As we emerge from the pandemic lockdown, there can be no doubt that we now live in a changed world. New norms, new approaches to work, new life choices and new priorities. With these changes come new opportunities.
During the lockdown, the BTR sector has performed robustly compared to other property classes, especially the challenged retail, tourism and office sectors. Even with life returning to the high street and offices starting to open once again, the considerations of funds, investors, occupiers, developers, operators and tenants are all shifting. In this new landscape, BTR holds great potential and is attracting increased interest. The UK BTR sector remains less established than the more proven US multi family model, with Scotland lagging England in terms of market penetration. Experience from the US suggests that the UK market could account for up to 20% of new build development if similar patterns of development from the US took hold in the UK.
If this level of BTR penetration occurred in Scotland, then we could expect around 4,500 BTR units to be built per year. While this is a theoretical figure, and quite some way ahead of the current 10,000 units pipeline, which has taken the best part of a decade to develop, this does show the potential of the UK and Scottish BTR sectors when compared to the mature US multifamily housing sector.
A key component of the more mature US market is the prevalence of suburban development, rather than the UK’s more ubiquitous flatted approach. The development of family housing for rental has been gaining interest in Scotland. Developments are progressing for not only open market BTR, but also rental variants like mid market and intermediate rents. If this interest grows and can be converted into more deals then BTR’s potential for more rapid growth has a chance of being fulfilled.