National Regional Property Group will develop the site and Hampshire based PMC Construction has been confiirmed as main contractor.
Construction is set to start imminently with completion anticipated in late 2020.
Helen Gordon, Chief Executive of Grainger, said: “Today’s acquisition is confirmation of our ability to continue to source new and exciting PRS investment opportunities in attractive locations with compelling returns.
“Southampton is a target location for Grainger and this scheme on East Street will deliver 132 new high quality, purpose built rental homes and will allow us to utilise our operational base in Hampshire and provide our customers with great service and a great property to live in.”
Mike Harris, Director of Growth at Southampton City Council, said: “The development at East Street reinforces the importance of Southampton having a City Centre Master Plan.
“It gives developers the confidence to be part of the transformation of this part of the city centre, which is currently undergoing significant redevelopment.
“The provision of high quality apartments in the build to rent sector contributes to attracting and retaining talent in the city, which continues to drive the economic growth of Southampton.
“This £27m mixed-use regeneration project is a predominantly residential led scheme, adding to the city’s emerging private rental sector offering.”