Robust returns in residential development and student accommodation - Viewpoint - careers advice blog Viewpoint careers advice blog

Robust returns in residential development and student accommodation - Viewpoint - careers advice blog If we take the real estate sector in the UK and consider investment strategies, what is patently obvious is that the growth rate of residential valuations has begun to fall, especially in the last 18 months or so. Previous record highs simply could not be sustained. What are the implication for careers in the sector? It’s certainly not all negative. The speculator looking to maximise investment strategies will continue to look for residential real estate opportunities in potentially lucrative prime property markets, such as London. Lending at a stretch Investors from the Asia and the Middle East have been flooding in Despite an increasing demand for capital to finance these development projects, the banks no longer have the appetite of yesteryear to readily offer lending facilities for certain higher risk property transactions. Having had their fingers severely burned, these venerable institutions aren’t keen to expose themselves to yet more catastrophic scenarios. Risk aversion has become the order of the day. The vast swathe of financial regulatory measures (we’re now at the third Basel Accord) imposed on the banking sector has also meant that the once freely flowing lending tap has now been reduced to a mere trickle. However, it’s not all doom and gloom for our property developer friends. The banks’ reluctance to provide the level of finance needed has opened the door to a burgeoning number of boutique funding providers. These firms are prepared to take a risk and are willing to provide stretch senior loans. As the name implies, these financial instruments are a way to increase the lending percentage of the project’s gross development value (GDV), thereby boosting the housebuilder’s cashflow and ability to complete concurrent projects. Gold rush for student digs The other area of significant growth for investors is the purpose-built student accommodation (PBSA) market. Major refurbishment projects are taking place in London and across the UK in all the big university towns, with Manchester, Liverpool, Birmingham and Brighton leading the way. Investors from Asia and the Middle East have been flooding in to get a piece of the action in what is fast becoming one of the UK’s best performing asset classes. In 2016, the Financial Times reported that Mapletree, the real estate arm of Singapore-based investment company, Temasek, acquired a UK portfolio of student accommodation said to be worth £417 million. According to property agents Savills, £4.2 billion was spent on student digs in the first half of 2015, 40% above the previous peak of 2012. With increasing numbers choosing to continue their studies away from their place of birth, the competition to provide affordable and premium quality housing is red hot. While the UK remains a magnet for foreign students, the market has huge potential not just here but across Europe and beyond. An article in the Sydney Morning Herald revealed that the student housing market was worth around $20 billion to the Australian economy, making education the country’s third largest source of export revenue. Demand for debt origination Most organisations are themselves still in growth mode What are the actual implications for recruitment in the sector? While there is an obvious demand for talent, most organisations are themselves still in growth mode and therefore the development, retention and training of staff will be paramount at this stage of the business cycle. The market is however favourable to those individuals who can demonstrate a solid track record in property lending and employers are willing to offer improved salary and sales commission structures to attract top talent. Originators in senior debt finance and stretched senior debt finance are particularly sought after. Although employers are having to contend with a limited, nascent supply of talent, we would, however, expect the labour market dynamics to change as departments and teams increase specialist headcount over time. The big banks are rationalising and diversifying their risk positions, typically reducing their annual real estate investment exposure, but non-traditional lenders, including challenger banks, are stepping into the fray to provide that much-needed financial lifeline. Demand for people with real estate experience could be on the up. Join our Financial Markets Industry Insights LinkedIn group to share your thoughts and stay up-to-date with the latest financial markets business, employment and recruitment news. 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