The Role of Living Sectors & BTR
What role can the living sectors play in the success of cities?
- Housing and residential development are fundamental to the economic fabric of any town or city, as a driver in their own right and a vital complement to commercial property e.g. through nurturing and retaining talent.
- Regional markets are crucial, with more than two thirds of the current BTR pipeline located outside of London.
- Lower land values, less competition from the sales market and more attractive entry yields make for a compelling regional investment case.
- But understanding local demographics and need is key to determining the right types of homes (e.g. BTR, PBSA, Senior) that need to be built in the right locations.
Stemming the flow: The role of housing in reversing regional brain drain
- London has historically been a net exporter of students, whilst large regional cities such as Manchester, Leeds and Birmingham are net importers. This trend typically reverses upon graduation.
- Graduates want affordable homes in great locations, close to work and entertainment. Student accommodation has improved and professionalised over the last decade. Graduates want more of the same post-study.
- Of the final year students who said they would be moving into a rented property post-graduation, 60% indicated that they would consider living in a purpose-built development.
- There are 59,000 BTR homes under construction, and a further 102,000 with full planning permission granted.
- Around two thirds of BTR homes in the pipeline are located outside of London, led by Birmingham, Manchester, Leeds and Edinburgh.
What role can the living sectors play in the success of cities?
- Housing and residential development are fundamental to the economic fabric of any town or city, as a driver in their own right and a vital complement to commercial property e.g. through nurturing and retaining talent.
- Regional markets are crucial, with more than two thirds of the current BTR pipeline located outside of London.
- Lower land values, less competition from the sales market and more attractive entry yields make for a compelling regional investment case.
- But understanding local demographics and need is key to determining the right types of homes (e.g. BTR, PBSA, Senior) that need to be built in the right locations.
Stemming the flow: The role of housing in reversing regional brain drain
- London has historically been a net exporter of students, whilst large regional cities such as Manchester, Leeds and Birmingham are net importers. This trend typically reverses upon graduation.
- Graduates want affordable homes in great locations, close to work and entertainment. Student accommodation has improved and professionalised over the last decade. Graduates want more of the same post-study.
- Of the final year students who said they would be moving into a rented property post-graduation, 60% indicated that they would consider living in a purpose-built development.
- There are 59,000 BTR homes under construction, and a further 102,000 with full planning permission granted.
- Around two thirds of BTR homes in the pipeline are located outside of London, led by Birmingham, Manchester, Leeds and Edinburgh.
What role can the living sectors play in the success of cities?
Authors: Oliver Knight, Matt Bowen, & Katie O'Neill
With more than two-thirds of the current build-to-rent pipeline located outside of London, housing and residential development are fundamental to the economic fabric of any town or city.
What role can the living sectors play in the success of cities?
Authors: Oliver Knight, Matt Bowen, & Katie O'Neill
With more than two-thirds of the current build-to-rent pipeline located outside of London, housing and residential development are fundamental to the economic fabric of any town or city.
The UK economy has a productivity problem, having experienced significantly slower productivity growth than comparable countries since the Global Financial Crisis. This issue weakens economic resilience, particularly at the local level, as seen in cities like Birmingham, Glasgow, and Manchester, where productivity growth has stalled compared to London and similar European cities.
All major towns and cities across the country are undergoing economic evolution, often particular to that geography. On the one hand, this is leading to changing requirements in commercial property requirements. On the other hand, it presents opportunities for residential development – and potential bridgeheads and cross-over between the two.
Adequate and well-located housing is vital for attracting talent, supporting the economic fabric of any city. This paper explores the role living sectors—including purpose-built student accommodation (PBSA), private and affordable rented sectors, and senior housing— play in supporting productivity and growth.
Investment
The last few years have seen an increase in institutional capital being allocated to the living sectors, driven by desire to meet growing demand and tap into areas of strong potential income growth.
Accordingly, across the UK, investors spent more than £10 billion acquiring or funding assets in 2023, Knight Frank data shows. Build to Rent (BTR) led with £4.6 billion spent, followed by PBSA (£3.4 billion) and seniors housing (£2 billion). Promisingly, within those figures, investment into regional markets, and cities in particular, has been rising.
The appeal of regional markets is clear. Lower land prices, less competition and attractive entry yields make for an attractive investment proposition. However, with housing affordability less of an issue outside London, the right demographic needs to be in place, and at sufficient scale.
Investment spend across the UK in 2023 in Living Sectors (acquiring and funding)
Addressing housing need across all ages
Rising regional investment is also being reflected in development volumes. There are over 95,000 units in the BTR development pipeline, and more than two-thirds of these developments are located outside of London. BTR supports younger tenants in the early stages of their careers, with over 25% of multifamily tenants aged 26-30, aiding employment growth.
