4: NOWNERSHIP - THE RESIDENTIAL LIFECYLE
More people are choosing to live in rented accommodation. The idea of space as a service in the context of offices has been around for a few years. But while we've spent time exploring the techniques required to value this phenomenon, it is not justoffices where this change is happening. Societal, demographic and tenure changes mean that more people are choosing to live in rented accommodation operated by large-scale operators.
This journey starts at university. Student numbers are rising around the world, and an increasing number of undergraduates and post-graduates are living in purpose-built student accommodation that provides the space and services to suit their needs.
In many countries, new graduates often move directly into the rented sector. This is partly due to the flexibility on offer. Institutions have created a market by providing co-living that has affordability of accommodation in the best locations at its heart.
The appeal increasingly encompasses all age groups. Flexibility of living, alongside affordability issues, are also leading to an increase in renting among all age-groups in some geographies previously dominated by the owner-occupier model. This phenomenon is occurring later in the life cycle, too, as rapidly aging populations mean there's a rising demand for senior living accommodation, which can allow independent living for longer, as well as care homes, as nursing needs intensify. This structural move towards renting has led to residential investments taking their place among more established real estate asset classes.
For investors, the sector represents a potentially large opportunity. With notable exceptions in North America and parts of Asia Pacific, few of the markets popular with commercial real estate investors have yet seen the same scale of institutional investment in residential assets. This is changing rapidly, however, both as the development of new assets continues, and as we predict, global investors continue to rotate away from some ‘traditional’ types of commercial real estate investment.