CBRE foresees 25% increase in residential investment for 2022, as Q1 shows healthy start to year

The UK residential sector recorded a total of £2.9bn of investment in Q1 2022, according to data from global real estate advisor, CBRE.

Investment was up 48% on the same period of 2021, illustrating the strength and resilience of the sector in the face of rising construction costs and inflation. The strong performance seen in Q1 has led CBRE to forecast a 25% increase in UK residential investment for the year.

Purpose Built Student Accommodation (PBSA) accounted for nearly half of the total investment, £1.4bn, the highest Q1 volume since 2015 (excluding the iQ/Blackstone entity-level transaction in Q1 2020).

PBSA activity was distributed across the country – with the largest portfolio deal being Downing’s £388m acquisition of assets in Manchester, Coventry and London from Greystar. It demonstrated appetite for both old and new PBSA stock, with more than a third of beds traded in Q1 built in the last three years. However, the acquisition of the Unite portfolio by Lonestar also shows the appetite for older stock, with all beds in the portfolio developed before 2015. Despite supply constraints and a slowdown in development activity, several significant deals already in the pipeline nod towards a highly active rest of the year.

Build-to-Rent investment activity was also strong in Q1 – up 9% from the same period of last year at £860m. Investment was heavily weighted towards London and the South, accounting for 77% of deals.  A new entrant, Oaktree & CompassRock, partnered with Crest Nicholson to provide more than 400 Build-to-Rent homes in Walton-on-Thames, Southampton and Farnham. The largest deal of the quarter was PIC’s £130m income-strip style arrangement of Wirrall Waters One. The deal showcases a new and diverse structure in Build-to-Rent funding opportunities and is a model that may be considered for other developments in the future. The quarter showed that demand from occupiers is strong and growing, with a return to city centre living evident.

This positive momentum is expected to continue in Q2, with provisional CBRE data showing £2bn of Build-to-Rent deals under offer, as well as significant PBSA deals in the pipeline. The appetite for other residential sectors, including co-living and affordable housing, also remains strong.

Following unprecedented levels of investment in 2021, and in the face of some headwinds including higher construction costs and inflation, investment levels for Q1 have certainly been healthy.

Investor appetite for residential remains strong as the sector continues to go from strength to strength.

Andrew Saunderson, Head of Residential Capital Markets, CBRE