Build to Rent (BtR) has become an established strand of the UK property sector after hitting headlines with the conversion of the Olympic Village in East London in 2012. Yet the wave of BtR investment, which started in London and spread outwards across England’s regional centres, more or less stopped at the Scottish Border – until recently.   

A distinct asset class within the private rented sector, BtR refers to properties built for the private rental market. Typically owned by an institutional landlord and managed by a single entity, often with an onsite presence, they are being looked upon favourably by investors seeking a relatively secure, longer-term investment right across the UK. But why the relatively slow take up of BtR in Scotland? 

While Scottish cities offered many of the factors attracting investors to other regional cities, such as the availability of sites located near transport links and employment hubs, some key financial fundamentals meant that they could not rival locations like Manchester, Birmingham and Bristol. Indeed the uncertainty surrounding the Scottish independence vote was an additional factor deterring those looking for safe investments.                                  

However, seven years on, the Scottish housing market is now outperforming the rest of the UK and a growing number of investors are now targeting BtR projects in Scotland. This is against a backdrop of a systemic undersupply of new housing across all tenures in Scotland, and a trebling of 16- to 34-year-olds in the Private Rented Sector over the past 20 years. Indeed 40 per cent of this age group is now renting.

Rents in Edinburgh have grown by 33 per cent over the last five years and 25 per cent over the same period in Glasgow. Added to a compression of investors target yields, this is helping BtR compete against other land uses.

A total of 479 BtR units have been built in Scotland so far. A strong supply pipeline is emerging with a further 6,300 BtR units at varying stages of planning. But this figure only represents 1.7 per cent of the total number of Scottish households in the private rented sector, with the remainder being provided by private landlords. This is nearly half the figure for the UK as a whole, which illustrates the growth potential in Scotland. 

However, Savills is currently advising on transactions set to deliver more than 1,500 BtR units across Scotland. While these largely relate to the urban flatted BtR market, we are starting to see the emergence of a market for suburban houses for rent which is typically aimed at young families.

Looking first at the Scottish capital, the Lochrin Quay development, acquired by Aberdeen Standard in 2018, was a positive demonstration of the interest the sector in Scotland is now commanding from institutional investors.

Kingsford Residences, a conversion of a former school, is now more than 65 per cent let, with studios achieving on average an impressive eleven hundred (£1100) pounds per calendar month. And to the west of the city centre, development of 800 units in Fountainbridge (across the Freer Street and adjacent Springside sites) is anticipated to begin this year and the market will be closely monitoring their performance. 

Glasgow now accounts for over half the BtR pipeline in Scotland as it has benefitted from the availability of large sites close to the city centre. We anticipate that at least three major schemes in the ‘planning approved’ category will break ground over the next 6-9 months.

Savills advised Legal & General on the first forward funding BtR deal in Scotland at Buchanan Wharf in Glasgow: 324 apartments which will be developed by Drum Property Group adjacent to Barclays' new European Hub. 

As BtR becomes more established in Scotland, we anticipate more transactions being structured on a forward funding basis, just as they increasingly are south of the Border.

Further information

Contact Savills Development

Image: Stallan Brand