Category: Perspectives

Exploring the Dynamics of Private vs. Public Markets: Choosing Your Ideal Investment Strategy

Posted on by Qinorf

Exploring the Dynamics of Private vs. Public Markets: Choosing Your Ideal Investment Strategy

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  • November 21, 2023

Written and contributed by QIP's Marketing Team

Making investment decisions in the dynamic financial landscape involves understanding the unique characteristics of private and public markets. In this blog feature, we delve into the details of these markets and their core differences, to help you tailor your investment strategy and align with your financial goals & risk tolerance.

Part 1: Public Markets

Public markets, as highlighted in McKinsey’s Private Markets Annual Review, stand as a cornerstone for investors, offering a range of advantages:

a. Liquidity: S&P Global notes that public markets boast high liquidity, providing investors with the flexibility to buy and sell assets effortlessly. This liquidity is particularly valuable for those who seek quick access to their investments or prefer a short-term investment opportunity.

b. Transparency and Regulation: McKinsey emphasizes the transparency and rigorous regulation characterizing public markets. Regular disclosure of financial information by publicly traded companies ensures that investors can make informed decisions based on accurate and up-to-date data.

c. Lower Barriers to Entry: Public markets offer a more accessible and often lower-cost investment option, open to the general public. This accessibility provides a wide range of investors with opportunities to participate in the stock market. The relatively low entry barriers make public markets available to both individual and retail investors.

d. Market Volatility: WealthBriefing sheds light on the cyclical nature of public markets and it’s susceptibility to significant volatility and macroeconomic uncertainty. While prices can fluctuate frequently, this volatility presents both risks as well as opportunities for investors.p

Part 2: Private Markets

Private markets, encompassing alternative investments and private equity in Singapore, offer a compelling array of factors showcasing their unique appeal:

a. Superior Returns and an Attractive Risk-Return Profile: Considering private markets becomes particularly enticing due to the potential for superior returns compared to public markets. Over time, private equity has demonstrated returns comparable to Emerging Market Equities and surpassing those of all other traditional asset classes. The combination of relatively low volatility and impressive returns contributes to an appealing risk-return profile.

b. Total Assets under Management (AUM) Growth: Total private markets AUM reached an impressive $11.7 trillion as of June 30, 2022, growing at an annual rate of nearly 20 percent since 2017. The second quarter of 2022 saw dry powder exceed $3 trillion, marking the eighth consecutive year of growth. In private equity, inventory spiked, reaching the highest ratio since 2013.

c. Resilience of Private Assets:

Investors are drawn to private assets, such as real estate investment, due to their non-cyclical nature and lower volatility. The illiquidity and absence of secondary market pricing contribute to this appeal, making private assets an attractive option, especially during times of market dislocation when financing from direct lenders in private credit becomes a reliable alternative.

d. Integration into Financial Markets: Private markets, including private equity in Singapore, have become integral to global financial markets and the real economy. The surge in global private equity- and venture capital-backed M&A transactions in 2021, totaling over $600 billion, underscores their increasing influence. Private equity and private debt have formed a symbiotic relationship, leading to a convergence between broadly syndicated and direct-lending markets. 

e. Performance Outpacing Public Equity: JP Morgan’s 2021 analysis found that the private equity industry continues to outperform public equity. Notably, private equity’s performance metrics consistently showcase outperformance against benchmark indices such as the S&P 500, S&P 600, and the Russell 2000.

Choosing the Right Investment Strategy

While public markets offer certain advantages in liquidity and accessibility, the dynamic landscape of private markets, coupled with their proven track record of growth and resilience, makes them an appealing option for those seeking long-term stability and potentially higher returns.

Diversification and due diligence remain crucial considerations. Our team of experienced professionals is ready to guide you through unique access and co-investment opportunities in institutional-grade real estate assets.

Source:

Private Markets: Still Waters Run Deep
Private vs public equity
McKinsey Global Private Markets Review: Private markets turn down the volume
Will Private Markets Overtake Public Markets?
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UK Purpose-Built Student Accommodation (‘PBSA’) – Understanding the Factors Behind This Resilient Sector

Posted on by lavinia

UK Purpose-Built Student Accommodation ('PBSA') - Understanding the Factors Behind This Resilient Sector

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  • September 14, 2023

Written and contributed by QIP's Marketing Team

The student housing market in the United Kingdom has been witnessing a remarkable surge in recent years, driven by a growing demand for higher education and an increase in domestic and international students.

As a result, investing in UK student accommodation has become an attractive prospect for savvy investors seeking promising returns. This article explores the factors that contribute to the appeal of this market and sheds light on why it presents a lucrative investment opportunity.

Rising Student Population

UK universities are renowned for their academic excellence and diversity, thus attracting a constant influx of international students. With higher education enrollments soaring each year, hotspots like London, Bristol, Manchester, and Edinburgh are witnessing a thriving student housing sector. This mix of local and international students demands modern and secure accommodations near their institutions, creating a pressing need for investment. The result? A plethora of enticing, rock-solid investment opportunities. 

1. Private Landloards and HMOs Avoid Larger Housing

To meet the rising demand for student housing, it’s supply must increase. Private developers and investors can capitalise on the market gap stemming from university-provided dorms that fail to meet the needs of the modern student. This gap presents a great opportunity for investors to alleviate the supply constraints through the development of more purpose-built-student accommodations that supports students’ rising living standards.

