In a year of uncertainty, the operational residential sector has shown remarkable resilience. Significant numbers of global investors are recognising the value offered by a sector with strong underlying fundamentals
Foreword
Investment into operational residential real estate (which includes sectors such as multifamily, co-living, student accommodation and senior living) reached an all-time high in 2019. That came despite rising economic headwinds. When those headwinds strengthened after Covid-19 became a global pandemic, operational residential real estate continued to show resilience, with investment volumes holding up better than for other established real estate asset classes.
This resilience is due to strong underlying fundamentals. Housing is a basic need, and many markets are chronically undersupplied. Young people, meanwhile, moving to urban centres for work and study, have driven demand for rental residential accommodation. This is a trend unlikely to be altered by the pandemic in the long term, and coupled with rapidly ageing populations, means that there is an urgent and growing need for purpose-built accommodation for all age categories.
Once considered alternative, operational residential has become a mainstream investment asset class and the defensive benefits of investing in beds are set to continue. Investors, seeking portfolio diversification prior to the pandemic, have doubled down on their ‘beds and sheds’ strategies in a bid for secure income streams.
Significant opportunity remains. Barriers to home ownership, changing cultural norms and better quality product means that renting has become a more desirable option for all age groups. Larger, cross border management platforms will further improve the user experience, while bringing efficiencies to investors.
While Covid-19 has brought near-term challenges, the response to climate change remains perhaps the greatest long-term challenge, and opportunity, for the sector. Tackling climate change and making a positive difference for society are causes that have moved up the global agenda across all industries. Investors in operational residential are getting serious about this, as our ESG survey of the sector shows.
Lakeview Apartments, Ellerslie, Auckland
Read the articles within Report: Global Living – 2020 below.
