We all know that the Build to Rent (BtR) market within the UK has firmly established itself as a resilient sector. But how has it fared during the pandemic, and what risks and opportunities lie ahead?
In 2020, investors committed over £3.5 billion worth of capital, which is an even more impressive figure when you consider the impact of the Covid-19 and the threat of constant local and national lockdowns.
Throughout the last year, confidence remained, and positivity has been demonstrated by investors and operators alike. We saw new entrants to the market such as Heimstaden and DWS, which represented a good split of capital invested between the UK, Europe and Northern America, and we anticipate this level of investment to be met, if not surpassed, for 2021.
BtR also bucked the trend when it came to occupancy and collection levels, which remained high throughout the pandemic. Operators have shown the ability to react swiftly to changing tenant preferences, whilst buildings have also been quick to adapt and become more flexible in their approach and operation. Flexibility has come through in design, both in terms of individual units – such as the scope to utilise a second bedroom as a home office for example – as well as other wider scheme considerations including a strong focus on ESG and community spirit. Amenity space also has flexibility built in now too – for example creating extra workspace for professional sharers and co-working space with dual purpose social and dining areas.
Urban residential development is certainly not slowing down and the demand for high quality space in core locations continues to rise. There continues to be a stronger pull to locations offering excellent access to amenities such as arts, leisure, culture and the “buzz” of city living.
But for others, the pandemic has led to a more significant change in living habits, with occupiers no longer working the traditional five-day week from an office. This has led some people to consider relocating to an area further away from their place of work, instead placing a greater consideration on outside space and the appeal of the commuter belt towns. We have seen a marked rise in this demand for single family housing in more areas and this will continue to become a growth sector in 2021.
Now it feels as though the market is in a period of settlement as people readjust to different ways of living and working, which in turn the BtR market is adapting to, reflecting subtle shifts in tenant preferences and values. Strong demand continues, which is testament to the fundamentals that drive it, such as strong underlying market dynamics and the imbalance between supply and demand. If anything, the pandemic has shown the need for good, quality homes and the need for a strong sense of community and place. We believe that BtR will continue to play an important role in meeting that need.