2. Reassessing PBSA Supply Pipeline

Reassessing the UK PBSA supply chain is another recent issue. While the development of high-end PBSA initiatives have become a noticeable trend, affordable student housing is needed. The UK PBSA sector must grow to satisfy student needs. Diversifying its offerings in the market and providing mid-market PBSA to address the diverse demands of students and catering to individuals on tighter budgets both domestically & internationally

Attractive Rental Yields

With a limited supply of quality UK student accommodation, the potential for attractive rental yields becomes a significant probability that entices investors to invest in UK PBSA. The lack of supply means landlords can charge competitive rents, which leads to favourable rental yield percentages; this asset class is a lucrative option for many investors due to the higher returns on investments than traditional residential properties.

Long-Term Tenancy Stability

As it is common for students to sign tenancy agreements for the entire academic year, with some universities offering guaranteed accommodation to first-year students, ensuring consistent rental income for landlords, this long-term stability is reassuring to investors as it helps reduce the risks associated with property vacancies and fluctuations in the rental market.

Favourable Government Policies

When the United Kingdom reached its target of attracting 600,000 overseas students per year a decade ahead of schedule, the government announced it was “firmly committed” to maintaining that number.

In order to “maximise the UK’s education potential,” the update elucidates three priorities for the future. Growing and broadening the overall export base, ensuring the continued viability of the student recruitment market, and expanding the UK’s worldwide education offerings are priority.

Robust Transactional Activity & Momentum Beyond 2023

Defying market uncertainty, UK PBSA investment has surged since 2016, with the sector claiming a noteworthy 13% share of 2022’s CRE investments. A significant 82% of this investment originates from overseas sources, notably Singapore (24%). The sector is anticipating greater transactional vigour in this 2nd half of the year, fuelled by rising rents offsetting operational costs and bolstered by consistent student growth. Stripe Property Group’s forecast predicts an impressive resurgence, envisioning the UK PBSA market to reach £4.2 billion in 2023

Investors of private equity in Singapore, with a strong appetite for UK Student Housing, are familiar with the elements driving attractive returns for the sector and stand to gain from this predicted long-term growth. Market research and due diligence are essential for finding the best prospects and maximising returns in this booming industry, as they are with any investment.

Source:

Secure Trust Bank: PBSA is still attractive, provided investors follow four key principles to this type of real estate
London House Exchange: How we select PBSA properties
PBSA News: Checklist for successful investing in purpose-built student accommodation
 Savills_PBSA_Spotlight_May2023.pdf
Knight Frank: What does the journey to a million mean for UK student accommodation? 
Student_Accommodation_Market_Snapshot_April_2023.pdf
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PERE PODCAST by QIP: Conversations with Koji Naito [Part 2]

Posted on by lavinia
  • Perspectives

Demographic Shifts and the Rise of Multi-Family Investments in Japan's Housing Market

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  • June 27, 2023

Written and contributed by QIP's Marketing Team

For the past two decades, investment opportunities in the Japanese housing market have increased. Japan has the biggest established real estate investment market in attracting a significant portion of investments in the region. Remarkabley, Japan’s multi-family property market has become a prominent asset class and is now the biggest in the Asia Pacific reagrding trasnaction volumes. In a nutshell, the expectations for Japan’s multi-family market this year are encouraging. 

Urbanisation and Positive Net Migration of Major Cities

Generally Osaka and Tokyo have obtained the higest slice of the huge-scale companies per capita. This distribution has resulted in a stream into these leading cities, with residents looking to reap the benefits of fitting labour market conditions. Osaka, Nagoya, and Fukuoka had a net migration that made up 33% of overall Japanese cities’ net migration in 2020. The influx of young adults aged between 20 and 29 (40%) also drove rental demand. 81% of these who are under the age of 29 resort to renting, lowering the home ownership demographic. Yet, increase in the rental market can be credited to both steady wage growth and soaring house prices. Since 2015, house prices have increased by 17.7%, while wages only increased by 1.2% over the same time span. These lifestyle and demographic changes have been prompting demand for multi-family investments. 

Japan multi-family housing as an outperformning asset class

Steady high occupancy rates (>95%) and low (1-2%) but steady rent increases for rental residentials in metropolitan territories have been backed by the persistent arrival of young people to these locations. However, the pandemic altered such a situation in Tokyo, and in 2020 and 2021, Tokyo faced a surprising decrease in population emigration. Notably, the occupancy rate and rent level of rental homes for singles dropped, as students started attending classes remotely, tourists returned to their countries, and hotel and food service businesses cancelled their lease contracts. Occupants of studio-type homes in cities have also relocated to the suburbs due to the extended timespan of work-from-home arrangements.

Nonetheless, Japan’s multi-family has generated greater risk-adjusted returns compared to other subsectors. Historically, multi-family has been less affected by recurrent downturns and was the first subsector to recover from the worldwide economic emergency and the pandemic. With its defensive attributes, institutional capital heavily favours multi-family during such critical times. In the country’s multi-family sector, cap rate compression of 50-80bps is evident in the latest portfolio transactions.

As of 2022’s third quarter, year-to-date residential investments were 8% higher than the same period in 2021, the sole sector that achieved growth across all sectors in real estate. The adverse effects of the pandemic on rental residentials for singles would be wiped out and higher activity levels would continue this 2023, with rent and occupancy growth going back to the pre-pandemic situation in leading cities (Greater Tokyo, Osaka, Fukuoka, and Nagoya).

Since 2015, house prices have climbed to 17.7%, while wages only grew by 1.2% over the same duration. Condominium units also have steep prices nowadays. Besides the rising number of small families, these prices would drive the demand for multi-family units. This event would urge families to rent than buy an asset, further reinforcing the multi-family rental demand.

