The Rise of Build-To-Rent in Canada and the UK
A new generation of GPs are bringing US-style multifamily development to new markets, including Canada and the UK.
Thesis Driven is a newsletter series that dives deep into emerging themes and real estate operating models by featuring a handful of GPs executing on each theme. The deep dives will give an investor enough context to understand the trend as well as opportunities for personal introductions to relevant GPs actively executing on opportunities. This week’s theme is on the rise of Build-to-Rent outside the US, specifically in the UK and Canada. Thank you to Chris Dougray at CBRE UK for his help with this letter.
On the spectrum of real estate asset classes in the United States, multifamily rental apartments in major markets are as low-risk and established as they come. A new residential building full of creditworthy tenants is considered the gold standard of security and financeability, perhaps the next best thing to Treasuries. Therefore, equity and debt capital for the development of new multifamily assets in the United States has been plentiful over the past decades.
From an institutional perspective, the situation is quite different outside the United States. In most other countries—including Canada, the UK, and Europe—the majority of new residential developments are sold off as condominiums, many of them to retail investors rather than end users. Those retail investors then rent them out to end users, creating a patchwork of landlords, management, and rental availability in any given building. “Purpose-built” rental buildings are few and far between; for example, it is estimated that there are under 100,000 purpose-built rental units in the entire United Kingdom versus over 40 million in the United States.
However, real estate developers are increasing importing US-style build-to-rent to Europe and Canada, creating an opportunity for institutional investors to build and own differentiated products with higher returns than are available in the United States. Today, we will feature a few GPs who are capitalizing on this opportunity, bringing American-style multifamily development overseas.