Build-to-Rent: the construction perspective

Investment into the UK Build-to-Rent (or BTR) sector is surging, and this trend is expected to continue as developers aim to deliver the UK Government’s target of 300,000 new homes annually.

So it is timely that our recently-published report, 'Building blocks: unlocking the potential of UK Build-to-Rent', shines a light on the views and opinions of those who are shaping the future of the sector, namely BTR developers, investors and funders.

Our report delves into various aspects of the BTR sector, including sustainable development, unlocking investment strategies, and transatlantic trends - but what are the key takeaways for the construction industry?

Opportunities and challenges

Simply put, investment in BTR means more work for the construction industry, from regenerating urban areas to boosting housing supply.

However, the challenge for the industry is how this is delivered, as there is increased prioritisation of the need to build sustainable communities and eco-friendly developments. In fact, the results of our survey of 700 UK BTR developers and funders show that 98% of developers believe sustainability is critical in shaping their funding strategies. But there are currently high upfront costs for sustainable materials and technologies.

Other challenges include the ongoing skills shortages, availability of materials and recent changes in legislation for the industry, with 96% of developers saying that the implementation of the Building Safety Act and revised building regulations have had a depressive impact on the delivery of BTR.

Investment and stability

Nevertheless, half (50%) of the funders that we surveyed reported a very strong appetite for lending to the BTR sector and a similar proportion (47%) had a moderate appetite for BTR lending. In fact, very few (4%) said their appetite was limited. 

This is particularly reassuring for the construction sector, where long-term investment is crucial for planning projects, committing to investment in equipment and materials and labour, projecting and managing cashflow, and enabling competitive tendering. 

Ian Atkinson, Construction & Engineering Partner at Womble Bond Dickinson (WBD), adds: 

"It has been fascinating to witness the changes that housebuilders have had to make to the procurement of their supply chain and the management of their projects on site as a result of the strict requirements of institutional investors. Now that many have been through that learning curve, I am hopeful that the speed of delivery of subsequent deals will increase."

Lessons from overseas

The BTR market is more mature in the US than the UK. A large proportion of developers and funders we surveyed believe that the US rental market model provides valuable insights for UK investors. Our report sets out more about these differences, which UK developers may find helpful when shaping their long-term growth strategies. 

Tom Willows, Partner and Head of Living at WBD says:

"The government's ambitious housebuilding targets underscore the urgent need for diverse housing solutions, including Build to Rent properties. These homes are essential to meet the high and continually growing demand for rental housing, and to provide flexible and high-quality living options. For this vision to succeed, developers and those delivering housing must work quickly and collaborate effectively, ensuring compliance with changing regulations, and driving innovation to create sustainable communities."

While the BTR sector in the UK does face significant challenges, the robust interest from funders signals considerable growth potential.

In better understanding the long-term priorities for the sector and by taking the benefit of insights from BTR in other economies, developers, funders and investors will be in a strong position to lead the expansion of the BTR sector - benefiting the construction industry, but also the people in the UK who are in such need of good quality housing in sustainable communities.