 

Enhance your portfolio with Japan residential investments, guided by world-class Singapore headquartered private equity

The Japanese market’s stability and predictability are just two of the many reasons why you should invest here. We are QIP, a  a Singapore private equity real estate investment firm with an outstanding track record in the residential living market. With our deep expertise in Japan multi-family investment property market, we can definitely be of great service to you.

If you also have alternative investments in mind, please do not hesitate to reach out to us.

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PERE Trends to Watch Out for in 2023 & 2024

Posted on by qipmarketingaccess

PERE Trends to Watch Out for in 2023 & 2024

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  • August 1, 2023

Written and contributed by QIP's Marketing Team

Global predictions imply that economic growth will slow this year due to war, inflation, and increasing interest rates. In the Asia Pacific region, most central banks are trying to avert inflation by strengthening monetary policies. Many believe that a recession can still be adverted, APAC is in a better position globally, where milder inflation and more robust GDP growth continue. Private real estate is well positioned with healthy fundamentals to support stable income going into 2H 2023.

This year, the multifamily housing sector has continued to witness several important trends that investors should closely monitor. Firstly, there be a on-going surge in demand for affordable and workforce housing. As housing affordability remains a pressing issue in many urban areas, PERE firms are increasingly targeting investments in multifamily properties that cater to middle-income and lower-income households. These investments can provide stable cash flow and potential long-term appreciation, driven by the growing need for affordable housing solutions.

In this article, we highlight some of the key trends for 2023 – 2024, with a notable rise in the popularity of alternative investments in the real estate sector. Among these, multi-family real estate and other private equity investments are gaining significant traction.  

Let us dig deeper into last year’s data to fathom which private equity real estate (PERE) trends we are continuing to see.

Japan Multi-Family: A Lucrative Investment Avenue

Japan’s real estate market has been attracting attention from international investors, and the multi-family sector, in particular, is gaining momentum. The country’s ageing population and rising trend of urbanisation have contributed to the growing demand for rental housing. Investors recognise the potential of Japan’s multi-family investment properties as stable income generators and long-term value assets. Additionally, favourable regulations and government initiatives to encourage foreign investment make Japan an attractive market for PERE players.

Multi-Family Investment Property: Capitalizing on Changing Demographics

Beyond Japan, multi-family investment properties especially in the US remain a preferred asset class for PERE investors worldwide. Changing demographics, such as the rising number of millennials and the growing preference for urban living, have fueled the demand for rental housing in various markets. The flexibility and affordability offered by multi-family properties make them an appealing choice for both investors and tenants. As urbanisation continues to reshape cities globally, investing in multi-family properties presents a promising opportunity for generating consistent cash flow and potential capital appreciation.

Private Equity: A Thriving Hub for Investments

Private equity has established itself as a thriving hub for investments in countries like Japan, the United Kingdom (UK), and the United States (US). Each region offers unique opportunities and attractive investment environments for private equity in Singapore firms and investors.

Japan has experienced a significant rise in private equity activity in recent years. With a strong economy, a stable political environment, and a large pool of well-established companies, Japan presents opportunities for, growth capital and buyout investments.

UK’s well-developed financial infrastructure, favourable regulatory environment, and access to global markets make it an appealing destination for private equity firms seeking to deploy capital. London, in particular, serves as a financial centre that attracts both domestic and international private equity players.

The US stands as the largest and most mature private equity market globally. The country’s entrepreneurial culture, technological advancements, and access to skilled labour contribute to a thriving ecosystem for private equity firms.

Alternative Investments: Expanding PERE Horizons

The traditional avenues of real estate investment are transforming, with alternative investment options gaining traction within the PERE sector. These alternative investments include niche asset classes such as student housing, co-working spaces, data centres, healthcare facilities and logistics. Investors will prioritise prime logistics in trade centres and e-commerce countries, a sector currently experiencing historically low level vacancy rates in the UK, US, Germany, Netherlands, France & Spain. As technology continues to reshape various industries, the demand for specialised real estate assets is rising. Investors are increasingly diversifying their portfolios by venturing into these alternative sectors, which offer attractive risk-reward profiles and the potential for high returns.

Real Estate Investment: Embracing Technological Advancements

Technology is revolutionising how we live, work, and invest.

The real estate investment industry is no exception, as emerging technologies such as artificial intelligence, blockchain, and virtual reality are transforming various sectors. PERE investors recognise the importance of adopting technology-driven solutions for efficient property management, market analysis, and investment decision-making. Embracing these advancements enables investors to stay ahead of the curve, optimise operational efficiency, and enhance investment performance.

Access World-Class Global Real Estate Investments with QIP - A Leading PERE Firm in Singapore

The 2023 private equity trends are slowly revealing themselves, but many also fear what the unfamiliar ones may hold. Here at QIP, we know how to identify the best alternative investment opportunities for our clients.. Our real estate investment approach and expertise in residential housing guarantees vigorous deal flow and execution capabilities. And our track record can attest to our strong performance in the industry. Give us a call to learn more about us!

Sources

JLL –  4 bright spots for investors in 2023. Slowing global growth is forcing investors to be more selective on sector deals
Asian Investor – 2023 Outlook: Asia Pacific’s real estate markets
Construction Week Online –  Global real estate investment activity recovery predicted in 2023
KKR Real Estate – Q1 2023 Commercial real estate outlook: setting the stage for opportunities
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PERE PODCAST by QIP: Conversations with Koji Naito

Posted on by lavinia
  • Perspectives

Demographic Shifts and the Rise of Multi-Family Investments in Japan's Housing Market

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Tweet Share Share Email

  • June 27, 2023

Written and contributed by QIP's Marketing Team

For the past two decades, investment opportunities in the Japanese housing market have increased. Japan has the biggest established real estate investment market in attracting a significant portion of investments in the region. Remarkabley, Japan’s multi-family property market has become a prominent asset class and is now the biggest in the Asia Pacific reagrding trasnaction volumes. In a nutshell, the expectations for Japan’s multi-family market this year are encouraging. 

