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UK: Build-to-rent (BTR) investment reached a record £2.08 billion in Q2 2026, while viability pressures continue to affect new developments in regional towns and cities, according to Knight Frank.
More than 6,700 BTR homes have been completed this year. Almost half of all new homes were completed in London, Manchester and Birmingham, whereas Tier 2 cities such as Nottingham, Liverpool and Sheffield combined only accounted for 14 per cent of new stock.
Knight Frank said higher construction costs and financial pressures are affecting the viability of many regional schemes. Some developments are now needing grants, planning flexibilities or modification of affordable housing requirements to proceed.
Nick Pleydell-Bouverie, head of residential investment at Knight Frank, said: “The investment case for BTR remains incredibly strong. Demand for high-quality rental homes continues to outstrip supply in many markets, supporting strong occupancy levels and rental growth across the sector. Against that backdrop, it’s no surprise that many investors are gravitating towards stabilised assets where income and performance are already proven. We’re continuing to see a highly selective market, with a significant proportion of activity driven by a relatively small number of large transactions. The challenge now is ensuring that development opportunities can stack up financially so that much-needed new supply can be delivered. That’s where viability remains a key consideration for investors looking to deploy capital into the sector.”
Lizzie Breckner, head of residential investment research at Knight Frank, added: “While supply continues to increase overall, we’re seeing a growing divide between the largest cities, where schemes are still moving forward, and a number of regional markets where rising costs and tighter development economics are making it harder to bring forward new projects. Viability pressures remain, particularly across many regional locations, and are increasingly shaping where development can happen. As a result, multifamily delivery is likely to come under further pressure unless those challenges begin to ease. There are reasons to be optimistic. We’re starting to see improvements in parts of the planning process, particularly around Gateway 2 approvals, which should help improve certainty for developers. But there is still more to do if we want to unlock delivery at the scale required.”
In spite of these difficulties, the sector still has strong investor demand. Completed BTR stock in the UK is now 166,359 homes, with 49,620 homes currently under construction and 125,639 in the planning system.
Knight Frank added that improvements to parts of the planning process could help increase future housing delivery, while lenders continue to show strong interest in well-performing BTR developments.
Highlights:
• Knight Frank reported record UK build-to-rent investment of £2.08 billion in the second quarter of 2026, despite growing viability challenges in regional development markets
• More than 6,700 build-to-rent homes have been completed in 2026, with London, Manchester and Birmingham accounting for almost half of all new delivery
• Rising construction costs and tighter development economics are making regional build-to-rent projects increasingly reliant on grants, planning flexibility and affordable housing adjustments
• The UK build-to-rent sector now includes 166,359 completed homes, with 49,620 under construction and 125,639 progressing through the planning pipeline
• Knight Frank said investor and lender appetite for build-to-rent developments remains strong, supported by continued demand for high-quality rental housing across the UK
