BLOGS

A quieter capital markets story turns a corner

After eighteen months of subdued transaction volumes across UK living sectors, London's build-to-rent (BTR) and purpose-built student accommodation (PBSA) markets are showing genuine signs of life. The signal isn't a flood of headline-grabbing acquisitions — it's something more structurally telling: a rise in joint ventures and forward-funding agreements between developers and institutional capital.

This matters because forward-funding deals require investors to commit capital ahead of completion, taking on planning, construction and lease-up risk in exchange for a defined income profile. When this kind of appetite returns, it tends to say more about genuine confidence than opportunistic bargain-hunting on completed stock.

For developers, lenders and investors watching London specifically, the question is whether this is a durable re-rating of the sector or a tactical pause before the next stall. The data trail — planning pipeline momentum, rental performance, and yield behaviour — offers some useful signposts.

What the planning pipeline is telling us

REalyse's planning application data allows BTR and co-living schemes to be tracked from submission through to granted consent, using unit counts and project status flags specific to these asset classes. Across London boroughs, the pipeline of schemes flagged as BTR has continued to move through "in progress" and "granted" stages even as investment volumes cooled through 2023 and into 2024 — suggesting developers kept schemes planning-ready in anticipation of capital returning.

That's a meaningful distinction. A pipeline that stalls at planning stage points to genuine demand destruction. A pipeline that keeps advancing through consent while transaction volumes pause points instead to a financing gap — one that joint ventures and forward funding are precisely designed to close.

Student-led living tells a parallel story. Purpose-built student accommodation schemes, tracked via property type and scheme description within London's planning data, have continued to see consented unit numbers grow in inner and outer London boroughs alike, reflecting persistently tight purpose-built supply relative to full-time student numbers — a structural undersupply that has underpinned PBSA's reputation as a defensive, income-resilient asset class through the recent rate cycle.

Why joint ventures specifically

The structure of a deal carries information. A straight forward-funding purchase of a single scheme is one thing; a joint venture between an operator and an institutional partner — often structured around a multi-scheme platform rather than a single asset — is a stronger signal. It implies:

• A longer investment horizon and confidence in exit liquidity several years out

• Willingness to share development risk rather than wait to acquire stabilised, income-producing stock at a premium

• Institutional capital positioning early to secure scale and preferred locations before pricing tightens further

For lenders assessing risk, this shift also matters for underwriting. A JV-backed scheme with committed equity from a repeat institutional partner typically de-risks the capital stack in ways that a single-sponsor development does not — a distinction increasingly reflected in the loan terms and gearing levels lenders are willing to offer.

Rents, yields and the income case

The renewed appetite isn't happening in a vacuum — it's underpinned by rental performance. Comparable data across London's private rented sector, including BTR and co-living stock specifically flagged in REalyse's listings data, continues to show asking rents holding firm to rising year-on-year, even as sales market activity has been more mixed. Gross rental yields on BTR and co-living assets in well-connected London locations have generally sat in a range that continues to compare favourably to gilt yields and to traditional buy-to-let stock in the same postcodes, once auction-skewed outliers and yield anomalies above 20% are excluded from the comparison set.

That income resilience is precisely what forward-funding investors are underwriting against. Where rental growth assumptions can be evidenced with granular, postcode-level comparables — asking rent trends, achieved rent versus asking rent discount, days-to-let — funders have more confidence translating a development pro forma into bankable cash flow projections.

For agents and asset managers, this also reframes the value of granular local data: institutional partners entering JVs increasingly expect underwriting to be benchmarked against live comparables rather than desktop assumptions, raising the bar on the quality of market evidence developers need to bring to the table.

Outlook: cautious optimism, not a full recovery

It would be premature to call this a full-blown recovery. Interest rate normalisation is still working through property valuations generally, and BTR/PBSA transaction volumes remain below their 2021–2022 peak. But the combination of a resilient planning pipeline, structurally undersupplied student accommodation, and rental income that has proven more durable than sales pricing is giving institutional capital a reason to re-engage — carefully, and increasingly through shared-risk structures rather than outright acquisition.

For developers, the message is that schemes with planning momentum and strong local rental comparables are best placed to attract this capital. For investors and lenders, the opportunity lies in getting ahead of the next wave of forward-funding activity by identifying boroughs where planning pipeline growth and rental yield resilience are aligning most clearly — the kind of granular, comparable-led analysis that distinguishes genuine opportunity from optimistic pro formas.