Housebuilders’ share
price have fallen in recently weeks on fears that Brexit will take a heavy toll
on new private housing sales.
But sentiment around
Build to Rent remains positive and the sector is continuing to create new
tender opportunities for contractors.
Forecasts in the
latest Glenigan Construction Outlook
covering 2019-2020 highlight the pace of growth in Build to Rent to meet
increasing demand from the Private Rental Sector (PRS).
In the first ten
months of 2018, build for rent projects accounted for 7% of overall private
housing sector starts and were worth some £885 million. London, Manchester and
Birmingham emerged as favoured locations of major schemes and Glenigan is
expecting further strong growth in the sector during 2019 and beyond.
A strong vote of
confidence in the sector came in recent weeks with results from the largest
quoted residential landlord, Grainger. Alongside a 26% increase in earnings and
a £347 million rights issue to raise equity for growth, the company announced
an expansion of its build to let pipeline to £1.37 billion.
The expansion will
involve a further pipeline of 5,300 units at the company, which mainly operates
in London and the South East, alongside its existing portfolio of around 8,200
rental properties. Areas of strong tenant demand with strong growth prospects
where Grainger has recently acquired new schemes include Southampton, Leeds,
Milton Keynes and London. It is also currently planning schemes in
Waterloo, Haringey, Lewisham and Newbury.
Grainger believes
the private rental sector continues to offer a ‘vast market opportunity’ and
that demand is set to grow from 4.7 million households today to around 7.2
million by 2025. It notes that there are currently 132,000 private rental new
homes in the pipeline and that the sector is ripe for consolidation, with 20
per cent of existing buy-to-let landlords looking at selling. The company also
points to growing demand across all age groups, particularly 25-34 year olds,
and to changes in the National Planning Policy Framework which support private
sector rented development.
Last month, Grainger
agreed to forward-fund and acquire a £41 million build to rent development of
108 homes in Tottenham Hale in north London which it believes will generate an
attractive gross yield of 5.5-6%. Work is expected to start early in 2019.
The company’s
confidence echoes a regular British Property Federation survey on the sector
which estimated that in the third quarter of 2018, there were some 131,855
build to rent homes either completed or planned - including 41,870 under
construction – of which just over 67,000 are in London. It also highlighted a
further 64,320 with planning permission.
Glenigan
Construction data highlights construction opportunities on some major build to
rent/PRS schemes in the pipeline across the country. In Bristol, work on
Dandara’s £15.7 million East Street development involving 340 one and two-bed
build to rent flats is set to start next Spring and run for three years
(Glenigan Project ID 18178797). Meanwhile work on phase one of Caddick
Development’s huge £300 million PRS development at Quarry Hill in Leeds is set
to start early in the new year (Glenigan Project ID 17412985).
