Specialist property investment in the UK increased by 40% last year compared to 2016 to reach a record £17.7bn, with investors spending the most in the country’s rapidly rising private rented sector.
The latest research from Knight Frank, The Human Factor; Specialist Property, has revealed strong performance levels in last year’s specialist property sector investment, which accounted for more than a quarter (27%) of the UK commercial property market.
While four of the five specialist property sectors saw higher investment volumes than in 2017, the largest share of the investment went into the country’s private rented sector (PRS), which received £6.3bn worth of backing from investors over the course of the year. Around £0.5bn was invested in automotive, £1.3bn in healthcare, £5.5bn in hotels, and £4.1bn in student property.
Why is the sector so popular among investors?
A number of issues have driven the increase in demand in the PRS for investors. These include the depleting levels of homeownership across the country resulting in more people renting instead, smaller scale buy-to-let investors selling properties leading to a reduction in stock, and general lack of provision of properties combined with population growth pushing up demand.
The report says: “Despite seeing strong growth in recent years, PRS housing remains a tiny proportion of the UK’s overall rental market.
“We see significant scope for investors able to create or back PRS ‘brands’ which prioritise flexibility towards tenant needs and offer superior levels of service and professionalism.”
There are also opportunities to be had in city centre locations for rising number of young professionals, and the report says micro-apartments and co-living concepts will “enhance affordability”.
The benefits of investing in PRS
Income generated from the private rented sector is long-term, secure, and “typically diversified across a high number of tenancies” for many investors.
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Furthermore, it is still an emerging market in the UK as investment levels and developments continue to increase, and therefore now is the best time to start investing and identifying the top opportunities, while demand continues to outpace stock levels.
Knight Frank predicts that PRS investment is set to grow significantly over the next five years, with total investments hitting as much as £70bn by 2022, with an additional one million households in rented accommodation – and investment from both the UK and abroad will drive these numbers.
“The fastest pace of growth will be seen in the market for single family housing, which caters to the rapid growth in the 35-55 demographic,” adds the report.
