GRIThe state of play for UK PRS
Leading PRS developers & asset owners debated the evolution of the asset class & its future investment opportunities.
June 21, 2018Real Estate
GRI Club UK members gathered with a selection of the UK’s most senior PRS developers and asset owners for a closed door and frank discussion on where the asset class was evolving and the wealth of investment opportunities available.
Hosted at UNCLE, Elephant & Castle (a new build serviced apartment brand by Realstar Group) and moderated by Ryan Prince, Vice Chairman, Realstar Group, the venue reflected the growing popularity and tenant demand for hotel operated style rental accommodation for millennials especially. Members were joined by Gareth Blacker, Head of Transactions, Homes & Community Agency who shared insights into the state of finance for all gradients of rented living and working with investors and developers; social, affordable, multifamily, retirement, mid market and luxury.
Issues discussed
Questions on planning, availability of debt and government policy steered much of the earlier discussions; how are we to address the overwhelming supply and demand issue for residential in a climate where the consumer and the government aren’t completely bought into ‘generation rent?’ Whilst it was felt that there were billions of capital to deploy, the debate centred on getting the right mix of affordable, mid-market and luxury products. Co-Working, Micro and Serviced Apartment products were explored, especially whether they could be built to cost and scale. More could be done at a local level through releasing land for development, building to cost in the right place and having a cohesive plan from government to attract long term investment into the sector.
Building to cost and scale and when we would see a robust pipeline develop was cited by financiers and institutional investors as a main barrier, and possibly why we have yet to see much activity in PRS, especially as the fundamentals point to a sector that should be flourishing! However, it was encouraging to learn that most institutional investors are very prepared to move up the risk curve and take on planning and development risk in order to make the numbers work.
Affordability costs of the entire lifecycle to buy land, invest, build, operate and gain stable long term rental returns brought home the message that the PRS sector has a long way to go in the UK before it catches up to more established and liquid markets such as Germany, USA and Canada. The simple fact is that while demand is critically high for places to live across the UK, the asset class will remain slow to pick up because the market has no way of testing the revenue growth. Most agreed that until the government take some control and use some form of rent benchmarking and viability testing to help pave the way for a liquid pipeline, PRS will remain a business for the brave and innovative few; not an asset class to the many debt and equity investors waiting to enter into the UK & Irish PRS BTR market.
Hosted at UNCLE, Elephant & Castle (a new build serviced apartment brand by Realstar Group) and moderated by Ryan Prince, Vice Chairman, Realstar Group, the venue reflected the growing popularity and tenant demand for hotel operated style rental accommodation for millennials especially. Members were joined by Gareth Blacker, Head of Transactions, Homes & Community Agency who shared insights into the state of finance for all gradients of rented living and working with investors and developers; social, affordable, multifamily, retirement, mid market and luxury.
Issues discussed
Questions on planning, availability of debt and government policy steered much of the earlier discussions; how are we to address the overwhelming supply and demand issue for residential in a climate where the consumer and the government aren’t completely bought into ‘generation rent?’ Whilst it was felt that there were billions of capital to deploy, the debate centred on getting the right mix of affordable, mid-market and luxury products. Co-Working, Micro and Serviced Apartment products were explored, especially whether they could be built to cost and scale. More could be done at a local level through releasing land for development, building to cost in the right place and having a cohesive plan from government to attract long term investment into the sector.
Building to cost and scale and when we would see a robust pipeline develop was cited by financiers and institutional investors as a main barrier, and possibly why we have yet to see much activity in PRS, especially as the fundamentals point to a sector that should be flourishing! However, it was encouraging to learn that most institutional investors are very prepared to move up the risk curve and take on planning and development risk in order to make the numbers work.
Affordability costs of the entire lifecycle to buy land, invest, build, operate and gain stable long term rental returns brought home the message that the PRS sector has a long way to go in the UK before it catches up to more established and liquid markets such as Germany, USA and Canada. The simple fact is that while demand is critically high for places to live across the UK, the asset class will remain slow to pick up because the market has no way of testing the revenue growth. Most agreed that until the government take some control and use some form of rent benchmarking and viability testing to help pave the way for a liquid pipeline, PRS will remain a business for the brave and innovative few; not an asset class to the many debt and equity investors waiting to enter into the UK & Irish PRS BTR market.