Alternative residential sectors offer most opportunity, Rapleys finds 

The new report highlights the significance of the niche residential sectors in 2024, as Rapleys calls for better understanding at Local Authority level of these markets.

Rapleys' report highlights the significance of the alternative living sectors in the UK | BTR News
Rapleys' report highlights the significance of the alternative living sectors in the UK.

Property and planning consultancy Rapleys has released its latest report, discovering that alternative assets within residential offer value add opportunities whilst also increasing opportunities for land amid the current uncertainty facing the market.

The niche assets and sites within the residential sector offer the most opportunity for investors and developers in 2024 onwards, Rapleys highlights. The Alternative Assets report (An Alternatives View) assesses performance, outlook, challenges and opportunities with themes and trends that traverse across various niche assets including Build to Rent, affordable housing, and care homes and retirement.

The Build to Rent market swelled to £56bn in the UK by the end of 2023, but single-family housing (SFH) is only now getting traction with numerous new schemes consented throughout the Southeast, and its presence reaching more regional cities like its multifamily counterpart.

As renting becomes ‘the norm’ for a wider array of people and even an ‘aspirational lifestyle choice’ for families and more diverse generations, Rapleys says the outlook is overwhelmingly positive. The sector also benefited from a post-Covid surge as people’s priorities became more focused on amenities, services, socialisation, security and wellbeing.

The Rapleys report highlights that there are currently over 4.5 million affordable housing units in the UK but only 25,000 of these are owned by institutions, which equates to less than 1%. This represents a huge opportunity for the private sector to deliver quality accommodation at affordable levels and the last 12 to 24 months have seen a rise in the number of Registered Providers becoming ‘For Profit’.

However, the sector is in desperate need of reform with a lack of incentives, whilst Health & Safety concerns and decarbonisation has piled additional pressure on to viability on top of rising building costs and planning delays.

“While these assets themselves aren’t new to the UK, our report shows that they have attracted rising levels of investor interest thanks to the huge opportunities these sectors offer. However, there are also niche challenges to tackle such as planning nuances, a lack of understanding when it comes to local authorities and communities and, of course, rising build costs and viability struggles. It’s really important that investors entering these markets or seeking to optimise or de-risk their portfolio use a genuine expert with deep insight and experience to guide them through.” 

Nick Fell, Partner and Head of Residential, Rapleys

Another post Covid spike highlighted by Rapleys is in care homes, which fared badly during the pandemic news cycles. Despite an upturn in demand and a wider choice of retirement living brands, out of 750,000 properties in this sector, only 1.2% were owned by the private sector and despite brands being keen to point their services to ‘active 65s and over’, the average age remained at 80.

Rapleys states that a lower level of understanding at landowner and Local Authority level may also contribute to limiting opportunities and preventing interesting sites from coming forward.

“An implicit understanding of different Residential submarkets can often determine a much wider array of what’s possible in terms of development on various sites, which in itself opens up much bigger opportunity for landowners and a greater chance of delivering for Local Authorities. It also means development can be less risky if flexibility is built into the scheme design – it becomes less impacted by market fluctuations.

“We would like to see more understanding of the different types of residential asset at local level and flexibility within the planning system to accommodate changes of use within residential for major schemes. By working with a specialist in this areas from the very beginning of the land process, landowners and developers can realise much more potential for their sites, driving more interest from an array of potential buyers and partners and, ultimately, having a greater chance of success of delivery.”

Tom Spencer, Partner and Head of Land Development Agency, Rapleys