New opportunities for institutional investment in residential rented market

Real estate fund management firm Internos Global Investors has teamed up with Catalyst for Homes, a community interest company, to explore the formation of a range of direct and indirect investment vehicles that will enable institutions to invest in scale in the UK residential rented market.

The alliance is evaluating 152 residential development sites across Greater London with a view to selecting the most attractive for the institutional market.

Suitable sites are likely to provide a range of characteristics including asset management potential and up to 30-year income returns which are attractive to investors allocating from not only real estate, but also infrastructure and fixed income quotas.

Andrew Taylor, UK residential investment at Internos, said: “According to Investment Property Forum (“IPF”) seminal research in 2014, the UK private rented sector is worth around £837 billion, of which only £18 billion (2%) is currently in the hands of institutional investors – the vast majority being held by private amateur landlords. This compares to the UK commercial property market where more than 56% of the £647 billion estimated value is owned and professionally managed by institutions.

“This disparity provides a significant opportunity to grow institutional investment with professional management in this previously overlooked market. Couple this with a worrying outlook for global equity and fixed income returns and the UK residential market provides an attractive proposition for risk-averse / return hungry investors.”

Adam Sampson, executive chair of C4H, said: “The returns from residential investment over the past decade have significantly outperformed comparable markets. The alliance with Internos provides an opportunity for increased access to this market for investors at the same time as addressing the desperate shortage of affordable housing which affects both individuals and the economic health of the nation.”