Revealed - drivers behind Build To Rent, its clients and its investors

A European law firm has set out a critique of the driving forces behind Build To Rent - and it says the key factor is the growth of the ‘Millennial Nomad’ who cannot afford or doesn’t want to commit to home ownership.

Fieldfisher, in a comprehensive new report on Build To Rent, says the so-called Generation Rent group of Millennials, aged 22 to 37, make up roughly 14 per cent of the UK population and are ripe for a new kind of private rental offer. 

This is why, Fieldfisher says, Build To Rent has so far thrived almost exclusively in urban centres, especially London, where 28 per cent of households live in privately rented accommodation now - a figure expected to rise to 40 per cent by 2025. 

However, the report speaks of a widening market for Build To Rent in the future.

“Based on current trends, by 2040 up to one-third of 60 year-olds will be renting privately, according to a study by the Centre for Housing Policy at York University. This is compared to eight per cent of 55 to 64 year-olds and four per cent of pensioners in private rental sector accommodation today” says Fieldfisher. 

“In the young family bracket, while the proportion of 24 to 34 year-olds renting privately has been stable at around a third for the last two decades, the number of 35 to 44 year-olds occupying private rental sector properties has risen from 16 per cent to 25 per cent over the same period” it continues. 

It says for many residents in both the Millennial and older demographic groups, the main concern about private renting is insecurity in traditional buy to let properties - an issue addressed, at least partly, by Build To Rent, notwithstanding landlords still reserving the right to perform rent reviews and potentially increase rates and charges. 

Fieldfisher also gives an interesting insight into the attractions of the new BTR sector to institutional investors - the reason why many property consultancies are increasingly keen to be involved.

The report says investors get approaching a 4.0 per cent yield from BTR schemes in the so- called Golden Triangle of London, Oxford and Cambridge, where the majority of such developments are currently concentrated.

This is why, the firm suggests, BTR schemes are increasingly being financed by international funds, including Middle Eastern, US and even Australian investors who may not want exposure to Britain’s mainstream housing or commercial property markets - especially when faced with the uncertainties of Brexit and the growth of online shopping.

“Many of these [investors] do not wish to participate in the prime space, preferring to seek higher long-term returns in BTR, where market knowledge and long-term commitment to the real estate markets are key” Fieldfisher says.