Build-to-rent investment volumes have jumped to their highest quarterly level, reaching £1.3bn in Q1 this year, according to Knight Frank.
Research shows a 21% year-on-year leap in volumes, compared with nearly £1.1bn in Q1 2023.
The data differs from CBRE’s preliminary Q1 BTR data, published yesterday, as the latter does not include investment into the co-living sector or small lot sizes.
According to Knight Frank, Q1 2024 was the co-living sector’s strongest quarter on record, representing 20% of the total.
Some £258m was invested into the sub-sector, boosted by deals such as Hub and Bridges’ agreement to forward-fund the Yardhouse co-living scheme in White City, W12, alongside City Developments.
Multi-family BTR deals accounted for 53% of the sector’s total, amounting to £685m. Single-family housing made up 27% of investment during the quarter, totalling £345m.
Operational asset deals accounted for 35% of total investment in Q1 2024 – the highest proportion since Q1 2021, Knight Frank said, while funding transactions made up the remaining 65%.
London makes a comeback
London accounted for 52% of total investment in Q1, representing a sharp reversal from the slower investment volumes seen in the capital during 2023.
Researchers noted that investment returned to London in the first three months of the year, after a strong 2023 for the regions.
Jonny Stevenson, head of BTR funding at Knight Frank, said: “The rebound in London investment is a positive sign, as investors gain greater confidence in the capital’s BTR market.
“While challenges remain, the softening of yields through 2023 has provided more clarity on pricing and return metrics, facilitating increased investment activity.”
BTR rental growth slows
Separately, Knight Frank estimated that annual BTR rents rose by 4.7% in the year to February 2024, according to its BTR Rental Index. The agent said the data marked a return to more sustainable levels of rental growth, having eased from a peak of 15.4% in 2022.
However, year-on-year rental growth remained high compared with pre-pandemic years.
Knight Frank expects UK rental inflation will be 5% in 2024, with a lack of supply relative to demand keeping rental inflation at a level above the long-term average and supported by ongoing wage growth. Any further rationalisation of private landlord portfolios in the face of higher mortgage rates, alongside growing regulation, will deepen the existing shortfall and offset any rise in rental supply coming from the BTR sector.
Lizzie Breckner, head of BTR research at Knight Frank, said: “Overall, the Q1 2024 results showcase the resilience and growth potential of the UK BTR sector, as it continues to attract strong investor interest and navigate the evolving market dynamics.
“Robust operational performance, ongoing investor demand and an expectation that rental growth is moderating to a more sustainable long-term position will support an increase in BTR investment as the year progresses.”
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