When we started our annual real estate review in 2013 the world was a very different place. David Cameron was prime minister, Ed Miliband was leader of the opposition, Barack Obama was the president of the United States and Britain was an active participant in the European Union.
Global capital was flooding into UK commercial real estate of all types, with retail property and shopping centres in particular continuing to generate significant interest. Residential property was still an outlier.
How things have changed. Residential of the 'beds sector' is now one of the hottest asset classes in real estate according to our annual poll.
Beds, Sheds & Meds
Distribution/Logistics is the most appealing asset class for the fourth year in a row with 69%, followed by Retirement Living (63%). Having covered the sheds sector in our report last year, the rise of retirement living and PRS in particular are very much our focus in this year’s research.
PRS and Healthcare (58%) are joint-third, with the latter increasing its appeal by 10% since last year, and 14% since 2016.
There continues to be strong interest in the private rented sector: CBRE reports that total cross-border capital into European multifamily housing totalled EUR 52bn between 2015 and 2018 – a 221% increase over the previous four-year period.
Once again, Retail remains the least appealing asset class (12%), down 23% since 2016, although there has been a five per cent improvement in its appeal as values begin to bottom out. There is widespread speculation that private equity buyers and opportunity funds are circling the retail property world, bargaining that it is over-sold.
Among these investors there is a view that even if 20% of UK retail becomes obsolete that still leaves 80% to service a nation of more than 60 million people in one of the world’s top five economies. If rents are re-based – and, even better, if the business rates regime is overhauled – these investors believe they can refresh and rejuvenate retail property which for now appears in the doldrums.
Offices are another asset class which has bounced back a little this year, up 10% to 54% from 2018. With occupier demand still strong and a lack of available stock, investor interest in this sector of the market has returned.
To find out the very latest views from over 200 global real estate professionals with total assets of over EUR 3bn on Brexit, market sentiment, the London market and international investment trends, please download the full Urban Being real estate report.