A computer-generated image of the Wembley Park
development at completion in 2025/26.
In the north London streets surrounding what the English call "The Home of Football," there's a new game in town. Taking shape alongside the 90,000-seat Wembley Stadium, the largest in Northern Europe, is the U.K.'s biggest-ever single-site build-to-rent development: Quintain's £3 billion Wembley Park project.
Build-to-rent is a relatively new concept in the U.K., and that was attractive to Quintain's owner, U.S.-based private equity firm Lone Star Funds. Lone Star has invested billions of dollars in the well-established U.S. multifamily sector, and when it saw the opportunity to introduce its build-to-rent business to the U.K., it grabbed the chance with both hands, Catherine Webster, strategic finance and investment director at Quintain, said.
"There's surprise [at Lone Star] that [build-to-rent] doesn't really exist over here," she said. "There's therefore the opportunity to be one of the market leaders, take first-mover advantage and establish yourself as one of the biggest players in the market. That's an exciting opportunity."
The potential market for build-to-rent in the U.K. is sizable. Property broker Savills and the British Property Federation projected in a February report that if the right policies were put in place, the U.K. build-to-rent market could deliver 240,000 units by 2030, translating into a sector worth £60 billion. That is comparable in value to the U.S. multifamily real estate investment trust market.
Government initiatives announced in 2017 aimed at combating the country's massive housing shortage are projected to provide tailwinds to the growing sector. The U.K. on average has only delivered 160,000 new homes each year since the 1970s, far below the estimated 225,000 to 275,000 new homes per year needed to keep pace with population growth, according to a major housing-focused policy document published by the government in February. The document pegged the average cost of a house at a record 8x average earnings, pushing the number of people living in the private rented sector to double since 2000.
In that policy document, the government said the build-to-rent sector would play a key part in solving the housing crisis. In November, the U.K. finance minister in his annual budget statement committed £8 billion of new financial guarantees to support both the build-to-rent sector and private housebuilding, and vowed to tackle planning issues that prevent the development of new housing.
"Hearing the chancellor say the words 'build to rent' in his latest budget announcement was a real moment for me — and I've also heard the same words from the prime minister," Alex Greaves, residential fund manager at M&G Real Estate, the property investment arm of pension giant Prudential that has invested £700 million in the sector, said in an interview.
"Four years ago, it was a sector that was barely spoken about by people outside of the industry, so I think this year has been incredibly positive [in terms of] recognition at government and ministerial and senior minister level," he said. "I'm absolutely over the moon about it."
From an investor's perspective, Greaves said, the imbalance in the housing market presents a great opportunity to develop a flourishing build-to-rent sector. M&G has 1,850 units completed or under construction. "It's very clear to see that the demand for good-quality housing and well-managed rental stock is extremely high. We simply don't build enough homes for the demand that we've got within this country," he said.
London, in particular, is a focal point. While some build-to-rent schemes are popping up in most of the U.K.'s large regional cities, such as Manchester, Glasgow and Birmingham, the shape of the market in the country's capital means it is where build-to-rent is likely to work best. Beyond attractive employment opportunities and world-class transport infrastructure, the demographics of the city are a perfect fit for the growth of build-to-rent, according to Greaves.
"The average first-time [house] buyer in London is now over 35," he said. "As people are graduating at 21, they're going to be living in rented accommodation for 10 to 15 years, and as a result that demand is super, super high. So we're very happy to create homes to house some of those people whose demand is to live in a good-quality property in a good location with access to employment."
This does not mean that the golden age of build-to-rent in the U.K. is just around the corner. Greaves, who has been at the sector's coalface since 2013 setting up his company's operation from scratch, admits that build-to-rent in the U.K. is a "fledgling industry" that requires a lot of structural development. The main obstacles he has encountered in getting M&G's business up and running are a lack of suitable stock — forcing the company to build its own — and the fact that no one in the U.K. has any experience or expertise in the sector.
"That's across the spectrum from investment management to property management and on the legal side of things," he said.
Nevertheless, the sector is gaining momentum. The British Property Federation said in September that the number of build-to-rent units in the U.K. that were in planning, construction or already delivered was about to hit 100,000, suggesting that the sector was reaching the kind of scale that should tempt institutional investors and the billions of pounds at their disposal.
When Wembley Park is complete in 2026, residents will enjoy a thriving neighborhood with an array of retail, food and beverage, entertainment, hotels and office properties, according to the developer. "The key for us is, once we have tenants here, to make sure that they're happy, they're part of the community, they want to stay," Quintain's Webster said.
Similarly, Quintain is aiming to stay for the long term. "That's the big difference for us. We're not building it, selling it and leaving to go to the next site," she said. While that has been the preferred business model for U.K. property developers for as long as anyone can remember, a shift toward build-to-rent seems to be taking root.