£20bn boost for Build to Rent market as investors shift focus

The UK’s Build to Rent (BtR) sector is set for a £20bn cash injection over the next decade, according to a new report by Savills.

This shift in focus from investors highlights the growing maturity of the market, the real estate firm says.

While £35bn of institutional investment has delivered 100,000 BtR homes in the past decade, Savills warns a further £300bn is needed to meet future demand.

This translates to an additional one million homes in the private rented sector (PRS) by 2031.

‘Just 2% of PRS households’

The firm’s head of national residential investment, Piers de Winton, said: “The BtR market has made significant progress over the last 10 years. Although the sector is emerging as mainstream investment in the UK, it still represents just 2% of private rented sector households.

“When we look at more established markets such as Germany and the USA, where institutions own 41% and 37% of homes respectively, it’s clear that there is significant growth potential of the UK BtR market.”

Investors have funded development

Traditionally, investors have funded development projects, but Savills’ data shows just a fifth of the £20bn invested between 2018 and 2023 went into operational stock.

This trend is expected to reverse, with operational assets accounting for 25% of investment by 2028, rising to 30% by 2033.

The first quarter of 2024 saw the highest proportion of investment ever directed towards operational schemes, with 60% compared to 40% for development.

BtR is now established across 100 local authorities, encompassing all London boroughs.

Savills estimates the combined value of operational assets at £35bn, with £23bn in London and £12bn elsewhere.

The data also shows a record 110,000 BtR homes in the planning pipeline, suggesting faster growth for the sector.