U.K. commercial property company British Land Co. PLC plans to grow its nascent build-to-rent business to 15% of its total portfolio value within five years, CEO Chris Grigg said during an earnings call.

The U.K. build-to-rent sector is expected to see significant growth in the coming years following government backing for the model as part of its efforts to address the country's housing shortage.

"[Build-to-rent] is a complementary and structurally growing part of the market which is highly fragmented, so we see a real opportunity here," said Grigg. "There are a number of ways we can build scale in this market, starting with opportunities in our portfolio, site acquisitions or bolt-on acquisitions of portfolios or operating companies."

A 2017 report by property broker Savills and the British Property Federation projected that if the right policies were put in place, the U.K. build-to-rent market could deliver 240,000 units by 2030, creating a sector worth £60 billion. That is comparable in value to the U.S. multifamily real estate investment trust market.

"It is an exciting growth area where there isn't much institutional capability at the moment," said Charles Maudsley, head of retail, leisure and residential at British Land. "I think only 3% of the [private-rented] market is of an institutional grade; if that grows to 10%, that makes it three times the size of the retail market. So it's a good growth area with very few people doing it, which is why we see a lot of opportunity."

British Land's £13.5 billion worth of assets are almost entirely in offices and retail. The company will focus its build-to-rent operation on the London market initially, Grigg said, but would consider expanding to elsewhere in the country as the business grows.

The company, which owns about £134 million worth of residential assets in the U.K., according to S&P Global Market Intelligence data, is well-placed to become a major player in the sector, said Grigg. "From our perspective, we have a bunch of advantages in this space: [our] history, how we can run mixed-use [assets], our ability over time to deliver very efficiently. That's why we think we can be meaningful in this space and our approach to customers is very complementary to this."

British Land also plans substantial growth for its flexible workspace business Storey in the coming years, with a target to make it 10% of the company's office business. Storey has 115,000 square feet of British Land's total office portfolio of 7 million square feet, according to Tim Roberts, head of offices at the company. The company already has plans to increase Storey's square footage to 230,000 square feet, Roberts said. "You could see it growing to 700,000 square feet relatively easily," given the demand in the market, he added.

British Land's pretax profit, as measured by International Financial Reporting Standards, amounted to £501.0 million for the fiscal year ended March 31, a gain of 156.9% year over year.