| UK long income real estate market finding favour with institutional investors
While much of the global real estate sector has been adversely affected by the coronavirus pandemic, UK long income real estate is on the up and can provide attractive returns for investors, according to a new report from Alpha Real Capital. The market is currently worth an estimated GBP30 billion and is continuing to grow rapidly, with commercial ground rent deals in particular proving increasingly popular.
Commercial ground rent finance structures involve a real estate owner or acquirer selling freehold land to an investor while simultaneously agreeing a long-term (75 year-plus) lease to continue using the asset. The sector is currently worth around GBP4 billion, with around GBP1.5 billion of new deals completed in 2019 alone, and Alpha expects to see further rapid growth.
"We believe that the Covid-19 crisis will create more demand for commercial ground rents from tenants and that they will be the opportunity to achieve attractive returns for investors," says Hugo James, Partner and Head of Long Income at Alpha Real Capital. "This, coupled with the fact that the asset class has performed well so far during the pandemic will see more institutional investors looking to invest here."
Germany and the Central Eastern Europe (CEE) region meanwhile, are leading growth in European commercial real estate investment, according to Savills, with reported investment turnover growth in H1 2019, despite the effects of Covid-19 in Q2. Germany has seen a 31 per cent increase in investment transactions compared to the first six months of 2019 which, in terms of volume, translates to EUR10 billion in additional investment.
Turning back to the UK real estate investment market, Kames Capital has welcomed the findings of an FCA consultation on potential changes to the the structure of open-ended property funds, which, according to Richard Peacock, co-manager of the Kames Property Income Fund, could result in significant benefits for the sector.
Helical meanwhile, has reinforced its green credentials by achieving the UK’s first BREEAM 2018 New Construction ‘Outstanding’ rating for its 33 Charterhouse Street office development in London.
Pavlos Clifton, Senior Development Executive at Helical, says: "Sustainability is at the core of Helical’s business and this considerable achievement is the latest demonstration of how we are working collaboratively with best in class advisors to ensure that the buildings we own, manage and deliver are some of the most sustainable in the UK."
And finally, we report on the passing of one of the giants of the US real estate world, Hines founder Gerald D Hines who has died at the age of 95. Under his guidance the company went from a start-up in 1957 to today's global operation of more than 4,800 employees active in 25 countries around the world. Throughout his career, Gerald Hines teamed with some of the biggest names in architecture including Norman Foster, Frank Gehry, and Charles Moore.
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