'Beds for Rent: A Golden Age’ — which surveyed over 52 global institutional investors, representing £514bn in assets under management — looked at how the pandemic transformed investors’ attitudes towards real estate subsectors.
According to the report, BTR has become core to investment strategies, with 60% of investors currently investing in the sector.
It also revealed a fivefold increase in the number of investors committing over £1bn to the 'beds to rent' sector over the next five years.
In addition, 85% of investors expect to either increase or maintain their portfolio allocation towards the ‘beds for rent’ sector over the next 10 years, versus just 58% for offices.
In terms of location, over 80% of respondents believe the outlook for the ‘beds for rent’ sector is more attractive outside of London.
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Reflecting the growing maturity of the BTR sector, 71% said ‘beds for rent’ today can be viewed as two-tiered, with BTR and PBSA fully established versus the other asset classes.
Retirement living is viewed as the next market most likely to establish itself fully in the UK, with 60% seeing it as particularly appealing from an investment perspective over the next five years, up from 35% in the first Future Living report.
This area is now the most appealing of the ‘beds for rent’ sectors, significantly ahead of the well-established BTR and PBSA spaces.
While PBSA has become more appealing, with 40% currently investing in it compared to 33% in 2019, current uncertainty is impacting on its longer-term appeal, with optimism for the next five years for student accommodation (27%) almost halving since 2019 (48%).
Mark Bladon, head of real estate at Investec (pictured above), commented: “When we launched our first Future Living report in 2019, it was based on the idea that a new real estate asset class was emerging in the UK that would hold a powerful appeal for global institutional investors.
“It’s encouraging to see the findings of our second report prove this assertion.
“Quite simply, the ‘beds for rent’ sectors are now core to investors’ strategies, as a combination of accelerated structural shifts, the fact that everyone needs a roof over their head, and unprecedented disruption has reshaped the UK real estate market.
“As long-standing funders in the space, it is exciting to be at the heart of this evolution.”
He believes that as the UK’s recovery from Covid-19 picks up pace, Investec predicts to see growing appetite for nationwide investment into the sector, with strategies encompassing student, BTR, serviced apartments and retirement living becoming increasingly common.
“We also expect to see a new set of operational metrics taking hold, with the winners identified for their thoughtful design, development, asset management capabilities and customer care.”