Perspectives 2019

Our own research has also suggested that the specialist sectors will gain momentum over the next five years. Figure 2: Investors in specialist sectors are increasingly institutional and international Source: RCA, Cushman & Wakefield FOREIGN INSTITUTION DOMESTIC INSTITUTION FOREIGN PRIVATE DOMESTIC PRIVATE SHARE OF INVESTMENT VOLUMES BY BUYER TYPE AND SECTOR GROUP (2009 – 2018) Specialist Mainstream Largest Share 48% 58% 33% 30% 11% 9% 8% 3% Buyer preferences are already changing One of our key questions to attendees was “Which property type will be the most attractive investment opportunity over the next five years?” The responses showed that each city had its own variation on the main trends: • In Bristol, developers’ struggles to keep up with housing demand made the residential sector the most popular single sector for investment, with 31% of the vote (see Figure 1). • The lack of local development has made student accommodation similarly attractive in both Bristol and Newcastle. • In Edinburgh and Cardiff, hotels are popular due to the strengths of the local economy in the hospitality sector. Edinburgh sells over £1.3bn of services to visitors each year, and its 2020 Tourism Strategy has been a notable success. Meanwhile, Cardiff is likely to see a growth in visitor numbers now that the M4 Severn crossing is toll free. • Beyond the specialist sectors, logistics was often the preferred sector of investment and the most popular property type in Birmingham, Manchester and Newcastle. Meanwhile, offices ranked no.1 in Leeds and Edinburgh, the latter city having one of the lowest levels of available office stock in the UK. Why the specialist sectors? Overall, there are two factors driving the popularity of the specialist sectors. First, investors and developers are now more open to creating mixed-use schemes, as there are mutual benefits to users, managers and owners in an asset that allows different uses and income sources. Second, specialist sectors attract investment from foreign institutions, drawing new investors into the regions. It is tempting to assume that the main buyers of niche property types are small, niche investors – but over the last decade, almost half of all buyers of specialist sector property in the regions were foreign institutions (Figure 2). New attractors for investment The popularity of UK specialist sectors with overseas buyers also holds out the promise of investment on a scale that will make a difference to the regions. Because overseas buyers are often keen to invest in large, national portfolios – especially in hotel and student accommodation assets – they tend to pick a sector and invest at scale, rather than investing in a piecemeal fashion. The benefits for the area receiving investment are consequently greater and more connected. This exciting prospect is a key part of our regional outlook, and one that could even make a difference in addressing some of the economic disparities between the South East and other parts of the UK. 2019 will see whether this trend continues – and what it means for UK real estate investment. CUSHMAN & WAKEFIELD 19 #TRENDING