The Venture BTR Series: 01
Venture: Residential expertise for investors
Changing working and shopping patterns, combined with a demographic requiring urban living, means investors are increasingly turning their attention to residential assets.
The case for investment is a strong one given the requirement for another 340,000 homes per year in the UK (Unison), a statistic far outstripping supply. We expect a pipeline of residential construction well into the mid-2020s.
In a time of challenge, residential is a combined opportunity to meet a demand for homes while revitalising town centres; a driving factor which has resulted in increased permitted development opportunities. Indeed, new laws came into force in September 2020, to encourage and support investment into the residential sector.
The advancement of build-to-rent (BTR), a residential arena in which the Venture Project Management team has been providing advice for several years, comes as a response to the rising demand for high-quality, well-managed rental housing. Hailed as the fastest-growing rental category in the UK since its inception in 2016, BTR now comprises 171,814 homes in the UK, according to the British Property Federation, with 50,821 complete, 36,701 under construction and 84,292 in planning. These homes are spread across the nation, with 76,804 units in London and 95,010 units outside the capital.
As investors prioritise diversification away from retail and, in some cases, office assets, their funds are increasingly directed towards residential, and specifically the BTR sector. In the UK, investment in BTR assets is expected to reach £4bn for 2020 alone, while the overall size of the UK BTR market for professionally managed rental is estimated at £41bn, up 17% from £35bn in 2019. A further £19bn of additional capital is believed to be ready to be deployed in schemes with planning granted.
A wealth of knowledge
Having acted for leading investors including Columbia Threadneedle, Federated Hermes, CBRE Global Investors , KKR and Tristan Capital amongst others, our team has amassed a wealth of knowledge which is at the disposal of clients looking to invest. This understanding of the sector – combined with a detailed knowledge of clients’ investment risk appetite and funding arrangements – has allowed Venture to assist clients with the delivery of circa £1bn of residential schemes in the UK, Ireland and Europe.
With a deep understanding of the latest residential-led schemes and the development process, our residential team is on hand to assist clients when navigating through the process of residential investment, development and disposal, involving hotels, student accommodation, build-to-rent and affordable schemes.
Investors partnering with residential developers need to take advantage of developer knowledge and techniques, while maintaining institutional standards to ensure robust risk management, asset liquidity and alignment with corporate governance.
Our objective is to ensure our clients obtain the same level of institutional rigour and risk profile for residential investments as is typically available in the traditional commercial real estate world.
Indeed, the Venture teams’ expertise across both high and low-rise configurations means we have a constant oversight of technical issues, specifically increased fire and safety regulations, for example. We are well-versed not only in managing the requirements of government regulations, but regularly push for these to be exceeded to meet the often much higher benchmarks set by funds themselves.
To achieve maximum investment gains and meet user expectations, considerations ranging from green energy procurement through the provision of trees and green spaces to a well-developed walking and cycling infrastructure are key. Although the government goal for achieving Net Zero is 2050, Venture appreciates that for many of our investor clients, targets are much earlier, so both our ESG standards and Net Zero Asset Plan are implemented to help investors achieve their own goals.
Aligned to client pace and strategy
Our hands-on approach encompasses best-in-class practical, bespoke advice, an environmental awareness inherent within the business, and a track record of acting for funds and institutions active in the residential sector. By understanding the risk profile of each investor client and their position in the capital stack, the Venture team aligns itself to the clients’ pace and strategy in order to aid them investing into the residential market.
And with the appetite for residential investment undoubtedly on the increase as we head into 2021, the Venture team is well-placed to make a positive difference to clients’ future commercial objectives.
By Richard Cooper, partner, Venture Project Management
Up next in the Venture BTR series: 02 It’s all about the demographics