Build to Rent – a growing share of real estate investment
Whilst much of the focus during the Covid-19 pandemic has been on the impact felt by the retail, leisure and hospitality industries, there remains cause for optimism in other real estate asset classes. One of these sectors being purpose-built rental housing, commonly referred to as ‘build to rent’ (BTR).
Rent collections have remained high across Europe and the US, in comparison to other real estate sectors, with operators reporting 90%+ collection of rents.
Whilst Scotland was a little slower than the rest of the UK for BTR as an asset class to gain traction, this is no longer the case. Brodies has advised on the development and funding of over 4,000 BTR units, being a significant proportion of the BTR schemes either built or consented in Scotland thus far, and they continue to lead the way in legal delivery for the sector in Scotland. A prime example being the Moda/Apache Living developments, which will deliver 476 units at their Springside development in Fountainbridge and 433 units at Holland Park in Glasgow (pictured), the latter having appeared in Estate Gazette’s top 10 BTR deals across the UK in the first quarter of this year. More recently, the Brodies team advised on the widely reported Platform_ JV for the development of 498 units at Central Quay in Glasgow.
Whilst the sector’s underlying performance during the pandemic will be partially buoyed by state intervention measures which have provided near term economic stability and stimulus packages to support renters’ ability to pay, the living sector is expected to remain resilient. The UK and Europe can look to the US for reassurance that this should prevail. Market commentators note that during the last two recessions (2001 and 2008/9) the US BTR sector saw relatively low decreases in occupancy, shorter periods of rent deflation and returned quicker to pre-recession rental levels than the more traditional real estate asset classes. In fact, rents fully recovered and reached new rental highs within three to four years of each decline.
The resilience of the residential rental sector throughout these most challenging of times serves to underscore the widely held view that BTR will continue to attract a growing share of real estate investment with increased capital inflows from global investors, as the world economy emerges from the Covid-19 crisis. All of which will have helped to drive the £4.7bn reported by Estates Gazette to have been invested in BTR in the UK alone in the past year. It is a sector that is very much here to stay.