Outlook 2024: UK a harbinger of the future of real estate

If the UK is a harbinger of the future, as usually is the case, things are looking up for real estate, experts agreed at Real Asset Media’s Outlook 2024: Key Trends & Opportunities briefing, which took place recently at Schroders Capital’s offices in London.

“We’re seeing a pick-up and deals are starting to happen with more frequency in the UK,” said Nick Preston, head of investment management, Panattoni Investment Management. “The gap between sellers’ and buyers’ expectations was huge but now it’s narrowing. The UK is often the vanguard, so this is likely to happen in the rest of Europe soon.”

The gap is narrowing from both sides, he explained, because vendors are being more realistic about pricing and at the same time investors are becoming more positive because of macroeconomic developments, such as inflation’s downward path and the expected decline in interest rates.

“Price corrections happened earlier and have been faster in the UK and there are opportunities to be found this year,” said Miles Skinner, head of investment management UK & Ireland, Union Investment Real Estate. “It marks a change, as it has been a challenge to deliver returns and our funds are underweight to the UK market.”

In 2022, Union invested more in Poland than in the UK. Now, since opening its London office, the German group is actively looking for opportunities in the UK market.

It is definitely not the only one, said Preston: “There’s a real interest in investing in the UK from all over the world, from Asia to the Middle East to the US and Australia. A lot of people have raised equity, they have been cautiously sitting on the sidelines, but fundamentals and prospects are now better, so they are ready to invest.”

In some in-demand sectors like senior housing market activity re-started even earlier.

“2023 was the busiest year for us in terms of transactions,” said Mathilde Guittard, senior investment manager, Octopus Real Estate. “There were less buyers in the market so we were able to negotiate. But in the core sector in the UK there have been no pricing corrections. There’s a lot of interest from US and Middle Eastern capital and UK pension funds want to invest in senior living for rent.”

Traditionally, the UK market has been build to sell, with many cash buyers, so it has been less affected by rising interest rates, but now the rental model is being explored as the sector expands.

In general all the living subsectors – senior housing, student accommodation, BTR, affordable housing –   are in great demand.

The confidence that is returning to the UK market could be a sign of things to come in other European markets. “We’re positive things will improve by the end of the year,” said Rogier Bos, real estate finance Benelux, Berlin Hyp.