Rising demand, higher yields, and lender interest drive fresh momentum
The UK build-to-rent (BTR) market has experienced rapid expansion over the past five years, according to new research from real estate advisory firm Excellion Capital.
The number of completed BTR homes has risen by 173% since late 2019, reaching an estimated 123,539 units by the end of 2024.
Designed for long-term rental and typically owned and managed by a single party, BTR developments continue to gain traction among investors. The model differs from traditional blocks of flats, where units are individually owned or let by different landlords.
Excellion’s data indicates that around 18,000 BTR units were delivered in both 2023 and 2024 — up from approximately 10,300 in 2022. However, the sector still accounts for only 2.2% of the UK’s total private rented housing stock, suggesting ample capacity for further growth.
London remains the most developed BTR market, with 54,352 completed units as of Q4 2024 — an increase of 14.5% from the previous year. Nonetheless, regional areas are expanding at a faster rate. Completed BTR homes outside the capital rose by 19.1% in the same period, contributing to a nationwide increase of 17.1%.
This shift may indicate a maturing London market and rising interest in regional developments. Excellion suggests that investors could find new opportunities outside the capital, particularly as demand rises in cities like Manchester, Newcastle, and Birmingham.
The sector attracted record investment in 2024, with £5.2 billion committed to BTR schemes — an 11% rise on the previous year. A significant portion, £1.9 billion, was invested in the final quarter alone.
Yield analysis conducted by Excellion shows BTR is delivering stronger returns than the wider private rented sector. In early 2024, average yields in London’s BTR market stood at 4.93%, compared to 4.45% in the general rental sector. Outside the capital, returns were even more favourable, with yields in the North East reaching 7.65% and secondary cities averaging between 5% and 6%.
Lower development costs in regional cities, combined with higher yields, may appeal to smaller developers and income-focused investors.
The BTR model’s emphasis on tenant experience and long-term occupancy is contributing to its popularity. Homes are typically finished to a high standard, often featuring modern amenities and offering longer tenancy options.
Excellion notes that many BTR developments offer services such as concierge support, on-site gyms, and co-working spaces. Tenants may also benefit from partnerships with local businesses that provide discounts on services such as dining, grooming, and transport.
These features allow developers to command higher rents, with tenants often willing to pay a premium for the lifestyle and flexibility offered.
“It is our view that property investors should now be thinking about pivoting away from build-to-sell and towards build-to-rent, particularly outside of London,” said Robert Sadler (pictured), vice president of real estate at Excellion Capital. “This is a sector that is growing at astonishing pace.
“London has been a useful proof of concept for both the demand for BTR homes and the returns available to investors, so now it’s spreading across the whole country, not least our secondary cities such as Manchester, Newcastle, and Birmingham.”
Sadler noted a shift in lender sentiment, with some focusing exclusively on BTR due to concerns over build-to-sell project exits amid high interest rates and slower sales.
“Since rates have risen sharply, many developers have struggled to repay development loans on build-to-sell developments as a result of slow sales and reduced selling prices... buyers of stabilised BTR developments tend to be large institutions which represents an extremely attractive exit for developers,” he said.
“While interest rates remain relatively high, developers should be thinking about and planning for new projects later in the year when rates are expected to fall and cost inflation to settle.”
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