(Bloomberg) -- Legal & General Group Plc has started a U.K. suburban rental housing unit to tap into a surge in demand for larger homes and green space as more people work from home during the pandemic.
The asset manager plans to build about 1,000 family rental homes a year starting in 2024, according to a company statement on Tuesday. Output at that level would see Legal & General's build-to-rent business closing in on the country's top 10 homebuilders. The firm already has more than 5,000 homes in operation or development.
The transition to working from home during the Covid-19 outbreak has spurred city dwellers wanting more space to relocate to the suburbs, boosting demand for homes and driving up rental prices. Rents in outer London rose 3.3% last month, while in the city center they plunged by 14.9%, according to broker Hamptons International.
“There are more people looking for more flexibility, and not necessarily needing to be in the same locations they needed to be due to working from home,” Legal & General spokeswoman Lauren Kemp said by phone. “It was looked at by the business before Covid was a root cause, but clearly the changes in working patterns and where we see the future of office working going meant that we have brought this forward.”
Professionally managed rental housing in the U.S. attracts more investment than offices or retail properties, but it remains in its infancy in the U.K. where most rental homes are still owned by mom and pop investors. Global investors have poured into the country's nascent market for purpose-built rental apartments in city centers in recent years, but the Legal & General platform would be among the first to specifically target single family rental homes in the suburbs.
Read more: New Yorkers and Londoners Are Ditching Cities for Suburbs
Legal & General's suburban building push will focus on more rural locations, Kemp said. The new homes will be built across the U.K., but the southwest and southeast could be an initial focus given the strength of demand in those areas.
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