Article posted byon May 25, 2023
I was delighted to be part of UK REiiF 2023 in Leeds.
What a setting it was, proof that buildings do indeed exist outside of London! Evidenced by all the cranes on show, Leeds is a great example of a city benefitting from new investment, regeneration and redevelopment, with plenty of new mixed-use, BTR and student living developments in progress – themes that ran through the Forum as a whole.
With the Government’s Build Back Better plan now in action, some of the Cobalt team and I visited UK REiiF to get a greater understanding of the progress, challenges and opportunities the built environment is facing over the next few years in the UK – here are our highlights.
Community development key to BTR and PRS growth
Since the onset of the global Covid-19 pandemic, society in general has fostered more of a community spirit, with genuine care for the places they live and the people that are living there. This, coupled with a housing crisis and an ever-increasing population, mean that it’s therefore unsurprising that new communities, the regeneration of existing ones, and the creation of infrastructure to support these was a key focus at the Forum.
We learnt that the focus on mixed-use facilities, student accommodation, retirement villages and new houses (not ‘units’ as we were reminded in the spirit of these new ‘communities’!) will see huge growth in both the BTR and PRS spaces.
Indeed, BTR has continued to expand across the UK in the last quarter, with 186 (49%) of all UK local authorities having BtR in their planning pipeline. While this initial growth may have slowed slightly in some regions of the UK, the number of BTR developers announcing schemes at UK REiiF showed that the opportunities in this sector are plentiful. Organisations like Coliving, Moda Living and Urban Splash are going to be similar to leading hotel operators in the near future – BTR and PRS developments that’ll become features and high street names across the UK’s largest conurbations.
Many new partnerships and developments were actually announced as joint venture partners at UKREiiF, like Stockport MDC announcing a £250M development partnership with the English Cities Fund (The ECF - a consortium between Muse Living, Legal and General and Homes England) after a bidding contest. It was also announced ECF had been chosen by Bradford Council to deliver a new City Village comprising 1,000 homes in the Kirkgate and Oastler area of the city.
Globally, we’ve seen this happening already in the United States, where the largest asset class for institutional investors is now in PRS. Compare this with the 2-5% of institutional investors that currently invest into PRS in the UK and you can see the immense growth potential – up to 10x if the forecasts on show at UK REiiF are to be believed. But for this to happen, such builds will need to suit both investors and potential tenants, whilst strictly adhering to new sustainable build requirements and commitments to becoming carbon neutral.
Sustainability at the heart of new developments
MMC (Modern Methods of Construction) was another huge subject at UK REiiF, discussing both their effectiveness and place in the new built environment.
Should you prioritise sustainability in regeneration and new-build projects, or do you have to prioritise ESG? The regulations around the EPC ratings in 2025 and 2030 are not currently law so a lot of investors, property companies and other asset managers are often choosing not to always make every asset ‘net zero’ or ‘carbon neutral’, as the governance is really only suggesting it rather than enforcing it.
Regulation and governance were called out in a number of the sessions for not having specific enough guidelines so to ensure that in 10 years’ time there isn't a ‘carbon bubble’ forming. This idea, mentioned by Lydia Dutton, Director of Regional Sustainability at CBRE, would essentially be where assets aren’t created in the right spec for new regulations, and have their value wiped off in the market.It is perhaps this grey area in the green that is prohibiting a trend amongst all developers one way or another.
Positively, green funds and investments are on the rise, with CBRE, LGIM and Lloyds talking affably about how developments that improve communities or have a more sustainable or net zero footprint can secure more preferential lending terms with them. However, the stark reality is that it’s only in the minority of lending that this is taking place - CBRE IM for example only has one Green Fund doing these investments.
Green shoots for investment and job opportunities
Brilliant talks from the likes of Jessica Pilz, Head of Sustainable Investing at Fiera Capital, on sustainable futures, social value and communities were incredibly popular with attendees at UK REiiF. Their organisations are being seen as trailblazers and now true experts in the ESG space in a short period of time, showing how a dedicated commitment to it can reap rewards. Indeed, we’ve seen how the change is influencing the real estate space ourselves, setting up our own dedicated ESG team in Spring 2022.
Asset managers will be keen to improve their portfolios and ensure that they are part of this evolution. Demand for these ‘net zero’ and ‘carbon neutral’ retrofitting's and new builds from occupiers is 50% higher than the supply of such builds – meaning that there’s a deficit that needs to be filled.
How we plan for these changes, pay for all the work that needs to be done to get there and actually complete these projects will create many, many more job opportunities and the chance for some to reskill in a ‘green job economy’.It’s something that both people and planet are demanding and shows little chance of going away.
Other talks with partner organisations to the Sector like Real Estate Balance, Freehold and Regeneration Brainery were also incredibly popular at UK REiiF and again show a changing, more inclusive environment coming through in the sector - one that’s got a lot of positives in it for people and planet.
So, while there was very little talk about the future of office spaces and other key components of the built environment, we’re energised for the prospects in construction and real estate over the next years.
With such demand and change on the horizon, particularly in the BTR, PRS and ESG spaces, it’s going to be critical for both candidates to know what skills are expected of them, and for clients to be able to effectively recruit for these roles as projects come up, but also with regard to their overall branding and EVP (Employer Value Proposition)to ensure that they continually have talent in their pipelines.
Cobalt are a specialist recruitment and consultancy business, with 22+ years of experience delivering search, recruitment and HR advisory services to the Construction and Real Estate sectors. We pride ourselves on our work across the full spectrum of the built environment that includes real estate investors, working with REITs, funds, private equity and investment banks, to property companies, landed estates and developers, as well as real estate advisory, corporate occupiers, management and maintenance, main contractors and local authorities.
To find out more about how we can help with recruitment requirements across the above, please get in touch with me or any of our team leads below:
Regional Real Estate: Maria Sinclair, Director
Real Estate and Capital Markets: Tom Enefer, Director
ESG and Sustainability: Olivia Marsdale, Associate Director