CBRE has reported an excellent start to 2025 in the Build-to-Rent (BTR) market in the North with three forward funding deals totaling £420m transacting in just two weeks across Manchester and Leeds.
However, the firm’s northern sector lead warns that the Building Safety Act (BSA) is a major challenge; impacting transactions and ultimately new homes delivery, representing the single biggest barrier to building in city centres.
The two stand out deals to complete in recent weeks include the acquisition of the 51-storey, 494 apartment development in Renaker’s New Jackson area of Deansgate, Manchester by a partnership between L&G, Nest and PGGM. Known as F1, the development is currently underway.
In Leeds, property investment management firm Barings agreed the £152m forward funding deal with Glenbrook for a 600 apartment mixed-use scheme at Kirkstall Road in Leeds.
The commonality between these two forward funding deals is that they were both already implemented ahead of the new Building Safety Act Gateway 2 regime, which affects the construction of higher-risk and large-scale buildings.
Head of Residential Investment, North at CBRE, Tom Sinclair, explains: “With BSA compliance now being mandatory for developers and building owners, and whilst the construction sector adjusts, there are significant challenges ahead.
“All projects must now navigate three critical safety gateway check points, meaning that approval is required at the planning stage, before building work can commence and before a building can be certified complete and occupied.
“The two significant transactions we have concluded in recent weeks were already implemented before the Act came into force and as a result we will see the delivery of much-needed new homes in Leeds and Manchester.
“Whilst many viability constraints on funding deals can be overcome with creative solutions, the Gateway 2 approval may have a major cost and time impact on future strategic funding deals of this scale, due to lengthy delays being imposed by going through the system. This will further compound challenges in the market, restricting delivery of new homes.”
Sinclair continues: “For schemes that can successfully navigate the Gateway process, we are seeing proven investor demand for Build to Rent developments in all regional markets. Indeed, the contraction in anticipated supply of new developments and consequential lack of new rental options is anticipated to drive strong occupational demand and investment performance.
“In the meantime, we are working with Developers across the region to optimise funding structures that mitigate the impact of the BSA regulations and present developments in a manner that work for both Investors and Developers to enable new forward funding agreements and seed the delivery of new homes.”
