Category: Market Reports

Rental growth surged across the Living sectors in Q2 2024, driven by high demand and tight supply underpinning performance in each sector. Investors are increasingly drawn to the sector, recognising the important role they now play in the UK housing landscape. Purpose-built student accommodation (PBSA) continued to be the darling of the Alternative sectors and is set to outweigh other living asset classes over the next 12 months. 

Rental growth surged across the Living sectors in Q2 2024, driven by high demand and tight supply underpinning performance in each sector. Investors are increasingly drawn to the sector, recognising the important role they now play in the UK housing landscape. Purpose-built student accommodation (PBSA) continued to be the darling of the Alternative sectors and is set to outweigh other living asset classes over the next 12 months. 

Rental growth surged across the Living sectors in Q2 2024, driven by high demand and tight supply underpinning performance in each sector. Investors are increasingly drawn to the sector, recognising the important role they now play in the UK housing landscape. Purpose-built student accommodation (PBSA) continued to be the darling of the Alternative sectors and is set to outweigh other living asset classes over the next 12 months. 

Investment in UK purpose-built student accommodation (PBSA) topped £1.7 billion in the second quarter of 2024, the strongest quarter for investment since 2022. Investment volumes were strongly inflated by Singaporean-based Mapletree’s acquisition of the Cuscaden Peak Portfolio. Although this deal included some assets in Germany, the portfolio is UK dominated and our estimate of the UK asset value proportion is approximately £960 million. This took investment in the first half of 2024 to £2.45 billion, notably ahead of the same point last year (£1.1 billion).

2023 has been a challenging year for real estate due to persistent inflation and a 15-year high in interest rates, both of which negatively impacted economic growth. This led to plummeting volumes of commercial real estate (CRE) investment, which hit a decade low, as investors grappled with declining asset values and increased borrowing costs. Yet while 2024 will likely start the same way, there is more to be optimistic about. The inflation rate significantly fell towards the end of 2023 and is expected to continue its downward trajectory. Although CBRE anticipates base rates to stay high for an extended period, there is the real prospect of rate reductions in the latter half of 2024, which would be advantageous for both occupiers and investors, and should stimulate increased activity.

2023 has been a challenging year for real estate due to persistent inflation and a 15-year high in interest rates, both of which negatively impacted economic growth. This led to plummeting volumes of commercial real estate (CRE) investment, which hit a decade low, as investors grappled with declining asset values and increased borrowing costs. Yet while 2024 will likely start the same way, there is more to be optimistic about. The inflation rate significantly fell towards the end of 2023 and is expected to continue its downward trajectory. Although CBRE anticipates base rates to stay high for an extended period, there is the real prospect of rate reductions in the latter half of 2024, which would be advantageous for both occupiers and investors, and should stimulate increased activity.

Positive momentum is building across the national multifamily landscape. Decades-high inflation shook the financial confidence of many households in 2022, leading to a freeze in formations. The net absorption of rentals returned to positive territory last year, however, accelerating each quarter, and the positive momentum is set to continue this year as inflation tapers. Tight housing market underscores need for rentals. The cost to buy a condo or a single-family home today has skyrocketed, due to both elevated mortgage rates and stubbornly-high sale prices. The typical mortgage payment on a median-priced home now exceeds the average Class A apartment rent by over $800, a record. Fewer renters will transition to homeownership this year, which will further grow the renter pool amid new household formation. The nation still faces a long-term shortage of housing, warranting the magnitude of the current multifamily pipeline, if not the condensed timeline.

International real estate investment manager Savills Investment Management (Savills IM) has announced its global outlook for real estate investment markets in 2024, highlighting several key sectors it believes offer rewarding opportunities for informed investors. Although higher inflation and bond yields provide a challenging backdrop for the sector in 2024, Savills IM believes that real estate will continue to provide highly attractive value creation opportunities for investors through compelling yields, capital protection or capital growth.