The UK's build-to-rent hotspots

By Paul Norman - Wednesday, September 06, 2017 15:00

Brighton and Hove followed by Oxford, Reading, Cambridge and then Bristol are the national hotspots for build-to-rent investment according to LSH analysis of the demand-side prospects of the UK’s 250 most populous towns and cities outside of London. The findings form part of a wide-ranging report into the burgeoning investment class and how it is developing. CoStar News reviews.

LSH’s wide-ranging report – Build to Rent, Reaching out to the regions - flies the flag for institutional investors to rethink their attitude towards where the best opportunities for investment  in the fledgling sector lie.

LSH writes: “While BtR has significant growth prospects outside the capital, both as a form of private rented tenure and as an investment class, the nature of the supply means that its potential is far greater in some locations than others.”

It adds that despite the narrow market for BtR in relation to the entire UK private rented sector, there is significant variation between UK locations according to demography. As such is has analysed a number of key metrics to ascertain which of the UK’s 250 most populous towns and cities outside London have the best demand-side prospects for BtR.

The metrics comprise:

  • Relevant ACORN groups, scored for both number and proportion of households
  • Proportion of local population aged between 20-34
  • Projected economic growth
  • Population density
  • Affordability constraints (house price to income ratio)

Brighton and Hove is found to have the best  demand-side attributes for BtR of any UK location outside London. The seaside city scores highly across all of the metrics, most especially the ACORN profiles, which acknowledges both the scale of the city’s existing private rented sector and its relative affluence.

Locations in the South East and East regions feature prominently in the rankings, accounting for eight of the top 15. Oxford and Reading occupy second and third place respectively, with much of their performance drawn from their strong economic growth prospects, alongside affordability constraints.

LSH points out that there is a notable disconnect between the top-ranked locations and the current and forthcoming supply.

Despite showing very strong fundamentals on the demand-side, Reading is the only location among the top three hotspots where a BtR scheme is either delivered or in the pipeline.

Oliver du Sautoy, head of research at LSH, suggests the problem is strong demand-side attributes are often countered by local conditions in the wider property market.

“In Oxford, for example, potential sites are limited in number and size in the city centre, and potential schemes face stiff competition from other uses, such as student accommodation, hotels and the conventional Build to Sell market.

“Evidence of a current disconnect between demand and supply may resolve itself over time, but it indicates that planning policy should be evolved so that it can proactively support the growth in demand for BtR.”

CoStar News has today chaired a roundtable discussion with LSH and leading figures in the secto to discuss the report's findings. Full coverage of this will be published over the coming days.

To read the report please click here

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