Legal & General strengthens its rental construction portfolio with a second location in Birmingham
Legal & General has announced its agreement to finance a new £ 100million development site at Hockley Mills in Birmingham, its 16th BTR site and the city’s second, increasing its investment in the sector to 2.1 billion pounds sterling.
With a current population of 1.14 million, an increase of around 100,000 over the past 10 years, Birmingham’s population growth is the third fastest in the UK, behind London and Bristol, this which demonstrates an increased need for high quality housing. .
Centrally located in one of the most desirable residential areas in the West Midlands and next to rail and tram links, the Hockley Mills site sits on the outskirts of the Jewelery Quarter, providing a solid micro-location for accommodation BTR. The project will provide 395 apartments; one, two and three bedroom, adjacent to a new entrance to Jewelery Quarter station, 116 parking spaces and 28,000 square feet of flexible retail space for commerce, leisure and offices.
As Covid-19 brings secular changes and a fundamental overhaul in many areas of the real estate industry, BTR has continued to deliver a stable income performance throughout the crisis. The national lockdown, and the social distancing measures that followed, had a significant impact on economic activity. For BTR, rent collection levels remain high, with Knight Frank estimating that 95% of BTR segment rents were collected in the second quarter.
Additionally, many BTR assets – including the Hockley Mills site – are well positioned to benefit from some of the household behavioral trends and preferences emerging through the coronavirus pandemic; namely a growing need for housing with functional space to work, as well as convenient access to local cultural and leisure facilities.
Dan Batterton, Senior Fund Manager, BTR, LGIM Real Assets said: “In the space of the last few years, the BTR sector has really taken off. It consolidated its position in the UK as an asset class and successfully moved away from the private rental sector. Showing its resilience and the relative counter-cyclical nature of the residential sector, the BTR has remained largely unchanged throughout the coronavirus pandemic as occupancy rates, rent collection and demand have remained high.
The development of Hockley Mills further strengthens our existing portfolio, bringing the total number of projects to 16 in eleven cities offering more than 5,300 apartments. The program will provide high quality, professionally managed rental housing that can help address the imbalance between supply and demand in Birmingham. “
Hannah Badger, Partner in the Residential Financial Markets team at Knight Frank, said: “In times of economic stress, residential assets are viewed as extremely attractive by investors, in part due to both their resilience and their counter-cyclical rental performance. Our view remains that, in the long run, the current Covid-19 crisis may well act as a catalyst for an acceleration of institutional capital in the UK residential investment sector.
“Since March, activity has remained strong as investors seek to increase their exposure to the UK market – indeed, a recent Knight Frank study found that 77% of investors seek to maintain or increase their investment plans in a close future. As the UK’s largest city outside of London, investment in Birmingham’s BTR market has always been strong.
“However, thanks to the regeneration of the city center and the upcoming HS2 line allowing even faster links to the capital, investor demand for high quality rental assets is certainly on the rise and shows no signs of slowing down, despite the current enlargement, headwinds in the market. “