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News Release

London

Jones Lang LaSalle releases latest research on the growing importance of the Private Rented Sector - Estimating more than £5bn in capital directed at the sector


London, 10th February - In latest research, Jones Lang LaSalle provides new insights on the creation of Private Rented Communities, the asset class that will be the legacy of Build to Let initiatives. It highlights the organisations taking at-scale residential development and investment seriously, noting the range of entry points into the sector that are being considered.

Since the Private Rented Sector Initiative (PRSI) was created by Government in May 2009, residential investment has climbed up the consciousness of a wide range of fund managers and UK residential delivery bodies. We are beginning to see the tangible results of this activity, as the sector makes significant steps in becoming a legitimate alternative asset class to commercial property.
 
The report highlights the progress of new investment into the sector with Jones Lang LaSalle now estimating that there is close to £5bn of capital directed into it. Tom Henry, Head of Residential Investment at Jones Lang LaSalle comments: “There is a significant wall of money seeking UK residential assets, with more coming forward every day. Those who are serious are forging ahead with or without Government funding, with many different investment models being considered as growth in the sector continues.”
 
“There are still challenges that need to be overcome, but this report does something that has never really been possible before, looking forward to the key remaining issues that the industry must tackle to make Private Rented Communities the asset class that investors want and tenants deserve.”
 
Titled ‘Building Private Rented Communities’, the paper details the investment models that are being developed, many of which are applicable regionally as well as in London. Adam Challis, Head of Residential Research at Jones Lang LaSalle and author of the report notes: “People often associate the Build to Let model of delivering Private Rented Communities with London and the South due to stronger value growth. In reality, pension funds and other institutional money is more focussed on the income return and regional cities such as Edinburgh and Manchester represent some of the best opportunities for strong yields.”
 
The report highlights 5 key areas that need improvement in order to expand the sector, including a need to rebrand the new asset class to better reflect the experience being offered to new tenants. The 5 issues that need attention include:
 
  1. Local Government must develop a better understanding of the Private Rented Communities development model and how it needs to be treated differently in planning applications
  2. Continued innovation from the wide range of investors looking at the model will bring forward new investment opportunities
  3. Better funding models, and an alignment of long-term institutional money with more risky development lending that is required
  4. Re-branding ‘PRS’ or ‘Build to Let’ as Private Rented Communities as a way of better reflecting the tenant-centred legacy of this asset class
  5. Improvements to the data and metrics used to inform investment decision-makers, currently well behind the standards of commercial property colleagues.

Click here to download the report