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Record £1B Invested In UK BTR In First Quarter

The new BTR scheme at Westfield Stratford will provide 1,200 new units.

A little more than £1B was invested in the UK build-to-rent sector in the first quarter of 2019, a quarterly record for a sector that remains resilient in spite of slowdowns elsewhere.

Central London office investment dropped by 40% in Q1, depending on whose research you use. Retail had the worst quarter on record, and the numbers are not in yet for the still-strong industrial sector. But the £1.04B invested in BTR was a fourfold increase in the sector compared to the same period last year, according to CBRE. And there is already £780M under offer in Q2, the brokerage said.

London took the lion's share at £853M, although the number of deals was evenly split between London and the rest of the UK. Investment in Q1 was the result of several forward funding deals, along with some direct site acquisitions.

The bulk of investment in London was accounted for by the new partnership between Unibail-Rodamco-Westfield and a duo of Canadian Institutions, PSP Investments and QuadReal Property. The latter two each took a 37.5% stake in a £670M scheme adjacent to Westfield’s shopping centre in Stratford. Unibail-Rodamco-Westfield will retain a 25% share and will be appointed as the development and asset manager. The planned 1,200 rental homes will make it one of the largest single-site BTR schemes in London.

There were two further transactions in London in Q1. One was the forward funding of a 161-home scheme in Hackney by Realstar. Henderson Park and Greystar’s joint venture also agreed the £105.5M funding of Telford Homes’ BTR development in Walthamstow, known as Equipment Works.

A range of deals were also concluded outside of London. The largest was the £85M forward funding of Buchanan’s Wharf in Glasgow by L&G. The scheme comprises two 18-storey towers and will deliver 324 rental homes. The company also agreed to fund 104 BTR homes in Chelmsford, as part of Taylor Wimpey’s Chelmer Waterside scheme. There were also several direct site acquisitions in Birmingham, Leeds and Manchester, totalling £52.4M.

U.S.-based Viventi Capital Partners made its first move into the UK’s PRS in Q1. The investor has partnered with property management firm FirstPort and plans to invest an initial £100M into the sector.

UK Commercial Property REIT also announced its intention to diversify into rented residential.

The strong quarter means there are now 140,000 BTR units completed or in the development pipeline across the UK. Yields were flat across London and the regions except for in London zone 2, where yields rose from 3.15% to 3.25%. CBRE said this was because the sales market in this area got worse.