Build-to-rent: A five-year evolution

Build-to-rent: A five-year evolution

 

Build-to-rent has seen the dramatic development and evolution of the private rented sector over the last five years. Experts now expect the next five years will deliver further significant changes, improving the supply and quality of accommodation available to the UK’s growing rental population.

Summary

  • The private rented sector has evolved dramatically since 2011
  • Changes are attributed to the introduction of the PRS Taskforce and the build-to-rent sector.
  • The Build-to-rent sector is currently in its primary growth phase with a significant number of developments expected to be delivered by 2020.

Speaking at the RICS Real Estate Investors’ Conference in London, Andrew Screen, Senior Director at CBRE, described how the private rented sector (PRS) has evolved considerably over the past five years as a result of the introduction n of the PRS Taskforce and the governments £1bn build-to-rent fund.

Both schemes were implemented with the objective of improving the quality of existing rented accommodation and attracting institutional investment within the PRS.

The build-to-rent (BTR) fund provides loans and equity to build-to-rent developers and has seen many institutional investors set up their own development and investment companies, delivering city centre schemes designed specifically with the tenants needs in mind.

Prior to the introduction of the build-to-rent fund, there was little debt or equity funding available to progress development opportunities on a speculative basis, while the BTR product was largely underdeveloped, in terms of design and amenities offered to residents.

Since the introduction of the BTR fund, the sector has evolved rapidly, supported by US Multifamily operators and the Urban Land Institute Build-to-Rent design hand book.

The PRS investment life cycle has now entered its primary growth phase with few developments completed and operating. Experts at CBRE now expect a significant number of projects to commence and complete over the next 3 years, with completed developments creating stabilised income over this 3-5 year period.

Andrew Screen commented: “We anticipate the PRS industry to move into the secondary investment phase in 3-5 years where some opportunistic investors will look to exit and new sources of funding will enter the market by way of bonds, securitisations, consolidations, listings, REITS and annuity or sovereign investments. This will also enable individual investors to invest in the funds or vehicles as they currently have limited access to this sector through buy-to-let.”

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