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Institutional investment into residential assets, encompassing student housing, co-living, multifamily and single-family rental and seniors housing, accounted for 15% of all UK real estate investment by value last year and 22% in 2020, only behind offices and a resurgent logistics sector. Ten years ago, residential accounted for just 8% of all acquisition activity.

Figures for Q1 2022 suggest that investor demand remains strong. Some £2.9 billion has been committed in the first three months of the year, which is 25% above the level achieved during the same period last year and in line with the quickening pace of investment activity over the past 12 months.

Demand is driven by a combination of strong structurally supportive market dynamics, an evolving service-focussed product, as well as an expanding and more discerning occupier base. There鈥檚 little doubt, as well, that Covid-19 has transformed the way global institutional investors look at real estate. The residential investment sector has proven resilient by delivering secure income in uncertain economic conditions.

As well as existing investors looking to build scale, activity is being fuelled by a deepening pool of capital looking to target residential. Some 23% of investment in the build-to-rent (BTR) market last year was from new entrants to the UK market, for example, while for seniors that figure was 48%.

Based on the level of investor demand 鈥� and supported by our survey of 54 leading investors who, combined, currently account for £76 billion in residential assets under management across the UK 鈥� further growth is expected. Some 80% of investors are expecting to 鈥榮ignificantly increase鈥� their exposure into residential over the next five years.

Set for another record year

In the short term, the survey suggests that residential investment volumes will top a record £16.5 billion in 2022, a notable increase from the £10.2 billion spent in 2021, according to 博鱼体育集团 Frank analysis. In total, an additional £75 billion has been earmarked to deploy across residential investment sectors over the next five years, equivalent to a doubling of their current committed capital.

Nonetheless, as our survey suggests, there remain challenges for investors to achieve their ambitions. A lack of operational stock was the most cited barrier for increasing investment, followed by competition from other investors, and the availability of development and funding opportunities. Currently, just 42% of our survey respondents said they are targeting land deals, with the majority looking for income producing assets, or forward funding opportunities. Consequently, we expect to see more investors move up the risk curve into development funding.

In the short-term, increasing construction and operational costs, rising land values and fire safety were flagged as the top three most immediate concerns.

ESG to shape investment

Longer-term, ESG will shape investment. Some 38% of respondents to our survey believe sustainability considerations will be the key influence determining investment strategy over the next three to five years. The remaining 62% said it would be somewhat influential.

New development in 2026 and beyond has the potential to be very different to current operational stock. In support of this, respondents have identified several opportunities including diversifying product, exploring new markets in a broader range of locations, and responding to occupiers needs with technology, amenity and service.