Record British property investment focused on commercial and BTR assets

Created: 03 May 2022

The UK property market continued to remain buoyant with the January-March 2022 period characterised by record  real estate investment volumes. The Build to Rent (BTR) and commercial sector attracted significant capital deployment during this period. The upwards trajectory of investment flows into BTR residential housing triggered a meaningful uptick in land purchasing by major housebuilders, with small and medium sized developers increasingly commanding greater market share. 

Across the property market, there was growth of 10 per cent in investment volumes to £13 billion, according to Colliers’ research. British BTR, for instance, experienced its highest quarter of investment over the course of  the first three months of 2022 with £1.6bn in transactions taking the sector to 225,400 total homes completed or in development, according to Savills data. 

Moreover, the city of London cultivated a sizable investment appetite with the largest first quarter (January-March) on record for volume with £3.8bn in deals. Colliers  indicates that the national office sector transacted £5.2 billion over the same period, its highest performing quarter since 2018. Yet the concentration of investments in London represents a 27 per cent increase on the previous record in the first quarter of 2007, and a 540 per cent increase relative to last year. 

Key trends in the investment  include a high prevalence of international players, heightened use of forward funding, as well as greater competition for land. 

Cross border investment, from US and Asia Pacific investors in particular, accounted for over three fifths of total investment volumes as travel impediments decreased. Further, forward funding agreements (also known as a development funding agreement), empower developers with liquidity whilst simultaneously providing fund exposure to de-risked long term oriented property assets.  

Additionally, fiscal policies, such as the £3 billion Home Building Fund and the £1 billion loan financing fund, have expanded SME developers’ access to funding in view of the government’s 300,000 new homes per year target for England. This is fostering greater competition for land to satisfy growing investment demand over the medium to long term. 

“Growth has been particularly strong for Suburban or Single Family BtR. The total planning pipeline for this segment of the market has grown to reach 18,000 homes, an increase of 38% over the past 12 months.”