UK BTR sector set for record £6 billion investment in 2025: LSH

The UK’s Build-to-Rent (BTR) sector is poised to attract a record-breaking £6 billion in investment in 2025, the highest annual figure to date, according to new research by  Lambert Smith Hampton (LSH).

Simon Wilson, Senior Director and Head of LSH Living and Capital Markets, said: “2025 is set to mark another milestone year for the UK BTR sector”, said Simon Wilson, Senior Director & Head of LSH Living and Capital Markets. “As many of the assets developed over the past decade begin to change hands, we expect a sustained trend towards forward purchases and operational transactions, underpinned by the strength of institutional capital and a maturing market landscape.”

The number of operational BTR units has more than doubled in the past four years, LSH’s “Built to Last” report says, surpassing 130,000 in Q1 2025. The pipeline remains robust, with over 56,500 units currently under construction and a further 126,000 in planning.

A key driver of this momentum is the continued expansion and diversification of the sector. The rise of single-family rental (SFR) and co-living schemes has broadened the appeal of BTR beyond its traditional base of young, urban renters. These emerging sub-sectors are helping the market mature and meet the evolving needs of renters across the UK.

While London and Greater Manchester continue to account for two-thirds of existing BTR stock, regional markets are taking centre stage. Birmingham leads this regional surge and is now recognised as the fastest-growing BTR market outside London. Over 16,000 units are either under construction or have received planning consent, with stock in the city increasing by 29% in 2024.

Co-living is also gaining traction across the UK. Now accounting for 15% of the development pipeline, the model is extending beyond the capital. Regional cities now host 40% of operational co-living beds, driven by landmark openings in Manchester, with nearly half (46%) of all consented and under-construction co-living schemes located outside London.

The SFR sector also continues to outperform, with £1.9 billion invested in both 2023 and 2024, more than eight times the five-year average. While SFR currently comprises just 10% of operational BTR stock, it attracted 38% of total investment in 2023–24. This figure is expected to remain elevated, as expanding investment platforms acquire more units for their SFR portfolios.

The trading of stabilised multifamily assets has become a significant feature of the market. In Q1 2025 alone, BTR investment reached £1.1 billion, following a record £5.2 billion in 2024. Stabilised assets represented 48% of Q1 multifamily investment volume, a sharp rise from 27% in 2024 and well above the five-year average of 15%.

Rental growth is expected to rebound in 2025 after a cooling in 2024, with rents forecast to rise 4.5% by year-end and sustain a long-term average of 4.0% annually. These projections, provided by Hamptons, reflect continued undersupply and expected impacts from legislative changes, including the forthcoming Renters’ Rights Bill.

The surge in activity in the BTR sector comes despite ongoing economic and geopolitical headwinds, reflecting the sector’s growing resilience, diversification, and appeal to institutional investors, Wilson said: “Amid wider economic uncertainty, the sector is evolving into a mature and diversified investment class, with rising activity outside of London, continued demand for SFR, and increased trading of stabilised multifamily assets.”