Real estate is considered the largest and most relevant asset class in the world by both institutional and individual investors. Despite the pandemic, the sector continues to hold its usual place at the top of investment choices. Even though traditional real estate assets are considered inherently illiquid, investors see the value in capital appreciation and the steady yields generated by them.
Specialist Real Estate Investment Trends to keep an eye on
Institutional investors operate within a competitive environment which demands a continuous effort to track promising assets to place their funds and ensure favorable returns. Alternative real estate developments that surfaced during the last decade are offering tempting advantages to investors such as higher yields, steady and predictable cash flows, with some even presenting the benefit of being counter-cyclical. For heavy weight investors who live by the rule “never put all your eggs in one basket”, assets that embody such traits are an opportunity to diversify portfolios and increase the ROI.
Every year renowned organisations such as PWC, Cushman & Wakefield and Savills, present their reports and insights on the upcoming investment trends in real estate. We have summarised four of the most prominent emerging real estate investment trends that are already grabbing the attention of the industry in 2021.
1. Student Housing / PBSA
For at least a decade the student housing / PBSA sector has been incrementally drawing investors’ attention. These real estate assets have a complex nature due to its user’s type, specific legislations and management needs. They usually generate a higher average rent per square metre and provide a higher yield in comparison to traditional housing complexes. As an investment, student housing also presents a counter-cyclical nature since it is able to deliver even during economically challenging periods.
In recent years there has been an unprecedented growth in participation in higher education, which continues to increase demand for student accommodation in university cities. Most of these urban centres are not prepared to accommodate the incoming rush of students, which results in long waiting lists for student accommodation and the inflation of rent cost for family-type apartments that are occupied by multiple students.
In 2019 the european market hit its record high investment volume in student housing / PBSA: €8.8B. The UK was the destiny of 84% of these funds, followed by France. Even though the pandemic put a halt in many development plans, by the end of 2020 multiple projects have already been resumed and the arrival of the vaccine brought hope of a market recovery by 2022.
The shortage of affordable, high quality student accommodation will continue to be an issue after the pandemic is over. It is only a matter of time until investments on student housing / PBSA developments go back to their usual volume. In the next few years it is expected that the UK will continue to receive the largest volume of investment in student housing / PBSA in Europe followed by France, Germany and the Netherlands. Once the market gets back on its feet, specialist developer owner-operators in Spain, Portugal, Italy and Ireland will likely continue their expansion in the european sector.
The true potential of this asset class can only be exploited through knowledge and market expertise, since value for the end users will not be created by only bricks and mortar, but through the quality of concept and overall user experience.
2. Senior Housing
Research estimates that between 2000 and 2050, the proportion of the world’s population aged 60 years and older will double, going from 11% to 22%. This demographic shift towards a progressively elderly population creates a demand for purposefully built senior living spaces.
The senior housing and elder care market is growing at different paces. In the US the number of institutional investors and private equity firms placing their funds in senior living developments grew exponentially since the 90’s, having transitioned from niche to a mainstream investment in the 10’s. In the Asia-Pacific region, Australia is the most developed senior housing market and is currently blooming with opportunities, while Japan is set to be the next in line to catch investor’s eyes. In Europe, the elderly care market is set to grow in the next six years, regardless of the pandemic impact, which will influence the flow of investments directed to senior housing developments.
The ageing of the world’s population is increasing the need for housing solutions that combine health care and independent living. Investors that can support smart portfolio acquisitions, such as senior living that demand high-level health care and safety operations, will likely take advantage of great returns within alternative real estate market investments.
If you would like to continue reading the full article and learn about the other two investment trends for 2021, click on this link.
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Originally published at www.spatial-experience.com.
