At just under £1.4bn, total institutional investment into UK multifamily housing (build to rent) for the first half of 2019 is 20% higher than the same period of 2018, according to the latest research from global real estate advisor CBRE.

CBRE UK Residential Investment MarketView for Q2 2019, reports that there was £359.4m of institutional investment into the UK private rented sector (PRS) in Q2, which was expectedly lower than the record volumes seen in Q1. Investment in Q2 reflects a combination of forward funding deals and direct land acquisitions.

London accounted for two-thirds of total investment volume, with £232.6m in transactions. The prime regional city centres attracted a further £119.5m in the second quarter of the year, and a land purchase in Scotland made up the balance.

There is just over £500m in transactions under offer as we head into the third quarter of 2019, and these deals are broadly evenly split between London and the rest of the UK.

According to the British Property Federation, an additional 2,909 private rented homes have either completed or are in the pipeline since Q1 2019. This is up 2% from the first quarter of 2019, and up 17% from the same period of 2018.

Kate Brennan, Director, Valuation & Advisory Services, CBRE
Since the strong start to the year, the second quarter of 2019 has seen some adjustment, but there was a good showing for the first half of 2019 overall, with yields remaining stable across the board. Investors are now looking for ways in which to diversify their portfolios, whether by geography, seeking to invest in new markets, or by the type of deal.

We may now have reached a point where land prices are reaching viable levels from a build to rent perspective. Indeed, L&G announced this quarter that they have exchanged contracts on two adjacent sites in Wandsworth. These sites will combine to deliver their largest scheme to date, providing around 1,000 homes and 85,000 sq ft of commercial space.

“We have also seen new entrants to the market. For example, Mitsubishi Estate London will forward fund part of the former Royal Mail sorting office in Nine Elms. This marks their first foray into UK build to rent.  Cain International has also invested a c.£385m loan facility for the Henderson Park / Greystar £101m site acquisition for the same site, demonstrating significant commitment to the sector.  Finally, there was the announcement that Grainger will deliver around 3,000 new homes across the capital, including up to 400 units at Nine Elms tube station, on behalf of Transport for London.

In summary: the UK build to rent market looks set for another strong year of growth, with key regional locations in particular trending stronger.
Kate Brennan, Director, Valuation & Advisory Services, CBRE

Read the report here