Urbanisation and Positive Net Migration of Major Cities

Generally Osaka and Tokyo have obtained the higest slice of the huge-scale companies per capita. This distribution has resulted in a stream into these leading cities, with residents looking to reap the benefits of fitting labour market conditions. Osaka, Nagoya, and Fukuoka had a net migration that made up 33% of overall Japanese cities’ net migration in 2020. The influx of young adults aged between 20 and 29 (40%) also drove rental demand. 81% of these who are under the age of 29 resort to renting, lowering the home ownership demographic. Yet, increase in the rental market can be credited to both steady wage growth and soaring house prices. Since 2015, house prices have increased by 17.7%, while wages only increased by 1.2% over the same time span. These lifestyle and demographic changes have been prompting demand for multi-family investments. 

Japan multi-family housing as an outperformning asset class

Steady high occupancy rates (>95%) and low (1-2%) but steady rent increases for rental residentials in metropolitan territories have been backed by the persistent arrival of young people to these locations. However, the pandemic altered such a situation in Tokyo, and in 2020 and 2021, Tokyo faced a surprising decrease in population emigration. Notably, the occupancy rate and rent level of rental homes for singles dropped, as students started attending classes remotely, tourists returned to their countries, and hotel and food service businesses cancelled their lease contracts. Occupants of studio-type homes in cities have also relocated to the suburbs due to the extended timespan of work-from-home arrangements.

Nonetheless, Japan’s multi-family has generated greater risk-adjusted returns compared to other subsectors. Historically, multi-family has been less affected by recurrent downturns and was the first subsector to recover from the worldwide economic emergency and the pandemic. With its defensive attributes, institutional capital heavily favours multi-family during such critical times. In the country’s multi-family sector, cap rate compression of 50-80bps is evident in the latest portfolio transactions.

As of 2022’s third quarter, year-to-date residential investments were 8% higher than the same period in 2021, the sole sector that achieved growth across all sectors in real estate. The adverse effects of the pandemic on rental residentials for singles would be wiped out and higher activity levels would continue this 2023, with rent and occupancy growth going back to the pre-pandemic situation in leading cities (Greater Tokyo, Osaka, Fukuoka, and Nagoya).

Since 2015, house prices have climbed to 17.7%, while wages only grew by 1.2% over the same duration. Condominium units also have steep prices nowadays. Besides the rising number of small families, these prices would drive the demand for multi-family units. This event would urge families to rent than buy an asset, further reinforcing the multi-family rental demand.

 

Enhance your portfolio with Japan residential investments, guided by world-class Singapore headquartered private equity

The Japanese market’s stability and predictability are just two of the many reasons why you should invest here. We are QIP, a  a Singapore private equity real estate investment firm with an outstanding track record in the residential living market. With our deep expertise in Japan multi-family investment property market, we can definitely be of great service to you.

If you also have alternative investments in mind, please do not hesitate to reach out to us.

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Demographic Shifts and the Rise of Multi-Family Investments in Japan’s Housing Market

Posted on by qipmarketingaccess
  • Perspectives

Demographic Shifts and the Rise of Multi-Family Investments in Japan's Housing Market

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Tweet Share Share Email

  • June 27, 2023

Written and contributed by QIP's Marketing Team

For the past two decades, investment opportunities in the Japanese housing market have increased. Japan has the biggest established real estate investment market in attracting a significant portion of investments in the region. Remarkably, Japan’s multi-family property market has become a prominent asset class and is now the biggest in the Asia Pacific regarding transaction volumes. In a nutshell, the expectations for Japan’s multi-family market this year are encouraging. 

Urbanisation and Positive Net Migration of Major Cities

Generally Osaka and Tokyo have obtained the higest slice of the huge-scale companies per capita. This distribution has resulted in a stream into these leading cities, with residents looking to reap the benefits of fitting labour market conditions. Osaka, Nagoya, and Fukuoka had a net migration that made up 33% of overall Japanese cities’ net migration in 2020. The influx of young adults aged between 20 and 29 (40%) also drove rental demand. 81% of these who are under the age of 29 resort to renting, lowering the home ownership demographic. Yet, increase in the rental market can be credited to both steady wage growth and soaring house prices. Since 2015, house prices have increased by 17.7%, while wages only increased by 1.2% over the same time span. These lifestyle and demographic changes have been prompting demand for multi-family investments. 

Japan multi-family housing as an outperformning asset class

Steady high occupancy rates (>95%) and low (1-2%) but steady rent increases have been backed by the persistent arrival of young people to these locations. However, the pandemic altered such a situation in Tokyo, and in 2020 and 2021, Tokyo faced a surprising decrease in population emigration. Notably, the occupancy rate and rent level of rental homes for singles dropped, as students started attending classes remotely, tourists returned to their countries, and hotel and food service businesses cancelled their lease contracts. Occupants of studio-type homes in cities have also relocated to the suburbs due to the extended timespan of work-from-home arrangements.

Nonetheless, Japan’s multi-family has generated greater risk-adjusted returns compared to other subsectors. Historically, multi-family has been less affected by recurrent downturns and was the first subsector to recover from the worldwide economic emergency and the pandemic. With its defensive attributes, institutional capital heavily favours multi-family during such critical times. In the country’s multi-family sector, cap rate compression of 50-80bps is evident in the latest portfolio transactions.

