The UK’s build-to-rent (BTR) stock now stands at 88,100 completed homes, with a further 53,500 homes under construction and 111,800 in the planning pipeline.

Savills research reveals that in the second quarter of the year, the sector saw a record-breaking £1.26 billion invested in 18 deals for the period; 8,300 homes have been funded since the start of the year, and although BTR only makes up 1% of privately rented homes, the sector is expected to grow as new investors emerge.

Family homes are proving particularly popular, making up 58% of investments in Q2.

“In tougher economic conditions, delivery of individual houses offers diversification of investment strategy and unit-by-unit handovers meaning operations can often commence faster than larger apartment blocks which have longer delivery timescales,” says Savills.

Increasing share

BTR is also taking an increasing share of new home sales, particularly in London. In Q1, BTR schemes made up nearly half of new housing sales in the capital, according to Molior data.

“Assets in London represent a unique proposition, given multifamily makes up less than 1% of privately rented homes in the capital. With new supply inevitable, there is a window of liquidity before the next wave of capital enters the market," the report says.

It adds that operators in the current market are learning valuable lessons when it comes to operational efficiencies, enabling them to run their assets more efficiently and limit gross-to-net losses.

“As rents increase, tenants become increasingly discerning. Operators that can deliver superior levels of service will be able to differentiate themselves in the market.

"We believe this to be the next wave of segmentation, with those operators offering the highest levels of service generating the greatest returns, as has been the case in the hospitality sector for decades.”