The private rented sector (PRS) has become a mainstream investment vehicle and the green agenda is a key part of the real estate investment decision according to a recent survey by leading audit, tax and consulting firm RSM.
An overwhelming 77 per cent of the 300 senior real estate professionals surveyed said they now view PRS as a mainstream investment vehicle, an asset class that has long been considered alternative, despite the prolonged industry and media attention it has received.
73 per cent also said they saw sound environmental sustainability credentials as an essential (22 per cent) or important (51 per cent) part of the overall investment decision. This compared to 20 per cent who saw it as a nice to have, and 7 per cent as unimportant.
The survey, entitled Real Estate 360, highlights how alternative asset classes and particularly PRS are critical growth levers for UK real estate. Changing consumer and occupier habits have led this change. Inflated property prices have locked a sizable population out of home ownership and forced social attitudes to evolve. Statistics show there were 4.5 million households renting via PRS in 2015/16, up from just 2 million in 2000.
Respondents also felt PRS would see the greatest investment growth in 2018, with the industrial sector a close second. Residential had been considered the sector with the greatest growth potential in 2015 and 2016.
Lee Marshall, partner and head of real estate and construction at RSM in the North East and Yorkshire, said: ‘The opportunity within the private rented sector has always been there but through a combination of social change and investor appetite it is becoming more prominent. It’s interesting to see that many now perceive PRS as a mainstream investment vehicle, and this is starting to drive activity across the North East, which is good to see.
‘Our findings also show how important environmental sustainability has become a key driver of investment decisions, highlighting a significant shift in sentiment which will shape future developments across the region.’
The survey also revealed how 42 per cent will look to overseas markets in 2018 for better returns, yet 81 per cent would continue to focus on UK investment opportunities over the coming two years. Tax restrictions were the biggest barrier to investment (51 per cent).
70 per cent said businesses will increase working remotely or from home to reduce cost, whilst only 30 per cent felt this would lead to a surplus in office space.