As of 2022’s third quarter, year-to-date residential investments were 8% higher than the same period in 2021, the sole sector that achieved growth across all sectors in real estate. The adverse effects of the pandemic on rental residentials for singles would be wiped out and higher activity levels would continue this 2023, with rent and occupancy growth going back to the pre-pandemic situation in leading cities (Greater Tokyo, Osaka, Fukuoka, and Nagoya).

Since 2015, house prices have climbed to 17.7%, while wages only grew by 1.2% over the same duration. Condominium units also have steep prices nowadays. Besides the rising number of small families, these prices would drive the demand for multi-family units. This event would urge families to rent than buy an asset, further reinforcing the multi-family rental demand.

Enhance your portfolio with Japan residential investments, guided by world-class Singapore headquartered private equity

The Japanese market’s stability and predictability are just two of the many reasons why you should invest here. We are QIP, a a Singapore private equity real estate investment firm with an outstanding track record in the residential living market. With our deep expertise in Japan multi-family investment property market, we can definitely be of great service to you.

If you also have alternative investments in mind, please do not hesitate to reach out to us.

 

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Student Accommodation: 5 Reasons Why It’s a Lucrative Real Estate Investment in the UK

Posted on by Fabian Tan
  • Perspectives

Student Accommodation: 5 Reasons Why It's a Lucrative Real Estate Investment in the UK

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  • February 27, 2023

Written and contributed by QIP's Marketing Team

The UK student housing market has been a hot spot for investors for many years now, and the demand for purpose-built student accommodation (PBSA) remains as high as ever – with an increase in interest from real estate investors looking for alternative investments. Strong underlying fundamentals are at the core, fuelling interest in the sector through rapidly expanding student populations, strong enrolment in higher education, demand for highly-amenitised purpose-built accommodations, and a severe lack of quality stock. Making up a large part of Europe’s residential real estate stock, it delivers a vital service to thousands of students nationwide every year, providing them with a high-quality alternative to renting privately or living at home with their parents.

Discover the benefits of investing in PBSA and why it presents a lucrative real estate investment opportunity in the UK student housing market.

1. The Growing Appetite for UK Higher Education: A Boom for the Student Accommodation Market

The UK higher education system is experiencing a surge in student enrolment, with over 560,000 new undergraduate students set to start their academic journey this year. The data, as per UCAS, indicates a 4% rise compared to the pre-pandemic period of 2019. This growth trend is evident as acceptances have risen by 14% in the past decade. By 2026, UCAS forecasts that the number of undergraduate applicants in the UK will reach a million, 250,000 more than in 2021. With such high demand for student accommodation, the market has emerged as a booming real estate investment opportunity.

A graph showing projected increases in full-time undergraduate students

Source: Knight Frank Research, Student Property Report 2023

The demand for PBSA is expected to remain strong in 2023 underpinned by demographic trends, with the population of students entering university expected to continue rising and increasing participation rates. The number of international students will also increase, building on a record number in 2022.

With travel restrictions completely lifted and studying abroad back to pre-pandemic levels, this number is expected to rise significantly. UK higher education attracts students from over 200 countries globally, those who are strongly influenced by accommodation offers.   International students, especially from markets such as China and India, account for the bulk of the demand, are drawn to the high quality and safety that the purpose-built developments can provide, and are willing to pay the premium. The pound’s declining value will further encourage demand by improving the allure of studying in the UK. This year there is an expectation of seeing more students, including domestic students alike, opting for the fixed-cost model of professionally managed, all-inclusive PBSA options as they seek to maximise value and experience. Asset management companies are tapping into the high rental yields, low vacancy rates, and strong underlying fundamentals of this sector to offer investors a diversified and stable investment portfolio.

2. Meeting the Demand: A Structural Undersupply of Student Accommodation Beds in the UK Market

A graph depicting the current undersupply of bed spaces in the UK student accommodation market

The slowing supply of PBSA is expected to continue into 2023 due to key factors limiting developments that include economic headwinds, financing & construction costs, and the planning system as a barrier to entry.

The student housing sector is facing a major challenge in providing enough bed spaces for the growing number of students. According to research from Knight Frank, with an estimated 25,700 bed spaces under construction for the 2023 academic year, there is still a shortfall in supply compared to the rising demand. This is particularly evident in cities such as Bristol and Manchester, where the rising demand will continue to significantly outpace the supply 

UCAS data shows additional 69,500-bed spaces in the planning pipeline, but delivery is still expected to lag behind the growth in student numbers. As a real estate investment opportunity, student accommodation provides a unique and stable investment option, offering high rental yields and low vacancy rates. This highlights the importance of investing in the student housing market, as it offers a unique opportunity to meet the housing needs of the expanding student population in the UK.

UCAS data shows additional 69,500-bed spaces in the planning pipeline, but delivery is still expected to lag behind the growth in student numbers. This highlights the importance of investing in the student housing market, as it offers a unique opportunity to meet the housing needs of the expanding student population in the UK.

3. Record Occupancy Levels and Strong Rental Growth: An Optimistic Outview Outlook For Investors

The UK PBSA sector has shown its resilience and popularity with record occupancy levels and strong rental growth for AY 2022/23, providing investors with a secure rental income stream throughout the year and making it a popular investment option for those seeking alternative investments. The market is expected to grow with intense competition and significant rental growth prospects into the 2023/24 academic cycle. The will reassure investors of net income growth and support further investment into the sector during turbulent times.

