Guests: Richard Jackson, co-founder of Apache Capital, Jason Constable, head of specialist real estate at Barclays and Vicky Pryce, board member at the Centre for Economics and Business Research (CEBR)
Covid-19 and wider investment landscape mean institutional investors will increasingly look to alternative residential asset classes, such as build-to-rent, to deliver stable, long-term income streams. A panel of experts joined Blackstock’s founder Andrew Teacher for a RESIcast on this topic in the lead up to the Property Week RESI Conference 2020.
According to our expert guests, build-to-rent (BTR) is in a good position to weather the Covid-19 storm, with macro-economic trends driving investor demand.
Vicky Pryce of the Centre for Economics and Business Research (CEBR) think-tank, points out that currently, “we have low inflation, very low bond yields and interest rates are near zero, so housebuilding and BTR portfolios will be a very attractive proposition to lenders and institutional investors.”
A report from global property consultancy CBRE found that although investment this year into UK BTR is likely to be lower than in 2019, as a reflection of challenges posed by Covid-19, levels will return to growth in 2021, and outperform other sectors over the next five years.
Apache Capital’s managing director Richard Jackson said: “In the medium to long term, we’ll see fairly consistent reallocations among institutional portfolios towards residential for rent as an investment class. It is defensive and generates long-term income streams that are sorely needed by institutional investors, such as pension funds, to match their liabilities.”
However, this does not go to say that the multifamily sector has not had to deal with its own challenges during the current crisis.
Jason Constable, head of specialist real estate at Barclays, mentions that the structure of development financing is very bespoke to suit specific construction programmes. For example, different tranches of capital will be deployed at different, predetermined stages of the build cycle.
“During lockdown, sites were shut and workforces sent home. I’ve never had to face that kind of situation before. The first thing you think about here is your clients.”
Constable says that at Barclays, “there was a lot of open and constructive dialogue with our clients and I’m very pleased to say we’ve helped our clients navigate their way back through getting their workforces back on site.”
Despite the challenges of 2020, the search for stable, long-term income streams in a low-interest rate environment will continue to fuel demand for funding alternative asset classes such as BTR.
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Co-founder and Managing Director
Head of Specialist Real Estate
Centre for Economics and Business Research (CEBR)