"The pivot to mid-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"
- Guy Stebbings - Knight Frank
Investors in the UK's build-to-rent sector are shifting their focus toward mid-low-rise schemes as financing costs, regulatory delays, and cost inflation continue to constrain new development, according to Knight Frank's UK Multifamily Market Outlook 2026.
The global property consultancy's latest research, covering supply and development pipeline findings, shows the multifamily housing market has expanded rapidly over the past decade, with operational apartments growing at 13% annually to exceed 122,000 in 2025. The pace of new delivery, however, is slowing sharply.
Supply falls sharply from 2023 peak
At the end of 2025, 38,500 homes were under construction across the UK, down 8% year on year and 34% below the 2023 peak of 58,000. Knight Frank expects just 16,000 new apartments to complete in 2026, reflecting the cumulative effect of high financing costs, significant Gateway 2 process delays and persistent cost inflation on development viability.
Although 92,000 homes hold full planning permission, converting those approvals into new starts has proved difficult. The scale of the gap between consented and delivered homes underlines the structural challenge facing the sector.
"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," said Oliver Knight, head of residential development research at Knight Frank.
"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."
Why investors are turning to low-rise product
As the build-to-rent market matures, operators and investors have broadened the range of schemes they are willing to pursue. For a growing number, that means targeting low-rise, lower-amenity buildings, motivated both by viability and a deliberate push into the lower-to-mid rental market.
One of the key advantages is regulatory. Schemes of this type can bypass lengthy Gateway 2 delays under the Building Safety Act, giving developers greater certainty over timing and costs and reducing the risk of redesigns or unexpected expenditure mid-build.
"The pivot to mid-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," said Guy Stebbings, partner and head of build-to-rent agency at Knight Frank.
"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."
Despite the headwinds, investor appetite has not diminished. More than £2bn was deployed into multifamily in the past year, with capital continuing to seek out the right assets in the right locations, Stebbings added.
Tier 2 cities emerge as the next opportunity
The build-to-rent sector now spans 102 local authorities across the UK, a sign of how far the market has expanded beyond its original urban strongholds. Established cities such as London, Birmingham and Manchester continue to benefit from strong employment growth and long-term demand fundamentals, supporting the case for continued delivery in those locations.
Beyond the core cities, Knight Frank's analysis identifies a range of high-potential tier 2 towns and cities where occupier demand is robust but development pipelines remain thin, primarily because of viability constraints. For investors with flexible mandates, those locations may offer attractive entry points.
"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," Stebbings concluded.
With supply well below demand and delivery expected to remain constrained through 2026, the structural case for build-to-rent investment remains intact. The question for much of the market is less about appetite and more about finding viable routes to deployment in a development environment that continues to test even experienced operators.
