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Bank investment signals build-to-rent property rise

The growing momentum behind the build-to-rent sector underlines the potential for investors as the commercial property market continues to recover. Within this sector, alternative-use capacity looks set to be a key driver.

The commercial property market is forecast to record total returns growth of nine per cent in 2021, indicating a sharp rebound from the woes of 2020. Interestingly, while industrial and logistics stock is proving by far the largest source of growth, reflecting changes in consumer shopping behaviour, followed by retail warehousing and supermarket property, the development of the buy-to-rental sector is drawing an increasingly amount of attention, not least given its connection to these main market growth engines.

Banks join retail giants in targeting build-to-rent returns

Retail giants including Amazon and John Lewis have both made the headlines this year as a result of their plans in the build-to-rent sector, including the redevelopment of retail and warehousing sites that aren’t meeting performance targets. Notably, recent deals show that the banking sector is following a similar strategic path.

A number of domestic and overseas banks, including Lloyds Banking Group and Goldman Sachs, have announced plans to enter and expanded their presence in the build-to-rent sector in the UK. This market has proved resilient during COVID-19 and is benefiting from the country’s housing shortage and a continuing trend for urbanisation.

Retail alternative-use development offers sizeable potential

As banks increasingly move into this area, it will be interesting to see if any with city centre properties reconfigure their buildings and look to alternative use to generate new returns. The alternative-use potential for such properties, turning them into retail and leisure buildings, appears considerable as the traditional high-street sector continues to struggle.

Notably, alternative-use potential applies not only to bank branch buildings. City-centre shopping centres have been hit hard by the pandemic and the acceleration of the trend for e-commerce. This is particularly the case for secondary and tertiary shopping centres that have older infrastructure and don’t boast the same level of brand names. These under-performing retail properties represent an opportunity for investors willing and able to redevelop.

Market reshaping brings property investor financing evolution

As banks and retail giants redraw their focus the wake of COVID-19, in particular in the high-street, and invest in becoming landlords, also changing is how commercial property investors are accessing the capital to take advantage of the growth of sectors such as build-to-rent and the potential of properties such as under-performing retail outlets.

In a marketplace that is still rebounding and reshaping, it is important for investors to be able to move quickly and with agility. This is why alternative finance is becoming more and more attractive and why it is important to have a commercial loan and mortgage lender that provides access to all available funding options.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.

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