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More than £8B is targeting the UK build-to-rent sector in 2024, according to a Cushman & Wakefield poll of leading investors.
The BTR sector saw strong investment in 2023 despite challenging market conditions, with £4.3B invested, only marginally down from the £4.4B invested in 2022, Cushman & Wakefield reported. It expects investment volumes to rise in 2024 as the costs of debt and construction ease.
The survey featured institutional investors with a combined 49,000 operational BTR units and 28,000 pipeline BTR units, plus others planning to enter the sector. Of those, 13% of investors who have no exposure to BTR plan to invest in the market in 2024.
Half the respondents have more than 30% of their UK real estate portfolio allocated to BTR for 2024.
When asked about asset type, investors favoured amenity-light, urban BTR schemes with midmarket rents, with 53% marking it as their first choice and 25% as their second, with London Zones 1-3 selected as the top choice. Next was single-family housing, with 19% voting it as their first choice.
Although London Zones 1-3 were the most popular choice for investment with 41% of the vote, 28% of investors ranked it last, meaning it ranked second-to-last overall. By contrast, 19% ranked Zones 4-6 as their first choice, and it was the second-highest scorer for second choice with 34% of votes.
Beyond London, prime regional cities such as Manchester, Bristol and Birmingham were named top investment locations, while Edinburgh was named the fifth-most-popular city, despite rent caps introduced in 2022.
Sustainability was also an important consideration, with schemes that have an energy performance certificate rating of D or below deterring 75% of investors. This theme continued toward schemes with gas boilers, with 47% not willing to invest in a scheme with this heat source.
The survey found that 29% of investors plan to dispose of some of their portfolio over the next one to three years, and the adviser said these assets are likely to see fierce competition from investors looking to enter the market via stabilised stock.
“There is undeniable strength in demand in the UK BTR sector. With forecasts anticipating a gradual easing of monetary policy by the Bank of England in the second half of the year and construction cost inflation easing, there is some cautious optimism that BTR investment will increase in 2024,” Cushman & Wakefield Head of Living Research Mille Harper said in a statement.
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