UK build-to-rent investment surges 50% in Q1 2022

Investment into UK build-to-rent has climbed by 50% so far this year, with £1.7bn in deals agreed in the first quarter of 2022.

This compares to £1.1bn in the same period last year, when activity was slowed by general caution during the pandemic. 

Investors agreed £3.5bn in transactions across the broader living sector, including at least £1.1bn in student deals and £900m in healthcare and later living assets. This follows a record year for living in 2021, with £13.5bn in deals, according to JLL.

Funders gaining confidence in BTR have expanded routes to acquisition. JLL tracked over £300m in investment via regeneration leases with local authorities, allowing investors to secure assets with yields at a premium to BTR direct lets. Traditional forward funding deals contributed just 40% of capital invested, compared with 76% in 2021, reflecting the broader range of investment types.

During the quarter, Pension Insurance Corporation more than doubled its portfolio with £293m in deals. This included two regeneration leases at Wirral Waters One in Merseyside and Newham in East London, with both purchases advised by JLL. 

Appetite for family housing

Listed housebuilder tie-ups supported some £335m in BTR investment, including major deals for Crest Nicholson, Countryside Partnerships and Inland Homes. JLL tracked £190m in single family investment, through a collection of smaller deals, bringing investment since the start of 2021 to over £1bn. 

Elsewhere during the quarter, public companies faced challenges as the global IPO market ground to halt as a result of the war in Ukraine. But, despite these geopolitical challenges, and record levels of inflation, private investment into living assets remains undeterred.

At the end of the quarter, yields ranged from 3.25% for prime London zone 1-3 stabilised BTR to 4.5% for secondary regional assets. Student yields remain consistent though strength in Inner London saw direct let assets dip to 4% at the end of the period.

Simon Scott, lead director for living capital markets at JLL, said: “The numbers reinforce what we are experiencing day to day, increasingly positive views across the living sectors and the likelihood of further yield compression expected, particularly on stabilised income-producing assets.”

Emma Rosser, research associate at JLL, added: “Investment is diversifying through a variety of deal structures as funders hunt new opportunities in a supply-constrained market.

“A combination of joint ventures, land, council leases and other funding deals last quarter will support over 10,000 homes for BTR, 8,700 student beds and 5,600 beds in the retirement and care industry.”