UK Multifamily investment expected to bounce back in the wake of COVID-19
CBRE MarketView: UK Multifamily Investment, Q1 2020
The UK multifamily sector enjoyed a strong start to 2020, with a total of £1.055bn of investment in Q1. This is the second highest quarterly investment volume for the sector since 2014. It reflects many of the £1.5bn worth of deals that were under offer at the end of 2019 being finalised.
Transactions in Q1 were broadly evenly split between forward funding and standing investment deals. The bulk of activity took place outside London; a total of £777.1m was transacted in regional markets, accounting for three-quarters of total investment in Q1 2020.
Looking ahead, we had expected activity to be generally lower in Q2. However, this decline will now be more acute in light of COVID-19. Lender caution and the inability to physically inspect sites are among the reasons that most investment decisions have been placed on hold. Operators have also reported lower levels of rent collection, which is therefore impacting net income.
“The overall impact on the multifamily sector ultimately depends on the persistence of COVID-19 in the UK, the duration of the government lockdown, and the broader economic impacts.
“Demand for multifamily remains high, as illustrated by the £800m worth of deals that were under offer at the end of the first quarter. Given this demand, and the underlying fundamentals of the sector, we expect investment activity to bounce back relatively quickly in the wake of COVID-19.
Prime yields are unchanged from Q4 2019, ranging from 3.25% to 4.25%.
Read the report here: CBRE MarketView: UK Multifamily Investment, Q1 2020