Investment in housing gains momentum as UK govt eyes planning overhaul
On the day that the UK Prime Minister announced the government would change rules to make homebuilding easier, ICG-Longbow announced it would fund the construction of 2000 purpose-built homes in the UK over the next five years.
Theresa May, speaking at a national planning conference in London, said she would overhaul the national planning policy framework (NPPF) in a bid to resolve the UK’s lack of available housing.
Meanwhile, institutional real estate debt fund manager ICG-Longbow, which has funded the construction of more than 1,8000 residential units since 2014, said it had moved more directly into the homebuildling sector through a joint venture with residential specialist SDL Group.
The venture Wise Living will buy sites and develop detached and semi-detached housing for rent in the UK, working with local authorities, land agents and housebuilders across the Midlands initially.
Today, CBRE released figures showing that institutional investment in the build-to-rent (BTR) hit a record last year, with committed capital going beyond £2bn (€2.45bn). According to CBRE UK Development and Residential Capital Markets, total capital committed in 2017 rose 33% to £2.4bn from the previous year.
Arthur McCalmont, a senior director at CBRE UK Development and Residential Capital Markets, said: “With over 19,000 build-to-rent units now completed in the UK, financial investment is finally starting to translate into a housing alternative that has been well-received by tenants.
“The response of the market, combined with a greater understanding of the build-to-rent investment offering, has engaged new operators from all over the world, as well as established investors, and we are now seeing more capital deployed into build-to-rent than ever before.”
Today’s speech by the Prime Minister focused on encouraging developers to desist from landbanking, but Adam Jaffe at Investec Structured Property Finance said this would not go to the heart of the matter.
“While Mrs May speaks positively about tackling planning delays and reducing land-banking to try to increase housebuilding, these issues have been prevalent for many years and require direct action to make a difference,” he said.
“The government can legislate to help these processes but real change has to come from within the industry itself. Working together with government is the only way to create the housing supply that is so needed.”
ICG-Longbow said it was in advanced negotiations to acquire a four-acre brownfield site in Mansfield to develop 75 family homes.
The start of the year has already seen a number of UK BTR investments, including a €450m project to develop over a thousand apartments along with retail facilities in Dublin by APG Asset Management and Hines joint venture in January.
In the same month, Lendlease and Canada Pension Plan Investment Board announced a partnership to invest an initial £1.5bn in the sector.
Last month Barings Real Estate Advisers said it was supporting a BTR project in the Northwest of England with a £34.7m loan.
Invesco Real Estate also expanded its UK build-to-rent programme by forward funding a development in Liverpool. Invesco again said it partnered with residential developers Patten Properties and Panacea Property Development to deliver 383 BTR units in Liverpool city centre.
CBRE said the majority of BTR investment last year was made in the form of forward-funding agreements. At 63%, they took over from forward-commitment deals that had predominated previously.
BTR land sales also increased significantly during 2017, CBRE said.
The report noted particular interest from US investors that have experience in their domestic multifamily market.
“US and Canadian investment accounted for 41% of total capital in 2017, with UK capital accounting for 46%,” it said.
CBRE’s report stated that majority of transactions, representing 40%, were recorded in the fourth quarter of 2017. Notable deals during that period include Grainger agreeing three deals for an aggregate £86m in Sheffield, Manchester and Birmingham.
Additional investment from Legal & General meant that Birmingham alone secured £81m worth of investment during the quarter.
One of the landmark London deals of 2017 – Canada Pension Plan Investment Board’s £250m investment in Lendlease’s Elephant & Castle project – was made in the fourth quarter.