Build-to-Rent:

Nottingham based Property Management company, SDL Group, have just celebrated the letting of their 2,000th built-to-rent property, in partnership with Sigma Capital Group plc.

Sigma is a £100m holding company, a property group principally focused on the Private Rented Sector (PRS). The Company’s activities also encompass urban regeneration and property asset management, operating in three business segments: property, venture capital fund management, and holding company activities.

Sigma partners with construction companies to build houses aimed at the rental market. They are built to a high specification and strategically placed to rent out for their proximity to transport links, and good schools.

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Sigma is to partner with PRS REIT PLC in the future, a newly formed closed-end real estate investment trust. The Company intends to qualify as a real estate investment trust (REIT) which will seek to invest in completed private rented sector (PRS) sites and PRS development sites. The REIT Group will only invest in private rented homes and apartments located in the UK and predominately in England.

Build-to-rent provision is still small-scale in comparison to the number of houses provided by the many thousands of small-scale buy-to-let landlords, owning just a few properties each, but the BTR sector is growing steadily. With the number of UK residents renting privately doubling over the past decade to 20% of all households (30% in London), there is healthy demand for this new housing.

Growing into the gap between social housing and home ownership, and challenging the small-scale landlord, the build-to-rent model is giving large-scale property developers and professional managers, encouraged by government policy, a new way to profit from Generation Rent.

The build-to-rent market comprises mainly purpose-built blocks of rental homes and single dwellings, built to a high standard, and therefore not suited to every tenant. In 2017 BTR attracted some £2.4bn in investment funding, a figure forecast to grow by 180% over the next six years.

Large pension and insurance funds are providing the capital to develop large blocks of flats to be professionally managed by one single management company, on a long-term basis, rather than being sold off to individual landlords. This, in theory, will provide the institutional investors backing the schemes with a reliable, long-term income stream. The model mirrors those PRS markets operating in the USA and in parts of Europe.

For tenants the attraction is high quality new-build accommodation managed by experienced professionals rather than the varying standards of individual landlords. However, big is not always best, and if the varying standards tenants experience in the social sector – councils and housing associations – some tenants may be disappointed.

The British Property Federation – Build-to-Rent Map of the UK

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