A new shining star
By Mike Gorman, senior director, CBRE’s UK Development & Residential Capital Markets team
Despite the prolonged issues resulting from the Covid-19 pandemic the residential sector has shown its resilience and stood up well against other asset classes.
As we start to look forward to warmer Spring weather and the easing of some lockdown restrictions, the residential investment market is in great shape to help accelerate housing delivery to meet the increasing demands of both occupiers and investors.
If you had told me a year ago that I would be spending a rather large proportion of my working week advising pan European and Global investors on strategies to deploy hundreds of millions of pounds into suburban housing, I would have said that this type of growth would take a few years. When we launched Project Thistle, a portfolio of 918 operational stabilised single family residential properties, we were overwhelmed by the diversity of capital willing to invest in the sector and since the portfolio has sold the market has ignited.
We have found that more and more investors are focusing on residential housing in the UK because of better returns (when compared to other European countries), the stability of the income and the prospect for favourable rental growth.
The structural supply/demand imbalance of decent housing stock has also helped accelerate this trend as occupiers seek increased green space and larger accommodation to support working from home and to provide a better environment for their family’s health.
As this sector matures and if the trend is to continue at a strong rate then there will not only be a focus on delivering high quality housing in strong suburban locations quickly, but due consideration must be given to the role environmental social governance (ESG) can play.
We have seen a sharp increase in requests from investors for changes to specifications and construction methods as funds are focusing on building and owning socially responsible homes for their tenants. As we have seen across the more established build to rent market, everyone has their own take on what should be provided and how best to provide it; one thing is for certain this market is continually evolving and improving and so too will the quality of the homes on offer as each scheme seeks to progress on the last.
As we start to ease out of lockdown and as the skies clear for the summer hopefully the residential star will help guide us through 2021.