London's Future: A Reset for Living

Living is the most-targeted sector across European real estate, again. CBRE’s European Investor Intentions Survey 2026, drawing on 698 respondents, has Living cited by 34% of investors as their priority – the second year running it has topped the list. London also ranks as the number one cross-border destination in the same survey, reinforcing the point that global capital wants to deploy here.

Transaction data supports the survey results. CBRE’s UK Living Investment Figures Q1 2026 put UK Living investment at £2.7bn for the quarter. PBSA comprised £1.8bn of this, the largest subsector by some distance. BtR investment totaled £819m, including £746m into Multifamily Housing and £72m into Single Family Housing. That sits on top of approximately £4.5bn of rolling annual UK BtR investment, of which £528m landed in London Multifamily Housing (or £846m when extended to the wider South East).

Andrew Saunderson, Head of UK Living Capital Markets, summarises the mood: “It’s no secret that the Living sector has faced a number of headwinds in recent years, particularly around development viability, resulting in a significant near-term drop-in supply. This is no doubt one of the principal reasons as to why the GLA have recently announced the City Hall Developer Investment Fund (CHDIF), with the aim being to unlock stalled or marginal schemes. Initiatives of this nature coupled with genuine appetite from investors to acquire truly best-in-class BTR assets should result in an increase in investment volumes.”

Peter Burns, Head of Transactions, picks up the thread on timing: “2024 was the year regional Multifamily woke up. 2025 was Single Family’s year. Look at where activity is concentrating now. The near-term has a greater focus on London.”

The logic is straightforward. In 2024, pricing differentials allowed regional schemes to borrow at rates below income yields. There was also wider availability of local government grants, meaning regional deployment was rational. The same dynamic emerged in the regions for Single Family housing in 2025. Being more capital-intensive, and slower to underwrite, London has followed later in the cycle.

What is changing now is the supply picture. Delivery across the capital is running well below requirement, regional markets are absorbing stock, and the medium-term rental thesis for London is strengthening just as the regional landscape matures.

The investors backing London Living today are not those who drove the last cycle. Domestic SME developers and private buy-to-let landlords have largely stepped back. In their place are international institutional platforms with long time horizons and serious balance sheets.

Quadreal’s platform investment in Realstar, Greystar’s diversified capital base, and Penta Real Estate’s entry from Central Europe sit alongside UAE-backed entrants. Arada has acquired Regal London, while Aldar has been building their position through London Square.

Despite its current challenges, London remains somewhere people want to live and work. CBRE’s offices research forecasts c.4 million sq. ft of London office take-up by AI companies by 2033. The employment growth that accompanies that take-up is a critical anchor for the Living thesis: high-earning workers, at scale, looking for rental housing across price points.

The capital dynamics shaping affordable housing are also changing. London’s largest housing associations – the G15 group, now 11 members following mergers – collectively hold c.£42bn of debt, much of it priced when the all-in cost of finance sat at 2 to 3%. Refinancing into a 6 to 6.5% market materially constrains new development capacity.

In the most recent set of published accounts, only three G15 members reported positive interest cover ratios. Awaab’s Law, building safety remediation and retrofit obligations are pulling capital and management attention towards existing stock. Hardman has been clear about the need for further interventions: “Asking London’s housing associations to do more new build on their own while every spare pound goes into remediation and stock improvement is the wrong ask. Steering institutional capital into products it is structurally better placed to deliver, while enabling housing associations to focus on existing stock, is the more sustainable model.”

Levels of investment from institutionally backed for-profit registered providers in recent years, demonstrates the capacity and will to deliver affordable housing at scale. Affordable housing investors have proven to be a complimentary partner, with the ability to step into schemes where a traditional housing association cannot be identified to acquire the affordable provision within a development. Rim Adem, Director, Living Investment Advisory, sees the structural shift: “Much of the capital flowing into this space comes from LGPS – local government pension schemes – which brings a certain logic to it: employees' pensions being recycled back into the communities they serve. Crucially, these investors share our long-term outlook. They have similar investment time horizons and are looking not just to acquire affordable housing, but to be custodians of it.”

Where capital comes from matters. How it deploys matters just as much.

The rise of joint ventures, however, goes beyond Gateway Two. Burns adds: “Often today’s value is not enough to justify all of today’s costs, making pure forward funding difficult. To unlock schemes sometimes you need to build through the cycle, in the faith that you are backing yourself to deliver a quality asset in a relatively supply starved market.”

Capital alone does not deliver a quality asset. What does is the chain that runs from the right land, through the right planning approach, construction partner, operational set-up at stabilisation and, eventually, the right exit route – whether that is a core institutional buyer, a refinancing or unit-by-unit sales.

Bringing that chain together inside one team is the difference between a deal that closes and a deal that performs. Deal terms reflect the same logic. The fixed balancing payment at practical completion is increasingly replaced by performance-based mechanics: preferred returns, developer tranches, risk-sharing on delivery and lease-up. The contract is doing more of the work the market used to leave to time.

The Ask

Penta Real Estate, a Czech investor with a track record of large-scale development across Central Europe, came to CBRE looking to build a London Living platform. Three months of research later, including time spent studying the market and assessing how other new entrants had succeeded, Penta concluded that it wanted to enter through a partnership with an established London developer rather than picking up sites individually.

The Outcome

CBRE brokered the partnership with Ballymore, known for design-led, high-density development across London and Dublin. The resulting JV covers three schemes in: Canary Wharf, Nine Elms, and Brentford. Approximately 1,000 private homes between them, with an end value in the region of £1bn. The schemes themselves are build-to-sell.