Accommodation plays a huge role in student retention. Knight Frank’s Student Accommodation Survey, conducted alongside UCAS, identifies that over 50% of university applicants cite accommodation influencing their university choice. Yet, the market remains supply-constrained. Fewer than 17,500 PBSA beds will be added to supply in the 2024/25 academic year, despite the student population increasing by 470,000 in this period.
In the seniors housing market, age-appropriate housing in urban areas is increasingly important. Older consumers already account for 54% of UK spending, likely to increase to 63p of every pound spent by consumers by 2040.
units in the BTR development pipeline in regional markets
Supportive policy is key
Chronic housing supply shortage in high-demand markets is constraining economic potential. Encouraging private capital investment is crucial to delivering the right mix of long-term homes that towns and cities need.
The Labour Government’s ambitious target of building 1.5 million homes over five years requires a near 50% increase in annual housing delivery. Living sectors can and will play an important role in achieving this goal – in 2023, delivery across student, BTR and seniors housing amounted to 43,000 homes.
Analysis of the development pipeline suggests there is scope to increase capacity, although this requires a step up from current levels, and comes amid a challenging development environment. In total, there are 160,000 student beds under construction or at some stage of planning, 146,000 BTR homes in the pipeline and just shy of 54,000 seniors housing units.
The real estate sector has an opportunity to improve the quality of homes available across the breadth of the UK. As people re-evaluate their work/life balance, so too are they looking at their housing requirements. A desire for greater flexibility, combined with a challenging ownership market, means that the rental sector has never been more critical in supporting local economies.
Stemming the flow: The role of housing in reversing regional brain drain
Authors: Katie O'Neill, Oliver Knight, & Matt Bowen
Katie O'Neill Graduate retention is an important but often complex issue. We explore the factors reversing the traditional brain drain of students for major regional cities.
Graduate retention is an important but often complex issue.
Economic, social, geographical and employment factors all contribute to whether graduates decide to stay in and their university town post-study. Retention rates differ throughout the UK, yet there is a unanimous acknowledgement of the economic benefits that retaining talent provides. In the future, retaining talent will take on even greater importance, in the context of the shifts underway across UK towns and cities. Consequently, implementing strategies that foster an appealing environment for skilled students is a priority for local authorities.
London is historically a net exporter of students, whilst cities such as Manchester, Leeds and Birmingham are net importers. This trend typically reverses upon graduation.
It is often reported that UK regional towns and cities experience a “brain drain” of graduates to London. London experiences a large inflow of people aged 22-30, and an outflow of people aged 31 and older. Other large cities such as Manchester and Birmingham experience a significant inflow of people aged 18-21, but then see outflows of people aged 22 and above.
Fig 1: Large cities see net outflows of young professionals Net change in domestic migration, 2022
Source: ONS
Fig 2: Graduate retention by city % of respondents indicating they will stay in the city in which they study after graduation
London
Glasgow
Bristol
Manchester
Brighton
Sheffield
UK Average - 38%
Bath
Leeds
Liverpool
Birmingham
Southampton
Edinburgh
Nottingham
Cardiff
Newcastle
Source: Knight Frank/UCAS Student Accommodation Survey
Graduate retention is an important but often complex issue.
Economic, social, geographical and employment factors all contribute to whether graduates decide to stay in and their university town post-study. Retention rates differ throughout the UK, yet there is a unanimous acknowledgement of the economic benefits that retaining talent provides. In the future, retaining talent will take on even greater importance, in the context of the shifts underway across UK towns and cities. Consequently, implementing strategies that foster an appealing environment for skilled students is a priority for local authorities.
London is historically a net exporter of students, whilst cities such as Manchester, Leeds and Birmingham are net importers. This trend typically reverses upon graduation.
It is often reported that UK regional towns and cities experience a “brain drain” of graduates to London. London experiences a large inflow of people aged 22-30, and an outflow of people aged 31 and older. Other large cities such as Manchester and Birmingham experience a significant inflow of people aged 18-21, but then see outflows of people aged 22 and above.
Fig 1: Large cities see net outflows of young professionals Net change in domestic migration, 2022
Source: ONS
Fig 2: Graduate retention by city % of respondents indicating they will stay in the city in which they study after graduation
London
Glasgow
Bristol
Manchester
Brighton
Sheffield
UK Average - 38%
Bath
Leeds
Liverpool
Birmingham
Southampton
Edinburgh
Nottingham
Cardiff
Newcastle
Source: Knight Frank/UCAS Student Accommodation Survey
Knight Frank research, conducted in partnership with UCAS, finds 64% of final-year students in London intend to remain in the city after graduation. This figure is higher than the UK average of 38%, and above Glasgow (53%), Bristol (48%) and Manchester (44%).