Due to the structural undersupply of PBSA, typically markets across the UK are able to achieve 90%-92% occupancy, with certain markets and new quality products experiencing 100% occupancy for consecutive academic years. and the prospect of high total returns-driven by the uptick in rental growth are expected to contribute to the investor demand for PBSA assets. With leases renewed yearly, Landlords can price in factors such as inflation and rising energy costs continuing to fuel the rental growth trajectory. Based on our own experiences, we are proud to share that we achieved full occupancy across all our properties for this current academic year. Despite the economic challenges, QIP has remained dedicated to investing in high-quality student housing, particularly in top-tier cities across the UK. This is exemplified by our recent £15 million PBSA deal in Leeds and the acquisition of a prime site in Newcastle, where we plan to deliver a 350-bed scheme by the start of the 2025 academic year.

As a private equity firm based in Singapore, we understand the potential for strong returns in the UK real estate market, particularly in the student housing sector. We believe that investing in high-quality student housing in top-tier UK cities is a smart real estate investment strategy and are confident in the long-term prospects of this sector.

4. Resiliency of Purpose-built Student Housing Against Economic & Political Headwinds

The nature of the student housing business makes it a promising real estate investment opportunity, particularly in the UK, as it is resilient and less affected by economic headwinds. PBSA’s operating fundamentals are expected to continue growing despite global events impacting the macroeconomic landscape. However, the asset class is not shielded from all [factors] as rising energy costs and high-interest rates have also been challenging for the sector. Despite this investor, appetite remains strong as PBSA is one of the only real estate sectors to have seen a positive increase in total investment volume for 2022. This is supported by solid return prospects and the fact student housing is driven by demographic instead of economic shifts. Historical data from Shoosmiths has shown that student housing is a non-cyclical sector, in times of crises it has reliable track record of sustaining its demand for beds and student numbers. In May 2022, GIC & Greystar’s acquisition of Student Roost’s 23,000-bed portfolio in UK, presented an excellent example of institutional capital coming into student housing as it continues to be seen as a counter-cyclical and maturing asset class. City Developments Limited (CDL) recent acquisition of five high-quality purpose-built student accommodation assets in the UK, in a deal worth GBP215 million ($357 million), demonstrates their continued belief in the resiliency and potential of this asset class despite current economic headwinds.

5. An Opportunity to Diversify Portfolios through a Maturing Asset Class

Although still considered an alternative real estate asset class, the UK PBSA market is a matured investment sector with large-scale operators, sophisticated investors, experienced service professionals and wide and transparent market coverage. 

There has been a visible trend of more institutional and overseas capital entering the UK PBSA market. A record £7.2 billion was invested last year, up 69% year-on-year and notably higher than the long-term average of £4.1 billion over the previous five years. The sector’s underlying fundamentals and solid rental growth outlook represent a good investment opportunity for investors to balance their portfolios.

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Are millennial lifestyle changes driving the buzz around Built-to-Rent (BTR)?

Posted on by Qinorf
  • Perspectives

Are millennial lifestyle changes driving the buzz around Built-to-Rent (BTR)?

BTR - Why the coveted asset class is here to stay and may unveil some serious investment opportunity

Are Millennial Lifestyle Changes Driving The Buzz Around Built-To-Rent BTR

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  • July 22, 2022

Written by Eu Khoon Ang, Co-Founder of Q Investment Partners

The BTR(Build-to-rent) model may not yet be a well-known concept in Singapore, but its emergence and subsequent appeal spans decades. In delving into how this asset class with its underlying investment opportunity is becoming relevant to our home ground, we will need to first uncover how the nation’s rapid economic and infrastructural growth influenced the population’s sociocultural makeup, and deep-rooted desire for homeownership be it private property, or in Singapore’s public housing system.

Of course, this sentiment is not unique to Singaporeans alone, but to understand the country, we need to understand how the need for public housing arose. When Singapore first became independent, living conditions were mostly squalid for the rapidly growing population, consisting of slums and overcrowded squatter settlements as few were able to afford proper housing. The solution to this problem became known as HDB flats, which are synonymous with affordable, sanitary, and safe public housing in Singapore. This resulted in 90% of Singaporeans realising their life-long dream of being homeowners, with 80% residing in them sometimes over generations in the same flat. (HDB.gov) HDB flats are no longer seen merely as fulfilling the need for shelter but has been ingrained into Singapore’s consciousness as representing a degree of comfort, security, and a sense of belonging.

Maturing millennials and the Covid-19 pandemic

It’s no surprise that over the Covid-19 pandemic, people find themselves with opportunities for inward reflection and for putting family dynamics to the test. With many discovering themselves, needs have evolved amongst those of age to acquire an abode of their own. As the millennial generation matures, natural progression dictates that this generation slowly dominates the property market.

According to Property Guru’s latest Consumer Sentiment Study H1 2022, there is a strong preference to buy instead of rent amongst Singaporean millennials. However, those who rent cite these as their top 3 reasons:

1. Insufficient savings
2. No urgency to buy right away
3. Government regulations making it unfavourable to buy

Source: Property Guru, consumer sentiment study H1, 2022

Compounded by inflation and rising housing prices, the desire to purchase a home has also gone hand-in-hand with the desire for longer-term rentals, especially for younger millennials.

This divide between renting and buying signals the difference in life stages within the entire millennial cohort with the impetus to rent formed largely by younger and/or single individuals – contributing to the creation of investment opportunities in rental markets in Singapore, in this period. Meanwhile, older and/or married millennials who typically have spent a longer time in the workforce have more savings and are more inclined to purchase.

 A 2021 CNA article explores the probability of the BTR model being a sought after property type presenting residents benefits like more space, more flexibility, more affordability, and chances to downsize. As a result, creating investment opportunities for “many global institutional investors.”

