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UK: Knight Frank’s UK Multifamily Market Outlook 2026 report has highlighted the potential of low-to mid-rise schemes to boost developer pipelines.
According to Knight Frank, the multifamily housing market has continued to grow at pace over the last decade with the number of operational multifamily apartments rising annually by 13 per cent to more than 122,000 in 2025.
However, hurdles to development last year – including high financing costs, significant Gateway delays and ongoing cost inflation – saw investment in new schemes fall.
At the end of 2025, 38,500 homes were under construction across the UK, an eight per cent fall compared with the previous year and a 34 per cent decline from the 2023 peak of 58,000.
Based on schemes that are currently in progress, Knight Frank expects just 16,000 new BTR apartments will be completed in 2026. And while 92,000 homes have full planning permission, translating these approvals into new starts remains challenging.
Oliver Knight, head of residential development research at Knight Frank, said: “The expected slowdown in multifamily delivery is representative of a wider slowdown across the residential development sector as a direct result of several macro-economic and regulatory factors, including increased regulation brought about through the Building Safety Act. Recent planning reforms announced by the Labour government may improve the backdrop somewhat, but the magnitude of the impact remains uncertain. There is a significant opportunity for investors to deliver best-in-class purpose-built assets for rent at a time when there is very little new supply being developed, while the ongoing supply shortage should support occupancy levels and rental growth.”
Knight Frank says that as the market grows, investors and developers are broadening the types of schemes they bring forward or acquire as they gain a better understanding of operating models, tenant requirements and the demand dynamics. For some, that means a pivot to low-rise amenity-light buildings, in part due to viability, but also to strategically target the lower-mid market. Such developments can avoid lengthy delays related to the Gateway 2 process, which gives developers greater certainty around delivery timing and costs. In practice, this reduces the risk of delays, redesigns, and unexpected cost increases.
Guy Stebbings, partner and head of build to rent Agency at Knight Frank, said: “The pivot to mid- to low-rise product is a practical way for investors to continue to deploy capital into new-build product despite the challenges in the development space. There are two main drivers here. Firstly, low-rise, lower amenity products can be more viable in the current development landscape and are often delivered by housebuilders who are able to build at a lower cost, aiding viability. Secondly, this product type is more likely to target the lower – mid market, an area of particular focus for investors due to its wider tenant pool and in turn, arguably more secure, sustainable and consistent income streams. What is clear is that the appetite for the sector remains strong. More than £2 billion has been invested into multifamily in the last year, and capital is still looking for the right opportunities in the right locations.”
According to Knight Frank, the opportunity to grow the sector is vast, with multifamily development now present across 102 local authorities in the UK, demonstrating that the sector can thrive in a wide range of markets. Established hubs such as London, Birmingham and Manchester continue to score strongly on employment growth and long-term demand, supporting the case for continued delivery. Beyond the core cities, Knight Frank’s analysis points to several high‑potential tier 2 towns and cities where demand is strong, but development pipelines remain limited at the moment due to viability.
Stebbings concluded: “Pricing in these locations has generally softened as core and some core plus capital focuses on tier 1 cities, but this presents a real opportunity for those with more flexible mandates or an appetite for tier 2 locations to capitalise on slightly softened pricing for operational stock in locations which fundamentally benefit from strong operational track records and excellent demand-supply dynamics.”
Highlights:
- Knight Frank’s UK Multifamily Market Outlook 2026 report has highlighted the potential of low-to mid-rise schemes to boost developer pipelines
- At the end of 2025, 38,500 BTR homes were under construction across the UK, an eight per cent fall compared with the previous year and a 34 per cent decline from the 2023 peak of 58,000
- The companies says some developers are pivoting to low-rise amenity-light buildings, in part due to viability, but also to strategically target the lower-mid market
- Such developments can avoid lengthy delays related to the Gateway 2 process, which gives developers greater certainty around delivery timing and costs
