The volume of specialist property investment will exceed £10 billion in 2015 and will account for 20% of the total commercial market by 2020, Knight Frank announced at its annual Specialist Breakfast yesterday. Healthcare, hotels, student accommodation and automotive are the core specialist property sectors gaining considerable share of the commercial market, a trend that industry insiders indicate will continue for the foreseeable future.

The UK’s ageing population and increasing student numbers, tourist volumes and car sales are the key driving factors behind growth in these areas, for which demand is still outstripping supply.

Investors are seeing much higher returns in the healthcare, hotel, student and automotive sectors since yield compression began to affect the traditional retail and office commercial asset classes.

Darren Yates, Head of Global Capital Markets Research at Knight Frank, said: “With improving occupier demand, easier access to finance and a greater willingness to move up the risk curve, investors’ appetite for specialist property continues to increase. Indeed, for many investors, specialist property now forms an integral part of a core portfolio.”

The key takeaways from the Knight Frank Specialist Property 2015 forecast include:

1. Care home property will likely be the strongest performing healthcare segment due to heavy demand, with the biggest potential within the mental health and learning disability sectors.New healthcare models in urban settings are predicted to bridge the gap between care villages, and new providers will enter the market, placing an emphasis on branding.

2. Space efficient, trendy hotel property in London will continue to outperform budget accommodation, with Shoreditch outstripping the West End in terms of operational growth. The conference segment will return to the regions and the Aberdeen market will feel the impact of lower oil prices, potentially boosting Edinburgh’s prospects.The weight of available money and recovery in trading will lead to resurgent demand for secondary locations across the UK.

3. Student property will continue to provide high yields and strong potential for rental growth, particularly in London.Deal volumes will soar this year, with at least £3 billion worth of student assets estimated to change hands.

 

4. Pricing for premium purpose-built dealership investments let to automotive manufacturers is at a record high. In 2014, new car registrations reached their highest level in ten years and manufacturers are reviving their long-standing site requirements as a result. This equals significant opportunity for investors and 2015 is set to witness the sector’s largest ever volume of deal transactions.

 

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1 Knight Frank, 2015. Specialist Property, The Core Markets. [Online] Available at: http://content.knightfrank.com/research/793/documents/en/the-core-market-2015-2703.pdf. [Accessed 27th February 2015].