2025-02-10-莱坊-NextGen_Living_2025_16页_4mb

NEXTGEN LIVING Summary

Core Content

The NEXTGEN LIVING report highlights the evolving dynamics and future direction of the UK Living Sectors, focusing on investment trends, market opportunities, and the impact of macroeconomic and regulatory factors. It outlines the growing importance of the Living Sectors as a strategic investment area for institutional investors, with a strong emphasis on sustainability, diversification, and long-term growth.

Key Findings

Investment Trends

• Total Investment in 2024: UK Living Sectors investment reached £10 billion, representing 25% of overall real estate acquisition activity.
• Projected Investment: Survey respondents outlined ambitions to invest a further £45 billion over the next five years.
• Growth in Sub-sectors:
  • Single Family Housing (SFH): 71% of investors plan to increase exposure by 2029, with £3.7 billion invested since 2023.
  • Seniors Housing Rental: 39% of investors plan to invest in this area within five years, with a forecasted 150% increase in the number of seniors rental properties.
  • Multifamily and PBSA: These remain key areas of focus, with continued investment and growth expectations.

Market Focus

• Top Target Cities: London, Bristol, and Manchester are the top three cities for investment, with regional markets also gaining traction.
• Regional Growth: 76% of Living Sectors investment in 2024 was in regional markets, indicating a shift from London-centric strategies.

Investment Strategy Shifts

• Deal Structures: There is a shift towards joint ventures and forward commit deals, which allow for shared risk and new asset creation.
• Return Expectations: 54% of investors require an unlevered return of over 10% annually, but there's an expectation of a move towards core and core+ strategies as the market stabilizes.

Yields and Market Outlook

• Yield Trends: Yields have increased over the past few years, but there is strong conviction that they will tighten over the next three years.
• Market Cycle: 2025 marks a new phase in the investment cycle, with a more stable macroeconomic environment and the start of a potential rate-cutting cycle.

Key Sectors and Opportunities

Single Family Housing (SFH)

• Dominance in Rental Sector: Houses make up 60% of the UK rental stock, making SFH a significant growth area.
• Future Growth: SFH is expected to grow from 11% of current BTR stock to over 20% by 2030.

Purpose-Built Student Accommodation (PBSA)

• Two-Tier Market: 65% of existing PBSA supply was built before 2012, highlighting the need for upgrades.
• Investment Opportunity: Investors can add value by repositioning older stock to meet modern student needs.
• Collaboration with Universities: Universities are key partners, with a focus on securing future accommodation pipelines.

Seniors Housing

• Rental Growth: The private seniors BTR segment is growing rapidly, with a forecast of a 150% increase in rental properties over five years.
• Customer Preferences: Operators are shifting to a mixed tenure model, with a focus on community and service quality.

Sustainability and ESG

• ESG Importance: 81% of investors consider ESG a key factor in investment decisions.
• Sustainable Features: EV charging (66%), heat pumps, and solar power are top priorities for new developments.
• Net Zero Goals: 28% of investors aim for net zero in operations, and 19% target a minimum EPC rating of A.

Challenges and Barriers

• Cost Inflation: 81% of investors cited construction cost inflation as the biggest obstacle.
• Planning and Regulation: Planning issues (60%) and regulatory pressures are significant challenges.
• Stock Availability: 36% of investors identified the availability of stock as a challenge, underscoring the need for new development.

Market Outlook

• Stability and Growth: Despite short-term volatility, there is a sense of certainty entering 2025.
• Development Acceleration: Ground-up development, repurposing, and value-add investments are expected to increase.
• Diversification: Investors are looking to diversify across sub-sectors and geographies, reflecting the sector's evolving nature.

Conclusion

The Living Sectors are poised for significant growth in 2025 and beyond, driven by structural tailwinds such as migration, urbanisation, and demographic changes. Institutional investors are increasingly focused on diversification, sustainability, and long-term value creation, with a strategic shift towards core and core+ strategies. While challenges such as cost inflation and planning issues persist, the market is expected to stabilize and offer more opportunities for investment and development.