Research from Oxford Economics shows that capital flows into Build to Rent development platforms are increasing, with the sector’s announced institutional dry powder having lifted above $14bn across 12 active partnerships between institutional investors and developers.
This funding is providing support to a significant pipeline of externally financed developments, of which Oxford Economics is currently tracking projects comprising over 9,000 units.
The company anticipate that the level of external financing in the Build to Rent sector will continue its rapid expansion as the asset class proves itself.
Additionally, the recent policy changes will likely provide a springboard for further investment from foreign financiers. Given the support provided to the market by this external investment, opening further pathways for this to occur will help provide for future development waves and support the holding of portfolios.
According to Oxford Economics, other property asset classes are facing difficult investment outlooks, having faced a series of significant factors such as rising interest rates and structural headwinds including the growth of hybrid working.
The company believe that Build to Rent will lead the way in terms of new asset investment over the remainder of this decade, despite the sector’s total asset pool being dwarfed by that of the larger asset classes.
Further supporting the investment outlook for Build to Rent is the sector’s position as both an inflation hedge and a more fragmented asset in terms of occupancy.
Historically, growth in observed rents has cycled in line with overall non-rent inflation, with a long-run average above that of CPI. The more fragmented nature of apartment building occupancy relative to other property classes will allow for some smoothing out of vacancy cycles, raising the security of investment in Build to Rent, Oxford Economics highlight.
