BNP Paribas Real Estate analysis has revealed that investor allocations to the ‘beds’ sectors are the biggest drivers of investment volumes this year to date, and have achieved the largest 12-month market share ever recorded.
- According to the latest data shared today, a total of £11bn of UK CRE investments changed hands in Q2 2024 (8%+ y/y), bringing the H1 2024 total to over £22bn (in line with H1 2023).
- On a rolling 12-month basis, the overall investment volume now stands at £40bn and has remain largely unchanged for the last 12 months, confirming overall liquidity levels have reached a trough.
- Living and hotels sectors account for 33% of the £40bn total at £13.3bn, the biggest 12-month market share versus other sectors achieved on record.
- Annual hotel investment volume alone stood at £3.6bn – the strongest half-year registered in history.
Rebecca Shafran, alternative markets research lead at BNP Paribas Real Estate commented: “The increasing institutional interest in the beds sector really is palpable at the moment. Cross-border investment is up 147% year on year in the first half of this year. We’re seeing allocations increase across the board from a domestic standpoint with the likes of L&G, Aviva and M&G.
“To give an idea of scale, a decade ago this would typically account for 10% of an annual overall investment, and today at double that against a backdrop of uncertainty of stagnation, as well as rising interest rates and build costs. Now that we’re on the other side of that, it’ll be interesting to watch how allocations could grow, especially given the recent change in government.”
The BNP Paribas Real Estate residential capital markets team note that student housing is dominating enquiries at around 50% of all investment interest and believes it will outperform all other living asset classes in the next year. This interest is followed by Build to Rent.
Andrew Screen, head of residential capital markets at BNP Paribas Real Estate commented: “There’s a huge amount of opportunistic capital chasing the beds sectors. As a firm, we’ve seen our volume of calls increase substantially over the past 8 weeks. Student Housing is drawing the most investment attention because its underpinned by counter-cyclical drivers and has a strong outlook on rental growth. Build to Rent is also commanding serious investment interest where yields are typically tighter and the current focus is for development opportunities in London and key regional cities.
“We can expect to see larger living sector portfolio transactions coming to market towards the end of the year. One of the key triggers to accelerating investment transactions will be the anticipated interest rate reductions which will provide greater confidence in the economy.
“In terms of the private rented sector, investment is largely weighted towards value-add aggregation opportunities and we have also seen an increase in investor interest in affordable housing, particularly in establishing new funds, recognising the need for new supply.”
BNP Paribas Real Estate also expects the government’s announcement to restore mandatory housing targets, with the Chancellor committing to manifesto pledge of 1.5 million new homes over the next five years, ensuring social and affordable homes are spread across the UK, will only support this continued growth.
On the outlook for the hotels sector, Simon Williams, head of national capital markets at BNP Paribas Real Estate added: “The comeback of hotel portfolio transactions alongside single asset deals have propped up activity levels as we start to see more a match between buyer and seller expectations. Further economic stability shall continue investor momentum to the end of the year and beyond.”
Within the Beds segment, Residential (including student housing, affordable and senior living) is up 23% y/y over H1 and 7% above the 10y H1 average.
