Lawyer Monthly Magazine - July 2019 Edition

Build To Rent Boom: What It Means for Commercial Property The popularity of residential build to rent is sending shockwaves throughout the UK property sector. In this article, the Smith Partnership Commercial Property team takes a closer look at the residential build to rent boom and its implications for commercial property. The explosive growth of build to rent is one of the most significant shake ups to have taken place in the property sector in recent years. According to the Office for National Statistics, an estimated 4.5 million UK households made up the private rented sector in 2017 – a 63% increase on the 2.8 million privately rented households in existence back in 2007. With the above growth showing no clear signs of stagnating just yet, it’s little surprise that build to rent developers have been quick to react to changing market conditions. All things considered, the UK is in the midst of a residential build to rent boom – but what exactly does this mean for the commercial property sector? What Is Build to Rent? The term ‘build to rent’ refers to private rented residential property that has been specifically developed for rental purposes. In many cases, build to rent schemes offer significant investment potential through offering developers a long- term rental income. As such, many build to rent properties are funded by private investors as part of a wider property portfolio. The Woes of Modern Property Ownership There are many reasons why the popularity of build to rent has continued to take flight in recent years, with the rising cost of property ownership being one of the most significant. While the cost of home ownership continues to pose challenges throughout many layers of the UK population, a 2018 report by The Institute for Fiscal Studies (IFS) showed that young adults are especially disadvantaged in finding their way onto the property ladder. With average house prices having grown approximately seven times faster than the income of young adults, it’s easy to see why more and more people are choosing to rent. “In reaction to the increased demand for private rented residential property, developers have been eager to step up supply” 22 Special Feature JUL 2019 www. lawyer-monthly .com