UK housebuilder Berkeley is branching out with plans to tap into the London rental market by building homes to let.
In its year-end results, Berkeley revealed it was establishing its own build-to-rent platform alongside its core trading. The company said it was adopting a strategic approach to maximising returns from its long-term regeneration sites.
Berkeley chief executive Rob Perrins said: “In the year, we have delivered 3,500 new private and affordable homes, of which 87% are on regenerated brownfield land, and provided over £370m in subsidies to deliver affordable housing and commitments to wider community and infrastructure benefits.
“Recognising the strong occupational and institutional investment demand for high quality, well-managed rental homes in London and the South East, Berkeley is establishing its own Build to Rent (BTR) platform to maximise returns in today’s market conditions.”
He added that Berkeley had identified some 4,000 homes across 17 of its sustainable and well-connected brownfield regeneration sites as an initial portfolio for this platform.
AJ Bell investment analyst Dan Coatsworth commented: “This seems a logical move given the strong dynamics behind this market. “It will take time to build up this side of the business but it could eventually provide a useful source of diversification given the rental space tends to be steadier than the wider property market. Berkeley’s moves tend to be widely followed in the industry, thanks to its late founder Tony Pidgley’s reputation as a shrewd operator.”
He added: “The company noted the supportive political environment – with both main parties making housebuilding a priority.”
In its annual report, Berkeley said it continued to benefit from a strong order book and had already secured 80% of its sales for next year.
However, the group posted a £557.3m pre-tax profit for the year to April, which itself was down 7.7% on the previous year due to the sector slowdown.
Berkeley said it has been impacted by interest rates remaining at high levels for longer than expected, but insisted there were signs that the outlook was improving with inflation greatly reduced, with the first interest rate cut expected later this year and a return to growth.
