Diversification throughout commercial property portfolios, by private and institutional investors, is a long-standing tactic but has tended to centre around a select number of core commercial real estate classes.
That has changed in the post 2008 environment, as the industry has seen a growing appetite from investors in ‘alternative commercial property assets’ and the rise in levels of investment in these asset classes across the UK and Ireland is starting to be felt north of the border here in NI.
Figures announced for the UK mainland at the start of this year show that in Q1 2019 investment in these alternative real estate assets; such as hotels, private residential, student accommodation and care homes, reached a record 42% share of the overall UK investment market for the quarter. Analysts report that this has been the highest share on record following 29% and 35% growth in this sector in Q3 & Q4 2018.
The proportion of Northern Irish investment transactions that fall into the alternative category doesn’t presently come close to this level, but there is no doubt that alternative property assets are increasingly piquing the interest of those investing in the province.
The proliferation of hotel investments in Belfast City Centre across the past 24 months is well documented, in parallel with heightened investor interest in student accommodation as the Ulster University campus takes shape on Royal Avenue.
Unfortunately, the unexpected delay of construction at the university campus served to cool the later for a time, but several significant student accommodation schemes are now nearing completion with others coming online as the construction of this vibrant new part of Belfast City Centre proceeds.
Other ‘alternatives’ including build-to-rent schemes that facilitate city centre living as well as alternative uses of traditional retail spaces that incorporate leisure facilities, entertainment and community alongside healthcare provision are becoming increasingly attractive to investors in the province as The Belfast Agenda strives to make Northern Ireland’s capital home to an additional 66,000 people by 2035.
Residential letting schemes in Belfast with concierge services, gyms and residents’ lounges may be a novelty today but based on the wider UK and Irish markets the time when these represent a solid investment, even for the risk-averse institutional investor, might not be too far away.
Markets are changing, as are attitudes, incomes and the priorities of the people in general. Almost 25% of UK households are expected to be living in rented accommodation by 2030, so it is unsurprising as models like build-to-rent start to become more common other ‘alternative’ investment options will follow suit.