The UK alternative property market is on the rise, as US investors plough funds into the country’s care home sector, and Simon Morris believes this could be extremely beneficial for UK property investment funds.
Simon Morris: London-Based Property Expert
A London-based expert who acts in an advisory capacity to UK property investment funds, Simon Morris has noticed the meteoric rise of commercial property as the economy enters sustained recovery. It is returning recording highs for investment funds across the board and performing at a stronger rate than stocks and bonds in the current climate.
Alternative commercial property is an increasingly lucrative sub-sector of the commercial property market. Alternative property, such as care homes and student accommodation, typically act to diversify a portfolio and expose it to a more diverse range of economic drivers, however it’s often been a defensive element of the portfolio, as it provides access to long term capital streams. However, alternative commercial property is increasingly seeing more asset management-type stock emerging, providing new opportunities going forward.
The US Invests in UK Care Homes
Currently the UK care home market is worth £15.1 billion a year, and that is set to rise, as US institutions increasingly recognise it as a strong possibility for investment.
Specifically US Hedge Fund Anchorage, more commonly known for its involvement in Hollywood film studio, Metro-Goldwyn-Mayer, bought 27 care homes for the elderly across the UK. It is the second such deal undertaken by the Hedge Fund in the UK care home market this year alone, and typifies a global interest in the sector, a Hedge Funds from Asia and the Middle-East join the scramble.
Scandals Create a Gap in the Market
Why are investors flocking to this subsector of the UK property market? Naturally, the sub-sectors penchant for longer 25-30 year leases (in traditional commercial property it’s usually six), and the higher yields reaped through the benefits of a long-term fixed income are part of it, however experts are suggesting that the scandals rocking UK care homes are also driving international investors to flock to the market.
The Financial Times spoke to Julian Evans, head of healthcare at Knight Frank on why the scandals are seem as a positive by international investors: “A lot of investors see the scandals as a bit of a positive because the negative publicity has created less competition in an incredibly crowded commercial property market.”
Simon Morris believes Evans has a point; the scandals have created an opportunity in this lucrative market, as evidenced by international interest in snapping these properties up. It may be an extremely wise investment choice going forward.