Spotlight on Investing in Rental Britain takes an in-depth look at Britain's rental market and also features an exclusive survey 'What Tenants Want'. Download here.

Following a number of Government measures designed to boost activity, the newly formed PRS Taskforce has identified at least £7bn of potential investment into the sector, yet there is limited stock and portfolios to absorb the quantum of investment.

So far we have not seen many investment models and bespoke schemes emerge, nor have we seen much flexibility around s106 negotiations. But it’s early days.

What is clear over the past 12 months is that behind the scenes both public and private sector organisations are creating innovative build to rent models and investment ‘platforms’ that are designed to be attractive to investors. Much focus has been on creating management businesses with the scale and quality of stock that meet investors’ criteria and are highly attractive to tenants.

Stratford Halo in East London is the clearest example of a purpose built scaled PRS development that is offering high quality accommodation to tenants that is professionally managed. Integrated within this scheme are the amenities and services that we expect to become more mainstream in the rental market such as furniture packages, wifi, gyms and ancillary space that is available to tenants. The average let up rate of 15 units per week is a strong indication of market demand for bespoke PRS developments.

Government policy has acknowledged the growing need for decent privately rented homes and, in London, the recent deal between the Greater London Authority (GLA) and Mace and Essential Living, a specialised PRS company, to develop PRS at Elephant and Castle shows the Mayor’s recognition that to meet housing targets in the capital, build to rent has a critical role to play.

What we are now seeing in the market is that where land suitable for PRS is offered to the market, PRS buyers are competing with developers for open market sales, even in the crowded London land market. Essential Living, BE:HERE and Fizzy have been the most active aggregators of land destined for the PRS market.

Housing associations have also become an active buyer group of both land and standing stock. Just this year, they have acquired over 2,150 PRS units and invested £275m in the sector. Over the next 12 months, expect to see many more management platforms emerge from the HA sector that are set up to target third party capital.

Investment activity is spreading beyond the capital driven by the highly competitive London market as well as the high income yields in the region. Unique at the current time is that investors in the regions can buy stock that is both high yielding and discounted to owner occupier values, widening the options and strategies open to investors in these markets.

Despite an improving economy, a strengthening housing market and better credit environment, Savills expects the private rented sector to grow by one million households over the next five years. By 2018, one in five households will be renting in the private sector – a total of 5.7 million in England. PRS requires a further £200bn of investment to provide these homes and large-scale investors are well placed to supply this level of investment.

Taken from
Spotlight: Investing in Rental Britain