What is Build to Rent?

Build to Rent (BTR) refers to purpose-built housing designed for rent rather than sale. Schemes usually offer longer tenancy agreements and are often professionally managed by the owner or operator. With a lack of affordable housing and UK house prices and rent soaring, Build to Rent developments are an attractive option for investors seeking long-term returns.

How is BTR different to PRS?

The private rented sector (PRS) is a classification of housing in the UK where property is owned by a private landlord and leased to a tenant. Any property that is privately owned and rented out is considered private rental housing and Build to Rent sits within this classification.

Where some PRS schemes are owned by a ‘buy-to-let’ landlord with a handful of properties, Build to Rent developments are owned by institutional investors and property companies. These schemes are professionally managed and appeal to residents for their higher security and overall quality.  

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Characteristics of Build to Rent homes

  • Ensuring long-term viability

    The long-term viability of a BTR scheme will depend on customer service and the sense of community generated by the development and its management activities. All this has a direct impact on rental income, rental security and void periods

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    Build to Rent characteristics - Long-term viability
  • Offering amenities

    More facilities and services, such as concierge, are key components of BTR schemes and its main differentiator from Build for Sale properties

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    Build to Rent characteristics - Amenities
  • Creating a sense of place

    Attracting and retaining the right group of residents, understanding the demographic

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  • Building community

    Residents will stay longer if they feel part of a community, avoiding net operating income issues with rent voids

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  • Promoting social events

    Residents that feel connected to people in their building are more likely to renew their tenancy - the property moves beyond just providing a living space

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    Build to Rent characteristics - Social events
  • Providing a healthy lifestyle

    Offering high quality homes that cater for health and wellbeing, work and social needs; eg gyms, workspaces and communal roof terraces

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    Build to Rent characteristics - Healthy lifestyle

UK rental market on the rise

The last decade has seen a shift away from home ownership in favour of private rental homes, particularly for younger generations. The most targeted demographic of 25-34 year old professionals saw an increase from 63% in 2010 to 69% in 2020, whilst the greatest rise in private renting were households aged 35-44 years old from 17% in 2010 to 26% in 2020.

Benefits of Build to Rent

For investors and developers

Long term investment – Incoming rent coupled with the steadily increasing asset value helps BTR hit the mark for a non-volatile and high-quality investment

Opportunities beyond London – We’ve seen BTR success in urban and sub-urban areas with competitive land values. Employment clusters around London are dispersing, with employers branching out of the capital to Manchester and Birmingham

Speed to market - Rental developments can be delivered faster than housing for sale as it does not risk market saturation in the same way. Modular construction can further facilitate speed to market

Technology - Smart buildings are the future of development - investing in digital infrastructure will certainly play a major role in achieving net zero carbon ambitions

For residents

Work, live and play under one roof – BTR homes appeal to residents for their community-focused design and their amenities; gyms, restaurants, green spaces, workspaces and communal roof terraces

High-quality - Facilities are typically maintained to a high standard by building management, often with staff on-site on a 24-hour basis

Flexible design – Flexible designs can cater for a broader demographic, including young workers house sharing and families. Designs are centred around modern and sustainable features, such as cooling systems

Beyond the younger demographic – The age bracket that has seen the most significant increase in private renting in the UK over the last decade are 35-44-year olds. Investors and developers are looking to tap into the family sub-urban rental market

Insights

Build to Rent insights

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