40% of the PRS could soon be build to rent, claims Savills

The build to rent sector (BTR) must increase in size ten-fold over the next decade if it is to keep up with demand, Savills has claimed.

While some 100,000 BTR homes have been built over the past decade at 542 sites almost exclusively containing apartments at a cost of £35 billion, the estate agency says this needs to increase to £300 billion between now and 2034, which would be a considerable feat given the difficulties gaining planning consent developers face.

Consequently Savills, which is no doubt hoping to manage either the blocks or tenancies that such growth will create, says BTR operators increasingly have no choice but to buy completed blocks rather than build their own, with approximately a fifth of all investment in the sector over the past five years being the purchase of fully let ‘operational stock’.

Build to rent

Looking at the bigger picture, Savills says BTR is now present within 100 mostly urban local authorities including Belfast, Birmingham, Bristol, Cardiff, Glasgow, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield – and to a lesser extent, London.

“The BTR market has made significant progress over the last 10 years,” says Savills’ expert Piers de Winton (pictured).

“Although the sector is emerging as mainstream investment in the UK, it still represents just 2% of private rented sector households. “When we look at more established markets such as Germany and the USA, where institutions own 41% and 37% of homes respectively, it’s clear that there is significant growth potential of the UK BTR market.

“Should the UK adopt a similar level of institutional ownership, institutions would own between 2.1 and 2.4 million PRS homes compared to just 100,000 today.

“As the sector continues to grow, there are numerous opportunities for investors to achieve similar large-scale portfolios as those in more mature markets.”

Main image: John Lewis Partnership