BLOGS

Build-to-rent was once a niche institutional product confined to a handful of London postcodes. Today it is a mainstream asset class, spanning every major UK city from Glasgow to Cardiff, and attracting capital from pension funds, sovereign wealth vehicles and specialist residential REITs alike. But as the for-sale market stalls under the weight of stretched affordability and cautious mortgage lending, BTR is being held up as the sector that can still offer investors a credible combination of income, occupancy and long-term capital preservation.

The reality, as ever, is more layered than the headline suggests.

A pipeline that kept growing — even when conditions tightened

REalyse planning data tracking 1,551 BTR schemes across England, Scotland, Wales and Northern Ireland shows a total of 291,726 units recorded since the sector's early institutional phase. The year-on-year submission trend tells a story of sustained momentum: from roughly 10,150 units submitted for planning in 2015, the annual figure climbed to a peak of around 27,300 units in 2022, before pulling back slightly in 2023 and recovering strongly to nearly 27,900 units in 2024 — a near-threefold expansion over the decade.

That recovery in 2024 matters. It came against a backdrop of elevated construction costs, a higher-for-longer base rate environment, and persistent uncertainty in the wider residential market. The fact that developers continued to submit BTR applications at scale — and in similar volumes to peak years — signals continued institutional conviction in the asset class.

Of the total tracked pipeline, approximately 302 schemes representing over 71,500 units carry a "Granted" planning status, while a further 233 schemes (55,300 units) are actively in progress and 250 schemes (43,660 units) are in construction. Together, that active pipeline of roughly 170,000 units represents the investable opportunity being assembled across the UK right now.

Geographic concentration: the big cities dominate, but secondary markets are catching up

BTR is not evenly distributed. REalyse data on the active pipeline (schemes that are granted, in progress or under construction) identifies a clear hierarchy of development concentration across UK postcode areas.

Birmingham (B postcode area) leads with over 21,000 active BTR units across 44 schemes — a reflection of the city's sustained population growth, regeneration momentum and the appetite of institutional capital for large-scale, single-ownership schemes. Manchester (M) follows with more than 16,100 units across 55 schemes, making it the most prolific BTR market by scheme count, consistent with its position as the UK's most mature regional BTR city outside London.

East London (E) and South East London (SE) together account for over 21,500 units, underlining that the capital remains a core BTR destination despite its higher land costs. Leeds (LS) is building a significant position with 10,400 units across 42 schemes — a trend driven by strong graduate retention, constrained private rented supply and a council broadly supportive of large-scale residential development.

The geographic spread beyond the top tier is also noteworthy. Glasgow (G) is tracking nearly 7,500 units, Sheffield (S) over 6,800, and Bristol (BS) and Cardiff (CF) are each above 4,000 units in their active pipelines. This breadth reflects the structural shift in BTR from a London-centric product to a genuinely national one — and reinforces the case for investors and lenders who have historically concentrated their exposure in the capital to look more carefully at regional fundamentals.

The yield case: BTR outperforms, but the premium isn't uniform

The investment rationale for BTR has always rested partly on the premise that professionally managed, amenity-rich schemes can command a rent premium over the fragmented private rented sector. REalyse listings data broadly validates that thesis — but with nuance.

Across the UK rental market, BTR properties consistently post higher gross yields than their non-BTR equivalents for every major property type analysed. BTR flats average a gross yield of 5.91% against 5.73% for non-BTR flats. The spread widens further for BTR terraced houses (6.17% vs 5.87% for non-BTR) and BTR semi-detached homes (6.12% vs 5.72%). BTR detached homes and bungalows follow a similar pattern.

The rent premium is particularly pronounced in the flat segment — the dominant BTR product. BTR flats carry an average asking rent of approximately £2,024 per month, compared with £1,597 per month for equivalent non-BTR flats — a gap of around 27%. That spread reflects a combination of location (BTR schemes tend to concentrate in higher-value urban cores), specification (amenity packages, concierge services, on-site management) and leasing terms (longer assured tenancies, inclusive utility packages).

For institutional investors benchmarking income assumptions, these differentials are material. A 6.1% gross yield on a well-located regional BTR scheme, sustained by long-term occupancy and low void rates, compares favourably with a sales market where buy-to-let landlords face higher stamp duty surcharges, tightening mortgage interest relief and an increasingly regulated operating environment. Many smaller landlords are exiting the market, and that supply contraction is, paradoxically, providing structural tailwinds for BTR occupancy.

The cracks in the pipeline: on hold schemes and viability pressures

For all the structural positives, REalyse data also captures the strain. Of the 1,551 BTR schemes tracked, 56 are currently classified as On Hold or Shelved, representing over 10,570 units that have stalled. That is a meaningful fraction — equivalent to roughly six months of a typical year's submission volume — and it reflects real viability challenges that have bitten across the development industry since 2022.

Construction cost inflation, which pushed hard on scheme economics through 2022 and 2023, has eased but not fully reversed. GDV assumptions in some regional markets have not kept pace with revised cost structures, and some schemes that pencilled in at a 2021 interest rate environment no longer clear hurdle rates under current financing conditions. A further 62 schemes totalling over 13,200 units remain in pre-planning, suggesting that development teams are proceeding cautiously before committing to full applications.

The refused and withdrawn categories remain relatively small — 27 refused schemes (1,709 units) and 18 withdrawn (2,279 units) — which indicates that planning itself is not the primary bottleneck for most BTR proposals. The greater friction sits upstream in funding, viability appraisals and lender appetite.

Government policy ambition under the current administration — including the revised National Planning Policy Framework and a stated commitment to 1.5 million homes over the parliament — should in theory create a more permissive planning environment for large-scale BTR. But planning reform tends to move slowly, and developers are rightly cautious about pricing in permissions that have not yet been granted.

Conclusion: resilient, but not immune

Build-to-rent retains its structural appeal as an asset class. The yield premium over the wider rental market is real and consistent. The pipeline — despite some stalling — remains active and geographically broad. And the macro backdrop, with a private rented sector under supply pressure from landlord exit, is arguably more supportive of institutional rental than at any point in the past decade.

But BTR is not immune to the same forces weighing on every other part of residential development. The 10,000-plus units sitting on hold are a reminder that conviction alone does not make a scheme viable. As investors and developers look to deploy into the sector in 2025 and 2026, the ability to underwrite schemes with granular, local-level data — on achievable rents, planning risk, comparable yields and cost benchmarks — is what will separate well-structured investments from those that compound the on-hold count.

The pipeline is under scrutiny, rightly so. But the fundamentals, examined carefully, still point in the right direction.