Global institutions are predicted to double investment into UK Living sector, according to Investec Real Estate’s “Living: As safe as houses – Future Living 3” report.
Data for the firm's third annual report was gathered from 50 global institutional investors representing over £400 bn (€460 bn) of AUM.
It says investors plan to deploy an average of £248 mln into the Living sector over the next 12 months, more than double the £113 million cited in the 2021 report.
Student accommodation has risen from tenth to first in terms of investor appeal – 59% of respondents are optimistic about student accommodation compared to just 27% in 2021.
Investor allocation to office and retail sectors are to decrease for 52% and 40% of investors respectively over next 12 months, while 71% of respondents said that it will be more difficult to access asset-backed, senior debt over the next 12 months.
Investec explained that despite an unprecedented period of macroeconomic volatility, global institutional investors’ attitudes towards the UK Living sector are at their strongest in nearly half a decade. The trend is being driven by a combination of the sector’s ‘compelling societal and demographic trends’, which were accelerated by the pandemic, and an acute shortage of product.
The picture is far less rosy for other sectors, with the future of offices and retail highly uncertain.
Jonathan Long, head of corporate lending, said: ‘The UK Living sector has been our strongest conviction call over the past decade and it is enjoying a prolonged period of global institutional investor support. Whilst the funding landscape has been turned upside down by higher rates and macroeconomic pressures, structural shifts accelerated by Covid-19 are redrawing the commercial real estate map and positioning Living firmly in the mainstream. Investors have been drawn to both the strong rental growth prospects and the valuation resilience.’
‘Comparing the findings from our third Future Living report with its previous iterations has enabled us to map a number of the trends driving investor decision making. These latest insights align with what we continue to see as a business with investors looking past the near-term market volatility at the Living sector’s compelling fundamentals.’
Attitudes towards sustainability remain complex. Three-quarters (77%) of respondents said recent market volatility and economic uncertainty had relegated sustainability down investor and corporate agendas. At the same time, 78% of respondents were likely to seek sustainability-linked financing over the next 12 months – showing that they still recognise the benefits of improving the green credentials of their portfolio.
