Investment Into UK Private Rented Sector Reaches Record Levels In 2018

  • Investment volumes reach £3.1 billion in 2018
  • Equity from North America now accounts for almost half of the total money targeting the UK’s PRS

Institutional investment into the UK’s private rented sector (PRS) reached a record total of £3.1bn in 2018, up 33% from 2017 according to CBRE’s latest UK Residential Investment report.

According to the report, deal volumes in the three months to the end of December totaled £906.6 million, which was slightly lower than Q3 2018 levels but in line with the same period last year. Investors continued to diversify in Q4, with £469.6mln of transaction volumes concentrating on regional centres. Birmingham witnessed increasing levels of investment. Two transactions were finalised in Q4 which saw £137m invested into the city’s PRS. While Manchester attracted further investment through two forward funding deals, and Warrington saw its first large-scale PRS investment in Q4.

In addition to the £3.1bn worth of deals concluded at the end of 2018, CBRE estimates there is more than £800m of deals currently under offer and interest from both domestic and international investors is anticipated to increase.

According to the report’s Equity Tracker, at the end of Q4 2018 there was £33.8bn of institutional equity targeting the UK’s PRS sector over the next five years. This is up by £190m from Q3 2018, with North American capital accounting for the entirety of this increase.

Equity from North America is now accounting for almost half (£15.8bn) of the total money targeting the UK’s PRS. Domestic equity accounts for a quarter of the total (£8.1bn) with a further £5.1bn from Asia and £4.8bn from Europe and the Middle East. However, it continues to be the case that most of the capital committed in 2018 has originated from UK investors.

Jason Hardman, Head of Residential Valuations at CBRE UK
The performance of the UK’s PRS market clearly illustrates the drive from investors to seek income from a secure and stable asset class. 2018 witnessed further landmark transactions both from a structuring, platform and location perspective. Innovation in PRS also came to the fore with major operators investing considerably to enhance the over tenant service. Going forward in 2019, we can only see these trends continuing and expect the volume of capital committed to grow at a faster pace. 
Jason Hardman, Head of Residential Valuations at CBRE UK