Why it Matters

What unlocks them is the long-term partnership behind them, the same logic that is reopening pipeline across Living more broadly. There is precedent: an earlier Ballymore collaboration with Eco World delivered c.3,000 homes worth £3bn across an earlier phase of Embassy Gardens, City Island, and the Wardian.

Legal & General’s acquisition of the Lambeth Hospital site illustrates how the buyer mix in London’s land market is shifting. The current market means underwriting traditional land deals in London with a build to sell business plan is difficult. This presents opportunity for long‑term Build‑to‑Rent capital to compete.

The Ask

Lambeth Hospital, an NHS disposal in Clapham advised by CBRE, came to market with planning consent for approximately 550 homes on a well‑connected site near Clapham North . The combination of the site’s strong location, planning certainty, and potential for further value engineering opportunities, meant it was well received by the market.

The Outcome

Legal and General acquired the site through its ADP fund, bringing patient capital with the intention of reworking the planning – likely through a Section 73 amendment – and operating the asset once delivered.

Why it Matters

The case highlights two structural advantages currently shaping what gets built in London today.

Firstly, a long-term view helps overcome the immediate challenges.

Secondly, scale and form matter more than ever, lower rise schemes are, today, demonstrably easier to get built.

The Ask

PIC’s BTR investment strategy sets out a targeted approach to acquiring well-located, best-in-class developments in strong locations. Their aim has always been to invest in the UK’s structurally undersupplied Living sector, and in order to do so were searching for an asset to match.

The Outcome

In Q1 2026, PIC completed the acquisition of Ebb and Flow, a stabilised income-producing Multifamily BTR asset in Reading, for in excess of £200m in a CBRE-advised deal – the largest single-asset BTR purchase in two years.

Why it Matters

Reading sits outside Greater London. The reason it reads across is that the supply of well-located, professionally managed rental stock inside Greater London is tight enough that workers are travelling further to find quality housing they can afford. That has stretched the geography institutional investors recognise as the London labour market.

Burns explains what the deal itself signals: “PIC have been looking for a really high-quality asset in London/the South East for a long time. Having funded bespoke assets across the country, they wanted to acquire an income producing asset that meets this specific criteria. In Ebb and Flow they have bought a first class building that works for them and should set a benchmark for what large annuity investors will pay for larger stabilised Multifamily assets.”

Forward funding from 2022 onwards has been a regional story. Bristol, Birmingham, Manchester, and Leeds. Land and, importantly, grants were available. Rents were affordable. Entry costs were lower. London, by contrast, carries one of the heaviest contribution loads in the country: CIL, Section 106, the forthcoming Building Safety Levy, tenure-mix requirements. Grants have been on the table – through the GLA’s Affordable Homes Programme, Places for London, and more recently the City Hall Developer Investment Fund – but it sits on top of contributions that themselves create a good part of the gap the grant is designed to close.

The grant numbers however, are not small. The Social and Affordable Homes Programme is a record £39bn over ten years (2026-2036), with the GLA delivering London’s £11.7bn share. Beyond that, £1.5bn of low-cost loans is being made available to registered providers on 25-year terms at 0.1% interest, enabling the delivery of affordable housing, and a further £324m sits within the GLA’s City Hall Developer Investment Fund, deployable as grant, debt, or equity to support all forms of residential-led schemes. The layering of instruments gives the system flexibility, and its complexity.

What is changing is the supply picture. London delivery has declined. CBRE’s analysis points to a particularly acute shortfall in 2027 and 2028. Population growth, buy-to-let landlord exit, and first-time-buyer affordability all push in the same direction. London Multifamily occupancy has held at 95% or above in every quarter since Q1 2022.

CBRE’s Multifamily Index recorded 2.9% rental growth in the year to Q1 2026 against the HomeLet Rental Index at 1.8%. All-tenancies growth is forecast at 2.4% per year through 2030 (12.7% compound); BTR is expected to sit above that.

Saunderson draws the conclusion: “Investors who were looking elsewhere are now looking at London and saying, because there is such low delivery coming forward, there will be a shortfall. That leads to a supply-demand imbalance, because we know the population of London is going to keep growing.”

For investors who entered the regions in 2024 and Single Family in 2025, London in 2026 is the next logical deployment – albeit one that demands more structured capital solutions than the cycle before it.

The capital story for London living in 2026 is something other than a return to the previous cycle. The previous normal is gone. What has replaced it is a market defined by international institutional capital, structured partnerships, longer hold periods, and a more sophisticated approach to risk-sharing. CBRE’s end-to-end Living platform – land, capital markets, agency, valuation, debt, and research, working as one – is built for exactly this market. For those with the capability to originate, structure, and connect these flows to viable London opportunities, transactions are getting done. For those waiting for a return to simple forward funding on yesterday’s terms, there is no real timeline to suggest when that will be.

The portfolios in or approaching the market reinforce the point. The L&Q portfolio is due to trade at circa £1.2bn. The Notting Hill portfolio is on the market at c.£750m. CPPIB's Elephant Park is reported to be under offer at c.£500m. The depth of capital ready to deploy at scale into London Living is greater now than at any point since the mini-budget in September 2022. Burns notes: “when these larger deals close, the interest in London as a global city to deploy significant capital will be elevated. London has always been the city of choice to buy large office towers and world class hotels and retail flagships. Living investment will join this roster for such investors.”

Our London Living series follows suit with our second article spotlighting the supply side of this same picture and a third article on the demand being seen across the sector.