Many initiatives are already in place to help drive graduate retention, however, these are predominantly employment-focused.
While access to good jobs is undoubtedly a key driver for graduates, other factors are at play too. Graduates want affordable homes in great locations. Knight Frank’s survey with UCAS indicates more than half (51%) of final year students plan to move into a property in the private rented sector following graduation. For London graduates that means over 70,000 students. The numbers in the regional UK cities are lower but still significant – approximately 16,050 in Birmingham, 14,500 in Leeds, 12,800 in Bristol, 16,100 in Manchester, and 14,000 in Edinburgh.
Affordability is a significant challenge for graduates, who often find themselves needing 'house share' arrangements, driven by the high cost of living and renting in many urban areas. Reliance on shared living situations can exacerbate the demand for housing.
For most, the journey into purpose-designed rental accommodation ends at graduation. However, this trajectory can be extended post-study by delivering additional Build to Rent (BTR) accommodation. Co-living, for example, is a crucial component of this – given the affordability that this sector can offer. Of the final-year students moving into a rented property post-graduation, 60% indicated that they would consider living in a purpose-built development.
Existing BTR schemes benefit from central locations with excellent transport links. They come with amenities that save graduates money on memberships, and are also energy efficient, saving residents money on bills.
Knight Frank research, conducted in partnership with UCAS, finds 64% of final-year students in London intend to remain in the city after graduation. This figure is higher than the UK average of 38%, and above Glasgow (53%), Bristol (48%) and Manchester (44%).
Many initiatives are already in place to help drive graduate retention, however, these are predominantly employment-focused.
While access to good jobs is undoubtedly a key driver for graduates, other factors are at play too. Graduates want affordable homes in great locations. Knight Frank’s survey with UCAS indicates more than half (51%) of final year students plan to move into a property in the private rented sector following graduation. For London graduates that means over 70,000 students. The numbers in the regional UK cities are lower but still significant – approximately 16,050 in Birmingham, 14,500 in Leeds, 12,800 in Bristol, 16,100 in Manchester, and 14,000 in Edinburgh.
Affordability is a significant challenge for graduates, who often find themselves needing 'house share' arrangements, driven by the high cost of living and renting in many urban areas. Reliance on shared living situations can exacerbate the demand for housing.
For most, the journey into purpose-designed rental accommodation ends at graduation. However, this trajectory can be extended post-study by delivering additional Build to Rent (BTR) accommodation. Co-living, for example, is a crucial component of this – given the affordability that this sector can offer. Of the final-year students moving into a rented property post-graduation, 60% indicated that they would consider living in a purpose-built development.
Existing BTR schemes benefit from central locations with excellent transport links. They come with amenities that save graduates money on memberships, and are also energy efficient, saving residents money on bills.
There are more than 122,000 complete and operational UK BTR homes. A further 59,000 are under construction and 102,000 have full planning permission granted, taking the total size of the sector to more than 280,000 homes. Around two thirds of BTR homes in the pipeline are located outside London, with Birmingham, Manchester, Leeds and Edinburgh demonstrating the highest concentration.
By providing high-quality accommodation, along with a defined career path and job opportunities, a city will fulfil two essential requirements for graduate retention.
Residential investors and developers are integral components in supporting this.
There is a significant opportunity to ‘ramp up’ the delivery of co-living and BTR accommodation across the UK. This could be the key to permanently unlocking graduate retention. If delivered correctly, this will become increasingly important in building human capital and creating an ecosystem to attract and retain talent in cities.
Fig 3: BTR supply picking up in regional cities Number of units in the pipeline
There are more than 122,000 complete and operational UK BTR homes. A further 59,000 are under construction and 102,000 have full planning permission granted, taking the total size of the sector to more than 280,000 homes. Around two thirds of BTR homes in the pipeline are located outside London, with Birmingham, Manchester, Leeds and Edinburgh demonstrating the highest concentration.
By providing high-quality accommodation, along with a defined career path and job opportunities, a city will fulfil two essential requirements for graduate retention.
Residential investors and developers are integral components in supporting this.
There is a significant opportunity to ‘ramp up’ the delivery of co-living and BTR accommodation across the UK. This could be the key to permanently unlocking graduate retention. If delivered correctly, this will become increasingly important in building human capital and creating an ecosystem to attract and retain talent in cities.
Fig 3: BTR supply picking up in regional cities Number of units in the pipeline