Azfar Rizvi, Commercial Director, Commercial Real Estate, Aldermore.
The PRS has been through a decade of significant change - from tax reforms and rising interest rates to the introduction of the new Renters’ Rights Act.
Our latest research shows that most landlords continue to generate strong returns, with achieved yields comparing favourably to recent historic levels.
While these pressures are felt most acutely by smaller or mid-sized residential investors, the broader Commercial Real Estate (CRE) sector is also undergoing significant adjustment.
However, the motivations and strategies of CRE investors differ from those of smaller or mid-sized residential investors.
Both groups face higher financing costs, regulatory reform and evolving tenant expectations, but they vary in scale, asset types and investment horizons. Opportunities still remain for both.
Aldermore’s latest analysis of Pegasus Insight research1 shows continued strong performance in the PRS, with five out of six landlords (84%) reporting profit from their lettings. Meanwhile, landlords are enjoying average yields of 6.5% - up slightly since the last quarter, with the North West (7.1%) achieving the highest regional returns.
Strong yields are also being recorded in Wales (6.9%), the East Midlands, South East, South West and West Midlands (6.4% respectively). The North East (6.3%) and the East of England (6.1%) also deliver yields above six percentage points. While these figures represent market averages, individual outcomes will still depend on financing costs, refurbishment needs, tenant turnover and periods of vacancy.
Many landlords are understandably cautious about the impact of regulation. On the Renters’ Rights Act, only 8% of landlords think the new legislation with positively impact their portfolios. 16% expect no impact, with 70% expecting an overall negative effect and 5% unsure. Nine in 10 landlords are also concerned about potential backlogs in the court system for evicting tenants.
While these concerns are real, we are seeing many landlords - particularly small and mid sized portfolio owners, and increasingly large and institutional investors - respond constructively. Clients are refinancing to secure more stable repayment profiles, upgrading older stock, and improving EPC ratings to future proof their assets and enhance tenant demand. These are exactly the kinds of practical steps that can turn regulatory pressure into long term resilience and strong returns.
At Aldermore, we’re supporting this transition by providing funding for refurbishment, energy efficiency improvements, and portfolio reshaping. Stronger compliance and improved property quality also create opportunities for longer tenancies, reduced voids, and more predictable returns.
The Renters’ Rights Act has introduced important protections and incentives that can improve standards in the PRS, but it is still creating some concerns for private clients.
By prioritising compliance, quality, and transparency, CRE investors will be best placed to benefit from a more accountable rental market. In turn, this can strengthen trust between landlords and tenants, support longer tenancies, reduce void periods, and ultimately deliver more stable, predictable returns.
These upsides are also helpful for lenders, making properties more attractive collateral and supporting the case for providing financing.
Looking ahead, the fundamentals of the UK residential market remain supportive of long-term investment. Demand for rental homes continues to outstrip supply across much of the country, driven by affordability pressures in the owner-occupier market, population growth in key urban centres, and a persistent undersupply of new housing. Supply remains between 20% and 30% below pre-pandemic levels in every region 2.
Rental growth has stabilised significantly from the peaks seen in 2022-2024, with ONS data showing average UK private rents rising 3.5% in the year to April 2026.
The strongest performing regions for investors remains in the North East, Yorkshire & Humber, the North West and the East Midlands, where gross yields of 6% - 8% combine with above-average rental growth and accessible entry prices. In London, rental growth has returned but moderated, with Zoopla recording 2.2% growth in the capital. Well-located, energy-efficient properties across all regions should continue to command a premium.
This rental growth is also likely to support property value appreciation over time, strengthening long-term capital return for investors.
One of the most promising areas of growth is Build to Rent (BTR). Investment in the sector reached a record £5.2bn in 2025 and is forecast to exceed £5.7bn in 2026, reflecting sustained institutional confidence in professionally managed rental housing as a long-term asset class3. The model is playing an increasingly central role in the UK housing market, offering a modern approach that prioritises flexibility, community, and high-quality living standards. Beyond residential, BTR is influencing wider commercial strategies, with mixed-use developments combining retail, leisure, and residential spaces becoming highly attractive to institutional and private investors alike.
That said, a substantial proportion of the PRS remains with smaller and mid sized landlords, who continue to see strong opportunities outside the institutional BTR space - particularly by upgrading existing stock, adding units to portfolios, or exploring mixed use assets with stable residential demand.
Assets with strong sustainability credentials are also rising up the agenda. Properties with higher energy performance ratings are increasingly seen as more desirable by tenants and investors, reflecting both lower running costs and reduced exposure to future regulatory change. From 2030, all privately rented properties in England and Wales will be required to achieve a minimum EPC rating, adding further urgency to energy efficiency investment. Alongside this, smart home technology and flexible commercial space are becoming key differentiators that enhance occupier satisfaction and long-term asset value.
The most impactful sustainability actions for residential landlords remain practical and asset specific, including targeted refurbishment of older units, EPC uplift projects (e.g., insulation, windows, heating systems) and installing smart metering or energy efficient appliances.
Despite economic and regulatory uncertainty, opportunities remain strong for adaptable investors. Landlords who invest in quality, compliance and sustainability are well positioned to thrive.
At Aldermore, we remain committed to supporting both CRE investors and residential landlords and we continue to see strong demand from professional private clients and institutional investors seeking funding to upgrade or expand their portfolios. This includes acquisitions, refurbishing or repurposing older stock, improving energy efficiency, or refinancing away from other lenders to support their business goals.
We are also seeing a growing interest in smaller-scale development opportunities, as investors look to unlock additional value by bringing forward new units or redeveloping underutilised assets in response to sustained housing demand.
While regulatory change and economic uncertainty brings challenges, they also present opportunities. Stronger standards can help rebuild trust in the sector, support longer and more stable tenancies, and drive demand for sustainable, future-proofed assets. With interest rates beginning to ease and confidence gradually returning, investors who adapt, evolve, and find opportunity amid change will continue to thrive. At Aldermore, we will continue to provide flexible finance and expert insight to help them navigate this landscape with confidence.
Subject to status. Security may be required. Any property or asset used as security may be at risk if you do not repay any debt secured on it.
1 Research conducted on behalf of Aldermore by Pegasus Insight between 9th March – 3rd April 2026 among 631 landlords via 25-minute online interviews with landlords who are current members of the National Residential Landlords Association.
2 Zoopla’s June 2026 Rental Market Report.
3 Cushman & Wakefield’s BTR Marketbeat Report.