Total investment into the specialist sectors in the UK will increase by 10% year on year to reach £14.3 bn (€18.5 bn) by the end of 2016, according to a new research report published by Knight Frank.
In 2015 18.3% of all commercial property investment transactions were in specialist property, with huge levels of inward overseas capital accounting for an average of 62% of all transactions. All four core sectors, hotels, healthcare, student property and automotive, saw volumes exceed their five and ten year averages, with hotels and student property markets setting new benchmarks in the last 12 months.
There has been a significant shift to the non-traditional asset classes by investors – since 2006, £46.6 bn has been invested into these sectors, with a record £13 bn invested in 2015 alone.
Momentum will continue across all specialist sectors, Knight Frank said, with a shift in buyer profile already witnessed, as debt-backed investors have entered the market along with the UK institutional funds. Buyers are now viewing specialist sectors as a ‘defensive’ asset class – providing long, stable income flows.
While overseas investors from North American Funds and Asia-Pacific investors will be prominent, evidence of growing momentum is provided by the scale of M&A activity occurring at operational level in these sectors – not only in private equity, but also REITs, hedge funds, family offices and US trade interests.
'The market has changed. Investors primary focus now is the longevity and durability of their income return and the specialist sectors are ideally suited to offer this style of investment product to the market,' said Shaun Roy, head of specialist property investment at Knight Frank.
Lee Elliott, head of commercial research, Knight Frank added: 'The momentum that has built within the specialist property sectors will be maintained. Despite emerging headwinds such as the EU Referendum and the operational effects of the National Living Wage, the inherent qualities and drivers of these sectors will be alluring to a broad array of investors.'
