London, 7th October –
Annual investment in UK living real estate has exceeded £10bn in the third quarter of 2022, putting living on track for a record year, despite global geopolitical and economic volatility.
Investors completed £3bn in build-to-rent, student and healthcare transactions in Q3, bringing the year-to-date investment total to £10.3bn, according to JLL.
This is a 47% rise from the £2bn invested Q3 2021, as investors seek scale through larger deals, reflecting bigger assets, portfolios and higher values.
BTR quarterly investment has doubled year-on-year, rising to £1.8bn in Q3, compared to £0.9bn in the same period last year. There was a further £0.8bn in purpose-built student accommodation and £0.4bn in healthcare investment.
Investors across the combined living sectors funded 19,000 homes and beds in Q3 and 63,800 in over 200 deals in 2022. Further deals in legals and under offer would see this rise over the £13.8bn record of 2021.
The rise in investment reflects a sizeable uptick BTR deal size, as larger transactions see the sector rise to account for a larger proportion of total living investment, peaking at 60% of investment in Q3. The sector has accounted for almost half of living investment this year, at £4.9bn, on course to top last year’s £6bn.
Excluding land deals and corporate mergers and acquisitions, the average BTR deal size has risen to £127m, up from £49m a year ago. In Q3, the largest living deal was Canada’s Alberta Investment Management’s £283m purchase of Angelo Gordon’s portfolio of five BTR schemes in Cardiff, Birmingham, Sheffield and Greater London.
Other significant deals include Round Hill Capital’s £165m forward funding of the Fairfax in Manchester’s Piccadilly East. The purchase completed in August and Round Hill Capital said it aimed to “unlock further opportunities in the coming months and years”.
The growing wall of capital targeting the living sectors comes as economies across the globe struggle with high inflation and rising interest rates. The cost of financing puts pressure on investor margins and real estate transaction volumes.
Simon Scott, lead director for living capital markets at JLL, said: “Although these transactions precede the recent volatility seen in the broader funding markets, the fundamental demand for quality rental housing stock remains at unprecedented levels and this is reflected in investor appetite for the product.
“As we are likely to be entering another period of “pricing discovery” the lack of quality supply and viability challenges, combined with the underlying occupational demand should provide investors with continued confidence of the resilience of the living sector and particularly as a hedge to broader inflationary pressures.”
Emma Rosser, associate director for research at JLL, added: “A persistent lack of supply of quality rental housing is an ongoing issue for the UK, highlighted by recent rental growth and students and renters struggling to find accommodation. Long term investors are looking behind the current market turbulence to provide homes for that growing tenant base.”
About JLL
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion in 2021, operations in over 80 countries and a global workforce more than 98,000 as of December 31, 2021. JLL is the brand name and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.