Conversely, the UK and the US are no strangers to the BTR model, and the popularity of these housing options is a boon to many institutional investors. They not only tackle the housing shortages within cities where young professionals have been flocking towards due to a profusion of job opportunities, these builds are also tailored to the needs of tenants with amenities that enhance its residents’ standard of living— improving their overall quality of life.   

With that said, let’s look into what BTR is, exactly.

What is “Build to Rent (BTR)”?

With housing prices outpacing income in industrialized countries, there has been growth in a category of housing called “Build to Rent”. A prominent feature in the property market in the United Kingdom and the United States — BTRs are purpose-built housing apartments or single-family homes in which residents stay on yearly rentals, rather than laying down hefty deposits and signing onto 30-year mortgages; this asset class is characteristically owned by institutional investors and managed by professional operators.

What’s the difference between BTR and PRS?

Some private rental sector (PRS) schemes are owned by “buy-to-let” landlords with a handful of properties and are often not purpose built, with zero focus on facilities benefiting renters. These property types can also come in the form of individual flats spread throughout a town area. Unlike the former property scheme. BTR developments are constructed with renter-focused amenities in mind, geared towards long-term rentability. These developments are often situated in large cities, and are owned by property companies that provide institutional investors with alternative residential real estate investment opportunities.

What are the key characteristics of BTR for residents?

  • BTR residence amenities are built to create a sense of community
  • BTR facilities are customised to the requirements of the demographic, eg, working space on certain floors and shared cooking areas
  • BTR is meant to facilitate healthy lifestyles

What does the experience in the US tell us?

Experience has shown that consumer economics is driving the BTR sector: US Home Prices increased by 20.6% (Mar 21 to Mar 22 – according to Zillow), while household income only increased by 2.4% (2021 over 2020 – US Department of Housing and Urban Redevelopment). Cash-strapped millennials who can’t afford mortgage down-payments are driving the BTR sector. They are saddled with student debt, and BTR suits their stage in life. 

zillow home value

Statistics from Hunter Housing Economics also show that BTR homes are now 6% of new home builds, and USD $85 billion will be put into US BTR projects, showing a steady demand for rental homes to address economic limitations as was reported by Bloomberg (28 January 2022).

What does the experience in the UK tell us?

According to the Long Harbour Build-to-Rent whitepaper published in June 2022, the impact and the wellbeing of residents is key to the rise in the demand for high quality, professionally managed and affordable homes for renters throughout the country. As such, professional landlords are shifting focus and kickstarting the race to meeting the country’s growing demand for rental accommodation. To add, BTR housing offer high standards not only to residents on a budget but also value adds to urban planning and governance, as such, institutional investors are gunning for this investment opportunity to bring supply, as Savills UK highlights the lack of stock fueling rental growth of 7.4% per annum. It is evident that
BTR is becoming an important part of UK housing delivery, with 14,660 completions in 2021, 15% higher than the 2019-2020 average and a total of GBP 4.3 billion was invested in UK BTR in the same year. By 2026, this will reach 13.5% of annual supply.

 

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How does the Build-to-rent model benefit investors?

As the statistic and trends suggests, this shift in focus towards rental accommodation is prominent in the consumer market. Monthly mortgage payments that would usually be residents down payments on mortgages are now yield income for real-estate companies. (Savills Spotlight: Suburban Build to Rent, 14 Sep 2021).

Furthermore, the general BTR sector in US, UK and Japan have proved resilient during the pandemic: Both Invitation Homes and American Homes 4 Rent reporting occupancy levels in excess of 97% through 2020.

How does the BTR model serve as an ideal investment opportunity?

In summary, BTR can be a scalable proposition to investors, benefiting them in the following number of ways:

  • Providing better risk-adjusted returns in a rising asset class
  • Tendency for better yielding when built with lower maintenance in mind
  • Attracts a more affluent generation of renters by giving them flexibility
  • And has shown to have less resident turnover when the BTR product caters to the demographic

The BTR model looks to boom beyond 2022 and gains popularity following another year of record transaction volumes. This asset class has displayed a remarkable show of resilience over the past few years with the ability to weather the impact of Covid-19 making it a sustainable investment opportunity that satiates growing institutional investor appetite. In their race to supply demand, there will be increasing emphasis on innovative design with a strong focus on the ESG agenda. With it, the requirements for “green premiums” will become routine in the years to come.

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A Year of Opportunity for Private Equity Residential Real Estate

Posted on by Qinorf


A Year of Opportunity for Private Equity Residential Real Estate

  • Perspectives
  • March 4, 2022

Singapore-headquarted private equity firm Q Investment Partners recently concluded its 2022 Outlook: A Year of Opportunity for Private Equity Residential Real Estate. Cast a spotlight on residential assets in the private equity real estate investment market, the roundtable presented a timely collection of proprietary insights by industry experts from Alyssa Partners, Colliers and JLL.

Peter Young, Co-Founder and CEO of Q Investment Partners
Regina Lim, APAC Head of Capital Markets Research, JLL
Paddy Allen, Head of Operational Capital Markets, Colliers
Chedli Boujellabia, Founder and Managing Partner, Alyssa Partners

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Key takeaways from the panel discussion include:

  • Private equity residential real estate investment markets will continue to be a calculated hedge against COVID-related volatility.
  • How people live, work and play is ever-evolving, and residential accommodation needs to adapt accordingly.
  • Institutional grade residential housing remains significantly underweight for many institutional investors, and growth in their allocation is expected in 2022.
  • As inflation rates are expected to continue rising, 2022 will see a focus on markets such as Japan, which possess a lower risk of inflation than others, such as the UK and US.
  • ESG-conscious investors will continue to demand greater access to a wide range of ESG-compliant products and clearer reporting standards in the private markets.
  • Digitisation and tokenisation of real estate investment is set to drive the next wave of growth in the PropTech sector, coming off the back of a bumper year for PropTech investment.
  • Clear winners are emerging within several real estate investment market subsets, including, residential, logistics, student accommodation and data centres, which will continue to be reliable and defensible assets throughout 2022.
  • Specialist residential housing investments will secure long term capital enhancement value through more listed listings in 2022.


