UK Build to Rent market sees a slowdown in new starts and completions

UK Build to Rent market sees a slowdown in new starts and completions

The UK's Build to Rent market has experienced a slowdown in new starts and completions acording to the latest report from Savills.

The report says that construction was largely put on hold in April and May and as lockdown eases across the UK, many developments are now progressing with many completions expected in the second half of the year and the impact that Covid-19 has had on Build to Rent delivery will become clearer in the coming months. 

Savills' report suggests that during lockdown, investors and their operators were focused on managing customer welfare and wellbeing and offering particular support for those experiencing hardship and points out that some operators made use of their digital platforms to provide better service for residents. Virtual viewings proved popular, allowing tenants the flexibility of remote self-guided tours while operators have been able to reduce their operating costs.

The report goes on to say that while there has been little concrete evidence on let up rates for schemes leasing up during lockdown, post lockdown tenant demand has improved across the rental market.

Savills also expects more long-term changes as lockdown restrictions are eased and Build to Rent operators adapt to residents' changing needs. It expects that demand for amenities will undoubtedly have changed and schemes may have to be redesigned in response with some operators are already considering switching out cinemas, restaurants and gyms in favour of co-working areas while others are looking to redesign their sites in order to maximise outdoor space.

The report highlights that, despite the clear economic impact of Covid-19, the long-term fundamentals of renting remain. Existing affordability issues, stricter lending criteria and a rise in unemployment as the Government’s furlough scheme eases will likely see first- time buyers delay the long-term commitment of home-ownership until the wider economy recovers.

Savills suggests that business strategies will be tweaked over the coming months and investors should take encouragement from knowing that US multifamily was one of the fastest real estate sectors to recover following the Global Financial Crisis of a decade ago. The report points out that UK Build to Rent was among the first asset classes to have its material valuation uncertainty clauses relaxed by RICS, suggesting that this highlights that there is now sufficient transactional evidence to provide certainty and should improve confidence among investors considering new deals.