The Next Phase of UK Multi Family/Build To Rent: Seizing Opportunities in a Fast-Evolving Market

Picture this: A decade ago, the Private Rented Sector (PRS) in the UK was largely dominated by small, independent landlords—often a couple managing a handful of properties for extra income. Fast forward to today, the landscape is changing at lightning speed, with large institutions stepping in and reshaping the game. The Build-to-Rent (BTR) sector is on the rise, and it's poised to be a game-changer for both investors and tenants alike.

The story of the UK multifamily and BTR market is one of rapid evolution. We’ve seen the sector grow from its humble beginnings with early institutional investments like Delancey’s purchase of the Athlete’s Village in East London to a milestone of 100,000 BTR homes nationwide. But if you think the market has peaked, think again. We're just scratching the surface—institutional ownership accounts for a mere 2% of the PRS. Now, that presents an enormous opportunity.

Why Invest in UK BTR Now?

Investors are increasingly looking at BTR as an attractive alternative, and for good reason. Recent surveys, like our 2024 European Living Investor Sentiment Survey, reveal that 84% of investors plan to increase their exposure to multifamily investments. The interest is rooted in several key factors:

• Rental Growth & Demand: Over the past two decades, rental growth in BTR properties has consistently outperformed the wider market, showing a 3.2% annual growth rate versus 3.1% for earnings. The quality of stock, coupled with professional management, contributes to higher rent levels—a significant draw for investors.
• Institutional-Scale Investment: Unlike the PRS dominated by private landlords, BTR offers large-scale opportunities. To put things into perspective, if institutional ownership of the PRS were to grow to just 10% (still far below international comparisons), that would mean adding another 480,000 homes to institutional portfolios. The opportunity for scale is vast.
• Changing Landscape: Regulatory pressures and rising debt costs are squeezing out individual landlords. This opens the door for institutions to step in and meet the projected 800,000 to 1,000,000 additional households expected in the PRS by 2031.

The Future of Institutional PRS and BTR Assets

As we look ahead, the institutional BTR market is at an exciting juncture. Core cities such as Manchester, Birmingham, and Leeds have begun to close the gap with London, showcasing regional investment potential and solid rental growth. This has piqued the interest of investors who previously focused on schemes not originally designed for PRS, and now they are looking to get in earlier to influence design and facilities.

New entrants to the BTR market are helping to raise the bar. Generation 2 BTR schemes, like Apache Capital's Angel Gardens in Manchester, represent a new benchmark with best-in-class facilities—think rooftop football pitches, co-working spaces, and pet spas. Such enhancements go beyond simply providing a home; they elevate the renter experience, adding ancillary income streams for investors through added services like personal trainers, ultra-fast WiFi, and even rentable meeting rooms.

Valuation Methodology—The Evolution

Traditionally, valuation for residential properties has been driven by Vacant Possession (VP) value. But with the BTR model maturing, there’s a shift toward income-driven valuation. As rents grow faster than apartment sales values—particularly in major cities like London and Manchester—income-driven valuations make increasing sense. Investors are beginning to recognise the value of steady rental income streams over the resale value of individual units.

What does this mean for the future? We expect the next wave of BTR transactions to push the boundaries, showing higher values tied to long-term income potential rather than VP metrics. This will require more transparent performance data, but with the growth in professionally managed properties, better data availability is on the horizon.

Conclusion: A Decade of Opportunity Lies Ahead

The BTR sector is on the cusp of significant growth, and now is the time for investors to seize the opportunity. With ￡300 billion of investment needed to meet future PRS growth, the path forward is clear—scale up, innovate, and meet tenant expectations with a quality experience.

Whether you’re a seasoned investor or a newcomer, the BTR market offers a practical, scalable, and resilient opportunity. The groundwork is laid: regulatory shifts, changing consumer preferences, and increasing institutional participation mean we are well on our way to reshaping the UK's rental landscape. This is not just an investment in property—it's an investment in the future of urban living.

Ready to make your mark? Dive into BTR and be part of the next big evolution in UK real estate.