and the major cities. Last year, Savills noted that some 55% of BtR investment deals involved sites in suburban and edge-of-town locations. Rising rents have made BtR schemes viable in prosperous towns in areas such as Cambridgeshire.

Glenigan data provides numerous examples of BtR schemes outside the core conurbations. In Cambridge, for example, detailed plans have recently been granted for a £36.15 million scheme on the site of a former HQ office for a development by Vertex Living (pictured). It involves 291 BtR units along with an ‘aparthotel’ and work is set to start this autumn and run for 20 months (Project ID: 21156798).

Meanwhile, at Cheadle, a village outside Manchester, reserved matters have been granted and a contract awarded on a £35.4 million Bloor Homes’ scheme of 123 BtR homes at Heald Green Phase 2. Work is set to start this summer and run for 17 months (Project ID: 22180277).

Yet the big cities will continue to provide significant opportunities for BtR schemes in the long term. Meeting the likely demand for BtR in ‘core cities’ up to 2031 will require large-scale investment of ‘at least £15 billion’, say Savills.

Bristol, it notes has the greatest mismatch of any major city between the projected growth in demand for private rented homes and its BtR pipeline. An estimated £2.4 billion of investment will be needed to boost a current pipeline in the city which amounts to just 1,500 homes.

Leeds and Manchester will also need heavy investment of £2 billion apiece for the supply of private rented homes to meet the projected growth in demand.