Yield-Hunting Sends UK Single-Family Rental North, First Stop Scunthorpe
The UK single-family rental revolution has taken another giant step forward, and it did it in Scunthorpe.
The earthy north Lincolnshire town is not glamorous, which is precisely why it makes a good ground zero for the next phase of UK SFR.
TPG Real Estate Partners and Gatehouse Bank launched Start Living, a £500M build-to-rent platform focused on the single-family sector, last autumn. The first of more than 2,500 homes are now being offered to tenants.
SFR is still modest in the UK, but Scunthorpe is very much an on-trend location.
Quarterly Savills/BPF data suggested single-family rental accounts for less than 10% of the UK’s modest BTR pipeline. At the end of Q1 2022 there are 18K SF suburban (mostly single-family) units compared to 206K SF urban (mostly in multifamily blocks).
Savills' yield map makes it clear that the higher yields are to be found in the north, north east and north Lincolnshire — where Scunthorpe is to be found. Yields in North Lincolnshire are 4.75%-5%, Savills said.
Savills calculations suggested considerable room for expansion if the wider private rented sector is to match the housing mix of the for-sale market. Today around 53% of PRS homes are suburban, compared to 66% of for-sale homes.
Encouraged by the numbers, big-name investors have been taking positions. Late last year Goldman Sachs teamed up with Urban & Civic and operator Pitmore to deliver 700 UK rental homes.
Goldman Sachs’ SFR business was seeded with a £150M purchase of 900 units from Gatehouse, TPG’s partner in the new venture.
Others are creating specialist platforms, among them Apache Capital’s Present Made.
The Start Living formula is to take schemes developed by developers like Vistry and Countryside.
The aim is to steal a march on rivals by making Start Living the go-to brand for single-family rental.
TPG knows a thing or two about this, having been investors in U.S. single-family rental, a well-established investor niche.