London,
20
June
2023
|
09:21
Europe/London

Multifamily Outperforms Commercial Property Sectors for Capital Growth

- CBRE launches first ever UK Multifamily Index report 
- Multifamily rental growth stronger than office and retail sectors 
- Assets outside of London generating higher capital value growth 

Multifamily capital values in the UK rose by 1.2 per cent over the year to March 2023 according to the results of CBRE’s inaugural UK Multifamily Index report.

Rental values also rose over this period, increasing by 8.2 per cent. This countered the negative impact on capital values of a rise in capitalisation rates over the year. Capitalisation rates for multifamily properties increased by 25 basis points for the year to March 2023.

Capital value growth was driven more by assets located outside of London than by assets located within London. Assets located across the rest of the UK saw an increase in capital values of 2.5 per cent for the year to March 2023 whereas assets located in London saw capital values decline by 0.7 per cent over the same period.

However, assets located in London reported stronger rental growth, at 10.1 per cent for the year to March 2023, whereas assets located in the Rest of the UK saw rental growth of 7.0 per cent. The reason for lower capital growth for multifamily assets in London was down to yields rising more sharply than in locations outside of London.

The results can also be compared to the performance of commercial property types over the same twelve-month period, as reported by the CBRE UK Monthly Index. While the capital value of multifamily assets rose by 1.2 per cent, retail capital values declined by 11.6 per cent over the same period, while office capital values declined by 14.2 per cent and industrial capital values fell by 25.9 per cent. Meanwhile, multifamily rental growth was stronger than both office and retail assets.

Jason Hardman, Head of Residential Valuations at CBRE UK

The results from our multifamily index show that multifamily properties have been resilient for investors, continuing to deliver rental and capital growth in the face of the challenges presented by economic uncertainty, high inflation, and rising interest rates over the last twelve months.

Jason Hardman, Head of Residential Valuations at CBRE UK
Jennet Siebrits, Head of UK Research, CBRE

This new index tracks capital value growth, rental value growth and yield movement using a sample of multifamily assets valued by CBRE. This index will enable the investment performance of multifamily properties to be compared more easily to that of other property types such as office, retail, and industrial assets. 

It was important for us to include multifamily in our performance monitoring as it’s developed into a mainstream investment asset over the past decade. While ten years ago residential investment made up just 3% of total UK CRE investment it now makes up 15%. According to our latest investor intention survey, it’s now the most popular asset class for investors into the UK – with 30% selecting residential as their favoured sector. This reflects the growing need for quality rental stock in the UK.

Jennet Siebrits, Head of UK Research, CBRE