Healthcare and Student Direct Lets Potential for 2015

2nd March 2015

Opportunities in core specialist property sectors including healthcare and student direct lets are set to account for an ever increasing share of the commercial market in South Yorkshire according to Knight Frank.

The squeezing of yields within the -traditional sectors such as retail and offices has prompted investors to look at assets which offer better returns, not to mention opportunities for diversification. Knight Frank say 2015 will see a sharp increase in deal volumes for specialist property, along with rental growth and further yield compression. Stephen Hodgson, Sheffield partner and head of regional commercial offices, said: "Key driving factors include structural changes such as the UK's ageing population and increase in student numbers, combined with increased occupier demand for high quality property.   "Care homes are set to be the best performing asset in the healthcare sector, with a new wave of domestic and international operators set to enter the market.   "Within student property, the direct let market is expected to be the best performing segment.  Deal volumes are set to rise nationally, with at least £3 billion worth of transactions in established portfolios expected to take place.  Sheffield alone has a student population of more than 56,000. "And the trend in these sectors  will continue for the foreseeable future." Nationally, the volume of specialist property investment will exceed £10 billion in 2015 and will account for 20% of the total commercial market by 2020, Knight Frank has forecast. A Knight Frank survey of investors suggested that there is a strong desire to boost allocations to non-core commercial assets including the -sleeping giant that is the Private Rented Sector (PRS) which is currently a cottage industry worth more than £1.5 trillion in addition to specialist property around the UK. Other sector activity has seen space efficient, funky hotel formats in London outperform the wider budget sector.  Emerging hotel markets will continue to thrive, while a recovery in trading performance will lead to an increase in demand for secondary locations across the UK. The automotive sector will see yields hardening further this year, alongside rental growth.  Institutional funds will continue their interest and 2015 will see the largest ever volume of automotive investment transactions in the UK. Darren Yates, Head of Global Capital Markets Research, Knight Frank, commented, -With improving occupier demand, easier access to finance and a greater willingness to move up the risk curve, investors' appetite for specialist property continues to increase.   Indeed, for many investors, specialist property now forms an integral part of a core portfolio." Shaun Roy, Head of Specialist Property Investment, Knight Frank, commented, -The continued rise in investor interest in specialist property reflects the appreciation of these business critical assets which, when bought on sensible rent covers and on sound operational business assets, provide their owners with confidence in the durability of income. Moving forward to 2020 we expect to see this sector experience strong growth within the total market, and to become an even more significant part of investor's portfolios.