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The Future of the Build-to-Rent Sector: A Look at CBRE’s 2024 BTR Market Outlook

Are you a property developer looking to stay ahead of the game in the Build-to-Rent (BTR) sector? According to a recent report by CBRE, significant changes are set to take place in 2024. To help you prepare for the future, this article delves into the key findings of the report and explores why they are crucial for your success in the industry.

Build-to-Rent Development

Supply and Demand Imbalance

There is an expected increase in the supply and demand imbalance in the private rented sector by 2024. Buy-to-let is becoming less profitable due to the rise in interest rates and tax changes, and as a result, there has been a significant sell-off of rental homes. Since the start of 2022, and estimated 150,000 properties have been sold. This situation presents an opportunity for property developers to fill the gap in the market with BTR (Build to Rent) properties.

Decrease in BTR Construction

In 2023, the number of BTR (Build-to-Rent) homes that started construction was less than half of what was recorded in 2022. This decline is primarily due to a lack of institutional investment, high construction costs, labor shortages, and more expensive debt. Additionally, the implementation of new fire safety regulations and the failure of several contractors will further impact the delivery of BTR projects in 2024. Developers must navigate these challenges strategically to ensure the successful completion of BTR projects.

Build-to-Rent Construction

Strong Rental Growth

Despite the decrease in supply, the demand from tenants continues to remain strong, which supports a robust level of rental growth in 2024. In 2023, average rents in England increased by around 6%, and a similar rate of growth is expected in 2024. The Build-to-Rent (BTR) sector is expected to outperform the broader headline level of growth, which highlights the potential profitability of investing in BTR properties.

Rebound in Investment

The start of the economic recovery and a more stable interest rate environment will boost investor confidence in 2024. Investment into the sector is expected to rebound strongly next year, underpinned by greater pricing certainty and improved viability of forward funding opportunities. This rebound presents a promising outlook for developers looking to secure funding for their projects.

Rebound in Investment - BTR

Stable Yields

BTR yields, having expanded throughout 2023, will be more stable in 2024. Further expansion is expected in early 2024, but this will be limited and continue to be mitigated by strong rental growth. This stability in yields can provide developers with a more predictable return on investment.

Strong Single-Family BTR Investment

Despite overall BTR investment falling in 2023, the Single-Family Housing (SFH) sector deviated from the trend, recording the highest level of investment. However, the sector could face challenges in 2024 as conditions in the sales market start to improve. Developers in the SFH sector need to stay abreast of these market conditions to optimise their investment strategies.

In conclusion, CBRE's 2024 Market Outlook provides valuable insights into the dynamic nature of the BTR sector. Property developers must stay informed about these trends to make strategic decisions and take advantage of the opportunities presented by the ever-changing market landscape.

If you require assistance with BTR design, please do not hesitate to schedule a call with Ademchic. We would be delighted to discuss your needs and explore potential solutions that align with your goals.

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