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UK Build-to-Rent investment 2017 – where did the money go?

by | Feb 27, 2018

Investment into the UK Build to Rent (BtR) has been booming – but where was the money invested in 2017?

I’ve blogged in a previous post about the burgeoning BtR investment market, noting some of the key deals. But 2017 was also a change from 2016 in terms of where BtR investment was focused, with London once again dominating. This was perhaps a reflection of uncertainty following the EU referendum which meant investment decisions, particularly those focused in London, were pushed into 2017.

Investment volumes in London doubled from £600m in 2016 to almost £1.2bn in 2017. As a result, the capital accounted for 60% of total investment in 2017, up from 40% the previous year. Investment into zones 1 and 2 was particularly strong, totalling £619.2m. This compares with just £257m in 2016. The £1.2bn invested in London is estimated to deliver 3,500 units.

Investment in the prime regional centres fell by a third in 2017 from £832.1m to £545.3m. This was mainly driven by lower volumes in Manchester and Birmingham. However, a wider spread of investment across prime centres translated into more units, which increased from 4,400 in 2016 to 5,200 in 2017.

There were an equal number of deals in Manchester compared with 2016, but total investment was down 27% year-on-year. This was perhaps a symptom of a lack of larger opportunities in the city last year, with the largest investment totalling £80m. This compares with 2016 when two deals exchanged for more than £100m each.

Investors were also active in Birmingham. L&G, Grainger and Patrizia all secured deals in the city in 2017. Total investment fell, but this is mainly because investment in 2016 was significantly boosted by the sale of Exchange Square for £98.5m. This remains Birmingham’s largest Build to Rent transaction.

Investment in other regional centres almost doubled between 2016 and 2017 from £113.8m to £215.1m. There was a total of nine deals across these other centres in 2017, involving an estimated 2,235 units.

In addition, several cities (including Bath, Nottingham, Milton Keynes and Exeter) recorded their first BtR investment deals. As a result, investment in 2017 was spread across 17 cities, up from nine in 2016. This widening of investment serves to illustrate investors’ increased confidence in the UK market, and willingness to take more risk.

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