BLOGS

Regional BTR's boom-to-bust cycle

Build-to-rent was supposed to be the story of the regions. Between 2018 and 2022, BTR activity outside London roughly doubled, as investors chased higher yields in cities like Manchester, Birmingham and Leeds that London's tighter margins couldn't match. REalyse planning data shows regional BTR schemes commencing rose from around 60 a year in 2018 to a peak of 105 in 2022, with total units started climbing from roughly 9,000 to over 20,000 over the same period.

That expansion has gone sharply into reverse. By 2024, regional BTR starts had fallen to around 86 schemes and 12,700 units — a drop of close to 40% in unit terms from the 2022 high. Early figures for 2025 point to a further slide, with starts tracking below 12,000 units. London's BTR pipeline, always the smaller of the two, has followed a similar downward path, falling from around 5,000 units started annually in the late 2010s to roughly 3,500 in 2024.

The result is a sector that looks smaller almost everywhere, but the retreat has been steepest in the markets that scaled fastest. Regional BTR built its growth story on cheap debt and yield arbitrage — both of which have weakened considerably since 2022.

Why the viability maths has changed

The core appeal of regional BTR was always the yield gap. REalyse listings data shows average gross yields on flats running at roughly 6.3% across the rest of the UK, against roughly 4.9% in London — a spread wide enough to justify the operational complexity of running large multifamily portfolios in secondary cities.

That gap hasn't disappeared, but the financing side of the equation has moved against it. Higher base rates since 2022 have pushed debt costs up across the board, compressing the margin between gross yield and cost of capital far more in markets where land and construction cost assumptions were built around a near-zero rate environment. For a regional scheme underwritten on a 2021-vintage viability model, refreshed build costs and debt pricing can turn a marginal return into a loss-making one, even before accounting for planning delays that extend the funding period.

London schemes, by contrast, tend to be underwritten with thinner initial yields but often benefit from deeper occupier demand, more established institutional comparables, and — for many operators — easier access to comparable transaction evidence to support valuations and lender due diligence. In a market where financiers are more risk-averse, that liquidity premium matters.

Planning friction adds to the drag

Planning has compounded the financing squeeze rather than caused it outright. Regional local authorities, many with smaller planning teams and less institutional experience of large BTR consents than London boroughs, have seen average time from submission to decision lengthen across the wider residential pipeline. For BTR schemes — typically larger, multi-unit consents that attract more scrutiny on design, amenity space and affordable housing contributions — that friction adds directly to holding costs at exactly the moment debt is more expensive.

REalyse's planning pipeline data shows the number of regional BTR schemes reaching decision each year has fallen alongside starts, suggesting the slowdown isn't purely a sponsor decision to pause — some of it reflects fewer viable applications making it through the system at all.

Is capital really rotating back to London?

The data doesn't show a clean swing of capital from regions to capital. London's own BTR starts have fallen too, and its share of total UK BTR units — around a fifth in most recent years — hasn't dramatically increased. What's changed is the shape of risk appetite: London is proving comparatively more resilient in percentage terms even as absolute volumes shrink, because its underwriting was already stress-tested against thinner margins and lower reliance on the "cheap debt plus high yield" formula that regional BTR depended on.

For investors and lenders, that has practical implications. Regional opportunities haven't disappeared — REalyse comparables still show meaningful yield premiums available outside the capital — but underwriting now needs to stress-test construction cost inflation, extended planning timelines and higher-for-longer financing costs far more conservatively than in 2021. Schemes that can demonstrate strong rental affordability fundamentals and a realistic path through planning are likely to be the ones that still get built.

Outlook

The next 12–18 months will likely separate BTR sponsors with genuinely resilient viability models from those still underwritten on pre-2022 assumptions. Falling interest rate expectations could ease some of the financing pressure on regional schemes, but planning reform delivery and construction cost trends will matter just as much. For institutional investors and lenders assessing where to deploy capital next, granular, up-to-date comparables — on both the planning pipeline and rental performance side — will be essential to separating markets that are merely paused from those that have structurally repriced.