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Investec RE predicts a golden age for UK resi for rent sector

A BTR scheme that Investec is funding in Walthamstow

It’s a golden age for investment into the UK resi for rent sector, according to a global survey of 52 institutional investors representing over £500 billion in assets under management.

The report by Investec Real Estate reveals that the UK “beds for rent” sector, which includes build to rent, PRSA, co-living and retirement housing, has emerged from the pandemic as a clear winner.

Built to rent has become core to investment strategies, with 60% of investors currently deploying capital in the sector, up from 60% in 2019. Retirement living has also soared in popularity, with 33% of respondents investing in the sector compared to 20% in 2019.

“Beds for rent” has far outpaced the office, retail and hospitality sectors and its prospects for the next decade are also better, which explains why 85% of investors plan to either increase or maintain their portfolio allocation to the sector, compared to just 58% for offices.

The number of investors committing over £1 billion to the sector is expected to increase five-fold over the next five years, according to the “Beds for rent: a golden age” survey.

This is the second Future Living report by Investec Real Estate and it highlights how much has changed since the first report was published in 2019. The pandemic has disrupted the traditional asset classes such as offices and retail and has transformed investors’ attitudes towards real estate sub-sectors, making them more attractive.

“Beds for rent” is seen as particularly attractive because of its defensive characteristics, which have come to the fore during the crisis and have “turbo-charged its appeal”, as the report says. Higher rates of occupancy and rent collection, coupled with investors’ growing comfort level with exposure to operational real estate, have fundamentally changed how the sector is perceived.

The report highlights also how, five years after the EU referendum, investors’ concerns over Brexit seem to have dissipated and political uncertainty is no longer seen as an obstacle to growth. Investors now identify availability of stock and unattractive pricing as the main stumbling blocks, while more than 80% of respondents believe the outlook for the sector is more attractive outside London.

“The beds for rent sectors are now core to investors’ strategies, as a combination of accelerated structural shifts, the fact that everyone needs a roof over their head and unprecedented disruption has reshaped the UK real estate market”, said Mark Bladon, Head of Real Estate, Investec.

“As the United Kingdom’s recovery from Covid-19 picks up pace, we expect to see growing appetite for nationwide investment into the sector”, he said, with strategies encompassing student, BTR, serviced apartments and retirement living becoming increasingly common.

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