Throughout 2020, the build-to-rent sector has shown its strength, seeing record investment. What makes build-to-rent so appealing for both investors and tenants?
Despite the challenges 2020 has brought with the COVID-19 pandemic, the build-to-rent sector has shown resilience. During the third quarter of 2020, £1.84bn was invested into the build-to-rent sector, according to analysis from Savills. This is the strongest single quarter of activity on record.
COVID-19 caused disruption to the sector as lockdown restrictions and social distancing guidelines limited the ability to make progress on developments. However, activity returned to the build-to-rent market quickly as the construction sector adapted to new measures and guidelines.
Even with this slowdown, the build-to-rent sector saw £3,097m of investment in the year to September. This is 4.6% more than the entire calendar year in 2019.
Throughout 2020, investor appetite, occupancy levels and rent collection rates all remained strong. The build-to-rent sector has shown stability even through the disruption caused by COVID-19. In a report from Savills, the firm said this has reinforced the build-to-rent sector’s “huge appeal to investors seeking long-term, reliable returns”.
Interestingly, in the first three quarters of 2020, 35% of investment was from investors new to the sector in 2019 and 2020. This is up from 20% in 2018 and shows the investor pool is widening as more investors see the benefits of entering the build-to-rent market.
More build-to-rent opportunities are continuing to come forward. Savills has previously stated the sector could consist of 1.5 million homes and make up a third of the private rented sector at full maturity. There is a large scale of opportunity in build-to-rent with enormous scope of growth.
Renting is still on the rise across the UK, and the sector is tipped for further growth. Many younger workers enjoy the greater flexibility that comes with renting. And after spending so much time at home this year, many people want to update their living situation as attitudes have changed towards where they live since the beginning of the pandemic.
Build-to-rents can offer more to tenants than traditional buy-to-lets. Build-to-rent developments provide high-end modern accommodation in urban areas. Additionally, the developments usually come with appealing amenities and a better sense of community.
These developments also often offer communal workspaces and high-speed internet. With more people working from home, this is especially attractive as more people are prioritising having somewhere to work at home.
Investment in build-to-rent is expected to continue to grow in the coming years as the market provides opportunities in the rental market. Attractive for investors and tenants, build-to-rent will likely be an even more popular option for property investment moving forward. And demand will likely remain on the up.
Source: Buy Association