U.S. private equity giant Blackstone has agreed to buy 1,750 new homes to rent from British housebuilder Vistry, as institutional investors bet on a shortage of rental properties.

Large investors are increasingly putting cash into rental homes which have fared better than other commercial property sectors such as offices and retail, through a period of soaring borrowing costs and changing working patterns.

Vistry said on Tuesday it had agreed terms with Blackstone Real Estate and minority investment partner Regis to buy the homes with a development value of 580 million pounds ($740 million).

This is Blackstone‘s second acquisition from Vistry in eight months, after the private equity firm bought more than 2,800 mixed-tenure new homes in November.

“Institutional private capital can play an important role in providing high quality housing stock across the UK, particularly in the private rented sector which is significantly undersupplied today,” said James Seppala, head of European Real Estate at Blackstone.

The latest portfolio, concentrated in the southeast of England, will be managed by private rented sector housing provider Leaf Living, which is backed by Blackstone and Regis.

The first completions under the agreement are expected by the end of this month, with the majority of homes expected to be completed within the next two years.

Vistry has sounded a more optimistic note on the housing sector than its peers in recent times on the back of resilient demand for its affordable homes, mainly from housing associations and the private rented sector.

Last month, Vistry raised its annual homebuilding target by about 3% to over 18,000 units after rivals, including Taylor Wimpey TW.L and Persimmon PSN.L, warned of subdued market conditions this year.

Reuters