Investment into UK student and BTR property will increase by 25% this year, CBRE has forecast.
A total £2.9bn of resi investment was recorded in Q1 2022, a 48% rise on the same period in 2021. CBRE said this illustrated the strength and resilience of the sector in the face of rising construction costs and inflation.
Andrew Saunderson, the firm’s head of UK residential capital markets, said: “Following unprecedented levels of investment in 2021, and in the face of some headwinds including higher construction costs and inflation, investment levels for Q1 have certainly been healthy.
“Investor appetite for residential remains strong as the sector continues to go from strength to strength.”
PBSA accounted for nearly half of the total investment, with £1.4bn being the highest Q1 volume since 2015, excluding the iQ/Blackstone entity-level transaction in Q1 2020.
Activity was distributed across the country, with the largest portfolio deal being Downing’s £388m acquisition of assets in Manchester, Coventry and London from Greystar.
Appetite is keen for new PBSA stock, with more than a third of beds traded in Q1 built in the last three years. However, the acquisition of the Unite portfolio by Lonestar also demonstrates demand for older stock, with all beds in the portfolio developed before 2015. Despite supply constraints and a slowdown in development activity, CBRE noted that several significant deals were already in the pipeline, indicating a highly active year.
BTR investment in Q1 was up 9% on the same period last year at £860m. Investment was heavily weighted towards London and the south, accounting for 77% of deals. A new entrant, Oaktree & CompassRock, partnered with Crest Nicholson to provide more than 400 BTR homes in Walton-on-Thames, Southampton and Farnham.
The largest deal of the quarter was PIC’s £130m income-strip style arrangement of Wirrall Waters One, which showcased a new BTR funding structure that could be considered for other developments in the future.
CBRE said the quarter showed that demand from occupiers is strong and growing, with a return to city centre living evident.
The positive momentum is expected to continue in Q2, with provisional data showing £2bn of BTR deals under offer, as well as significant PBSA deals in the pipeline. The appetite for other residential sectors, including co-living and affordable housing, also remains strong.
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