New sectors and locations attract capital
What if alternative investments and locations could mitigate risk and drive greater long-term growth?
There is currently US$1.5 trillion of new capital targeting global real estate from institutional investors, private equity and emerging new sources, which will support demand for UK property assets as capital-rich investors chase yield.
While the traditional sectors such as offices, logistics, residential and retail stand to benefit from this influx of capital, emerging property sectors are growing fast, particularly living, logistics, life sciences, data centres and self-storage. These alternative investments offer a different risk and return profile enabling investors to hedge against and even outperform traditional asset returns.
“Build to rent, senior living, data centres and life science: these are likely to be the main winners of post-pandemic life in UK real estate” Jon Neale, Head of UK Research
Meanwhile, UK cities significantly outperform other international real estate investment centres based on strong demographics. Investors and developers will focus on investment opportunities in the cities known as Innovation Geographies, which have recorded the fastest rental growth over the past decade and will continue to attract a higher proportion of capital. Almost half of investors surveyed (44%) say they will place greater emphasis on city investment strategies than before the pandemic.
"UK cities are well-placed to benefit as the ‘war for talent’ continues to push both corporates and investors to secondary, often more affordable, talent hotspots.”
Alistair Meadows, Head of Investor Developer clients
Reasons to diversify
End-users drive demand
UK cities are bouncing back from the impact of the pandemic with offices, shops and logistics seeing a surge in activity. This is largely being driven by demand among the younger population, who are disproportionately based in the UK’s urban areas.
New subsectors attract capital
Built-to-Rent is expected to remain a standout performer in the living sub-sector with student housing, healthcare, co-living and residential attracting a greater number of investors who see value in the full lifecycle of accommodation.
Regional cities rise in importance
Cities in the North of England and the Midlands can expect a boost from the UK government’s infrastructure investment programme known as ‘Levelling Up’, which has promised £4.2 billion in funding for transport in major cities outside of London.
Investors need to reposition, diversify and repurpose
Reposition, diversify and repurpose your assets and portfolios.
Traditional investment approaches are being challenged and investors need new strategies to drive returns and reduce risk.
Recalibrate your asset and capital strategies.
Investment and capital strategies suited to the pre-pandemic landscape may no longer be profitable.
Build resilience to withstand future unknowns.
Investors will repurpose existing assets to build resilience across their portfolio and drive performance