A £750 million investment fund launched by a US property fund is just the latest institutional buyer to acquire assets in the UK’s rapidly expanding build-to-rent sector, with investors drawn to the market’s ability to “generate strong cash flow”.

Summary:

• Up to £2 billion could be invested in the UK’s build-to-rent sector by a US property institution, continuing a trend of global investment into the market
• Between January and March 2019 alone, £1.04 billion was invested into build-to-rent projects by institutional investors
• The sector generates “strong cash flow” and, regardless of wider economic concerns, “people always need somewhere to live”

The UK’s rising demand for purpose-built rental living is making British rental property an institutional-grade asset.

Following in the footsteps of Goldman Sachs and Legal & General earlier in May 2019, now US real estate firm Greystar has launched a £750 million fund to capitalise on the UK’s expanding build-to-rent sector.

As reported in the Financial Times, the sector is attracting “institutional investors keen to lock in stable returns in an uncertain political environment”.

Demand for rental property in the UK will reach six million by 2025, with many tenants now searching for developments with exclusive communal facilities and prime city centre locations.

As traditional buy-to-let homes often cannot meet these demands, the creation of a defined build-to-rent sector has emerged and grown rapidly in recent years. JLL now estimates that 125,000 build-to-rent units in the UK have now completed, are in construction, or are in the pipeline.

And this is driving investment demand. Figures from CBRE highlight that in the first three months of 2019 alone, £1.09 billion-worth of institutional investment was made into the UK’s build-to-rent sector.

Commenting on his firm’s new fund, Mark Allnutt, Managing Director at Greystar, said: “There’s a huge amount of interest in [build-to-rent] because of its performance as an institutional investment: it generates strong cash flow, and people always need somewhere to live.”

Through a combination of pension firms and insurers, Greystar hopes to raise the funds for the scheme that, including debt, would have close £2 billion to invest in large build-to-rent schemes in the UK.