Housing needs in the UK are changing amid declining levels of home ownership and lifestyle shifts. Rather than the traditional ‘buy-and-hold’ model, residential housing needs are shifting towards developments that are built for rent and aimed towards a specific demographic who are at a particular life stage. As such, funding
Barings Real Estate, part of Barings LLC, one of the world’s largest diversified real estate investment managers, has announced that Landmark Manchester (Landmark), a 180,000 sq. ft. office development that it is undertaking on behalf of an institutional investor, is emerging onto St Peter’s Square with the concrete core now
BDC 319 : Aug 2024
Housing needs in the UK are changing amid declining levels of home ownership and lifestyle shifts. Rather than the traditional ‘buy-and-hold’ model, residential housing needs are shifting towards developments that are built for rent and aimed towards a specific demographic who are at a particular life stage. As such, funding needs are changing to support these types of developments and this should lead investors to consider new ways of accessing the property market. Why is the UK property market experiencing change? Homeownership levels have fallen dramatically among the younger generation over the last thirty years. In 1991, 67% of 25-34 year olds were homeowners compared with 36% in 2014. Meanwhile, private sector renting more than doubled between 1980 and 2014. This is not just a UK phenomenon. In the United States, for example, home ownership fell to its lowest level in more than five decades in 2016. Declining homeownership is resulting from both cyclical economic forces as well as longer-term structural trends. While economic pressures have been important contributors towards declining homeownership, especially among millennials, longer-term lifestyle shifts are also having a significant impact. The way people live and work is frequently less structured and standardised than in the past, and there appears to be less desire for people to be held down by long-term commitments. Coinciding with the advent of the ‘gig’ economy has been rising numbers of self-employed and contract workers over the last twenty years, suggesting a more mobile and flexible workforce. Nonetheless, while both the residential and commercial property sectors are experiencing significant change, new investment opportunities are opening as developers adjust their product offerings to meet evolving economic conditions and lifestyles. In fact, some of the most innovative developments are happening in the residential market. Co-living benefits the individual and the community ‘Co-living’ is an area of particular interest and future growth. These developments, which at this point are mainly focused in London, cater for young professionals’ more mobile lifestyles. They offer the convenience of all-inclusive costs, covering rent and bills as well as services such as cleaning and gym membership. This market is further developed in the United States and the evidence suggests widespread popularity in metropolitan areas such as New York and Oakland, California. In addition to convenience, this type of living arrangement combines the benefits of feeling part of a community while at the same time offering individual privacy. Occupiers have shared living spaces, but they can also retreat to their own fully furnished private apartment. It presents an attractive choice for young people, especially as a national survey recently found that 16-34 year olds experience feeling more lonely than older generations. However, it is not just the investment potential that these types of new developments hold for investors. Co-living and other purpose-built rental developments may also hold wider economic benefits that could help the struggling UK high street. How can investors take advantage? Investors can access these types of purpose-built rental developments through development finance or bridge loans, which are secured by the underlying assets and offer higher yields relative to UK government and corporate bonds – typically between 5% and 8% per annum net of fees. With banks and building societies retrenching from lending in the post-financial crisis years, this market presents a growing opportunity as developers look to secure funding from a diverse range of sources. Although still at an early stage of development, operational assets are a logical, modern way to benefit from an evolving and changing UK property market. By Tom Brown, Managing Director at Ingenious Real Estate
Barings Real Estate, part of Barings LLC, one of the world’s largest diversified real estate investment managers, has announced that Landmark Manchester (Landmark), a 180,000 sq. ft. office development that it is undertaking on behalf of an institutional investor, is emerging onto St Peter’s Square with the concrete core now complete. With Castlebrooke Investments retained as development manager, benefiting from their strong track record in project delivery, and having spent over a year in the demolition and basement formation phase, construction work is well underway with the Grade A, BREEAM Excellent office building set to be launched in Summer 2019. Appointed contractor Bowmer & Kirkland has completed the basement levels, which will support 14 floors of virtually column free office space and a double-height reception at ground level. The building’s concrete core is now visible on the Manchester skyline and, when completed, the scheme will add to the vibrancy of one of the North’s most significant public squares. Designed by world-renowned architects Squire & Partners, Landmark has been created with the next generation occupier in mind. The building is being constructed with an offset core to enable large and efficient floorplates to be designed offering maximum flexibility to occupiers. In a market that is currently experiencing strong levels of demand coupled with limited supply, Landmark is one of only two new build office developments due to be completed in Manchester City Centre in 2019. The scheme has received overwhelming support from Manchester City Council and will complete the Council’s vision for St Peter’s Square and the Civic Quarter. Situated in the heart of Manchester’s central business district at St Peter’s Square, Landmark is in a prime location close to St Peter’s Square Metrolink and several train stations. The development also has easy accessibility to the M60 via the M602 with the location being furthered strengthened by the planned High Speed 2 railway project which will connect Manchester with major cities across the U.K. Charles Weeks, Head of Barings Real Estate – Europe, said; “The city of Manchester is thriving. It is consistently one of the strongest, most active city centre office markets outside of London. Landmark will play a pivotal role in enhancing what the city has to offer by providing businesses with a destination that is both modern and flexible as well as providing excellent infrastructure and connectivity. Barings Real Estate has a proven record of accomplishment adding significant value to investments both within the U.K. and globally and we are delighted to oversee this important development project.” Agents on Landmark are CBRE and Colliers International. Barings Alternative Investments (BAI), part of Barings LLC, is a 450+ associate team located across 11 countries that manages $52.3 billion in client capital (as of March 31, 2018). BAI seeks differentiated sources of returns by incorporating decades of investment experience in alternative assets offering investors access to a diverse range of opportunities across private equity, real assets, asset-based investments and the four quadrants of real estate. We serve as a trusted partner to clients, leveraging our global presence and robust origination capabilities to identify the most attractive risk-adjusted return opportunities. The Barings Real Estate team offers a broad range of investment opportunities globally across the public and private debt and equity markets. The team invests across all major property sectors with a focus on global relative value and trend-backed preferred strategies. Barings Barings is a $306+ billion* global financial services firm dedicated to meeting the evolving investment and capital needs of our clients. We build lasting partnerships that leverage our distinctive expertise across traditional and alternative asset classes to deliver innovative solutions and exceptional service. Part of MassMutual, Barings maintains a strong global presence with over 1,800 professionals and offices in 16 countries. Learn more at www.barings.com
