In Focus Collections In Birmingham, a public-private
partnership between the city council and regeneration specialists is planning to transform a 43-acre site in a neglected area of the city, Icknield Port Loop, bringing 1,150 new homes, office and retail space, parks and leisure facilities. Elsewhere, a £300m regeneration plan
has been approved for a 112-hectare site in the Royal Docks Enterprise Zone in London, with the aim of creating 35,000 jobs and 4,000 new homes.
What about the demand? Affordability remains a significant hurdle for many homebuyers. The lack of housing supply, tighter credit conditions and high levels of valuations relative to incomes (despite modest wage gains in recent months) continue to present barriers for prospective buyers, especially those at the start of the ladder. All of these factors are increasing the
attractiveness of the private rental market and so institutional investment in this area is growing strongly, especially as private buy- to-let investors leave the market. According to CBRE, £2.1bn of institutional capital was invested into UK real estate between the fourth quarter of 2017 and the third quarter of 2018, a rise of more than 50% from the previous 12 months. The rental market is still considered to be
supply constrained and there is opportunity for further growth. Private rentals, for example, are becoming a lifestyle choice for the older generation, as shown by the growing popularity of build-to-rent retirement living. According to the Centre for Ageing Better,
the number of older people renting has risen to 414,000 in 2017 from 254,000 in 2007. It is estimated that up to one-third of those over the age of 60 could be living in private rented accommodation by 2040. More broadly, in the so-called ‘beds’
sectors – student accommodation, hotels, and healthcare – demand remains strong. Healthcare in particular is more defensive and should be less exposed to any political and economic turbulence. It should, therefore, continue to benefit
from new investment, especially as new technologies drive changes in how healthcare services are delivered.
June 2019 In other sectors, too, lifestyle changes
brought about by technological innovations may have the potential to transform UK town centres. Demand for flexible working space surged in 2018, with the ‘co-working revolution’ showing meaningful traction in the South East and regional cities, and further expansion is expected in 2019. According to CBRE, demand for flexible
working space is significantly above its five- year average – more than 50% in London; more than 100% in regional cities; and more than 150% in the South East.
Alternative lending Over the past couple of years, capital appreciation opportunities have diminished across commercial and residential property sectors. With this in mind, and given the expectation that re-development of the underperforming retail space will become more common in 2019, what is the most efficient way to access this market? As traditional lenders have stepped back
from property lending over the last 10 years, this has opened opportunities for alternative financing through the asset-backed loans market. These types of investment vehicles, with investments secured against the underlying assets, are considered to be a
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The lack of housing supply, tighter credit conditions and high levels of valuations relative to incomes (despite modest wage gains in recent months) continue to present barriers for prospective buyers, especially those at the start of the ladder
more efficient and stable route to access the property market versus buy-to-let or traditional equity funds. Asset-backed loans also offer attractive net yields for the risk taken relative to UK government and higher quality corporate bonds. The prospect of re-shaping the high street
for twenty-first century needs should be viewed as an emerging and growing market opportunity. Being able to take advantage of development finance opportunities, real- estate investors also have the potential to be part of the movement to transform UK town centres and bring wider social, economic and environmental
benefits.CCR
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