1. Private Equity Residential Real Estate Markets as a hedge against Covid-19 volatility

While changing consumer spending habits, market volatility and tech-related disruptions led to other assets suffering, residential living has remained defensive throughout 2021. As noted by Peter Young, CEO and co-founder of QIP, the solid fundamentals behind residential living assets has safeguarded against disruptions, driven by the simple factor that people will always need a bed to sleep in and a home to live in. In 2022, this trend is expected to remain.

Private Equity Singapore


2. Ever-evolving nature of how people live, work and play

As residential living is now a multi-purpose real estate investment asset, investors will need to be intelligent when considering market opportunities for 2022. The past 24 months has seen a shift in the definition of ‘residential living’, noted by Chedli Boujellabia, Managing Partner and CEO at Alyssa Partners. Driven by the blurring of boundaries between work and home, investors and developers in the housing market are cautioned to remain agile and adaptable to deliver what end tenants require most. Referencing Japan as an example, Boujellabia cites that real estate investments, specifically multi-family housing will continue to deliver low volatility at attractive risk-adjusted returns, making it a must-have asset class in any private or institutional investor’s portfolio.


3. Growth in investor allocation to institutional-grade residential housing

Institutional grade residential housing remains significantly underweight for many institutional investors. Many are seeking long-term, risk-adjusted assets to meet their needs, and therefore will continue to pivot to investment opportunities in institutional-grade residential housing. Once viewed as a risk several years ago, the granular income streams associated with this sort of real estate investment are now viewed as an opportunity to mitigate risk, Paddy Allen, Head of Operational Capital Markets at Colliers, voiced. Residential real estate investments also meet various sets of criteria by institutional investors, driving greater allocation. Compelling demand and supply metrics are promoting strong investment opportunities in the space.


4. Focus on country markets with low inflationary risks

As inflation rates are expected to continue rising, 2022 will see a focus on real estate investment markets such as Japan, which has a lower risk of inflation than others, such as the UK and US. As highlighted by Boujellabia, inflation in Japan has historically been very limited for about 20 years, and that trend is expected to remain for the foreseeable future. While Japan may see a limited impact from global inflation on imported goods, such as petroleum and certain construction materials, all else will be marginally impacted. Japan is the perfect jurisdiction to protect against the inflationary pressures faced by other markets, such as the UK.

Through targeting major regional hubs such as Greater Tokyo, Osaka, Nagoya, Fukuoka and Sendai, achieving portfolio premiums in Japan can be attained with scale and diversification. Economic and population growth under nationwide political stability continues to be observed in these areas.


5. Increase in demand for ESG-compliant products and protocols

Residential real estate assets naturally satisfy a lot of ESG parameters, Allen comments. As investors become more selective via responsible capital allocation, there will be more emphasis on choosing projects that are greener, more energy-efficient, and built using more sustainable methods of construction. On top of this, the clear social need for good quality, affordable and accessible residential accommodation means that real estate investment into the sector will also have a favourable impact toward social goals – something that institutional investors are actively looking to address in 2022 and beyond.

Private Equity Singapore


6. Increase spotlight on digitisation and tokenisation of real estate assets

The digitalisation and tokenisation of real estate investment assets is set to drive the next wave of growth in the PropTech sector, coming off the back of a bumper year for PropTech investment. As cited by Allen, technology is increasingly becoming intertwined into the fibre of our daily lives, and how we interact with our properties is becoming increasingly digitised. Innovations aimed at increasing transparency around energy performance, streamlining management and allowing residents to manage their homes on a day-to-day basis will become increasingly popular across the sector for 2022.

Technological advances are also bringing the sector closer to investors, with new platforms being created to allow fractional ownership of property. This enables investors to take a slice of the debt secured against a real estate investment. Smaller investors can benefit through such alternative investment, accessing high quality and professionally managed assets, continuing to diversify their portfolios with such lowered barriers to entry.


7. Emergence of clear winners within real estate market subsets

Real estate investment market subsets such as residential, logistics, student accommodation and data centres are emerging as reliable and defensible assets throughout 2022, and new verticals are also expected to rise in popularity.

Regina Lim, Head of Capital Markets Research at JLL (Jones Lang Lasalle), mentions that some real estate investment sectors have performed particularly well throughout the pandemic, and real estate investments in these sectors have recovered quickly to or beyond pre-COVID levels. These include income-resilient assets such as logistics, rental residential and more. Momentum is expected to pick up further in 2022 as investors seek to increase their exposure to defensive assets, improving portfolio diversification.

Student accommodation


8. Specialist residential housing investment will secure long term capital enhancement value

Through more listed vehicle and public listings in 2022, specialist real estate investments, especially residential housing investments will secure long-term capital enhancement value, notes Young. He cites that there is a growing appetite for specialist residential housing investments with solid, risk-adjusted returns. The availability of suitable real estate investment products remains relatively low, hence while the public markets remain liquid, specialist residential housing projects will be able to raise significant capital for compelling opportunities via public listings.

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Powering Possibilities Podcast: The Sharing Economy of Real Estate

Posted on by Qinorf
  • Perspectives

Powering Possibilities Podcast: The Sharing Economy of Real Estate

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