Urban Living News revisits 12 stories that defined 2024 for the living and urban development sectors.
• January: Edinburgh developers drop BTR schemes due to rent cap
UK: The Scottish government’s rental cap policy has been blamed for developers switching their plans for BTR schemes to student accommodation.
The SNP/Green government’s introduced emergency legislation in October 2022 designed to protect tenants coping with cost of living crisis. The new law imposed a zero per cent cap on rent increases.
Last spring it was raised to three per cent and extended for six months. Then it was extended again to March 2024, but with included a change that tenancies in student accommodation would not be covered.
Developers and investors have stated that the legislation has caused them to shelve schemes, while landlords of tenanted housing have been selling up.
One developer refurbishing a derelict call centre into 86 apartments and another building 90 homes as part of a city-centre regeneration will now reserve them exclusively for students in a city where demand for such accommodation remains unmet.
Bruce Patrick, a development and investment specialist for Scotland at Savills, said: “You must have somebody willing to fund your development. Everybody understands that Edinburgh and Glasgow are good places to do build-to-rent. They’re full of young people, affordable, there are great sites available, you can get planning. But until investors come back to the market it’s not going to get built. It’s the rent controls. We’re seeing some investor capital that would be chasing build-to-rent flipping to purpose-built student accommodation.”
Developer Scarlett said 1,713 student accommodation beds are at the planning stage in the city, compared with only 120 in BTR.
• February: Lenders face €14.5 billion of losses as defaults rise
Europe: Real estate investment manager AEW is forecasting a default rate of 7.5 per cent across loans originated between 2018 and 2021.
Despite a recent reduction in borrowing costs, AEW’s research says borrowers are still facing challenges when looking to refinance. It is thought up to €42.5 billion of debt originated in that three year period is likely to default.
AEW applied a three-step methodology to estimate the volume of loans that would not be refinanced at maturity, and the recoveries lenders would make on defaulted facilities.
It estimated a 7.5 per cent default rate on the maturing debt, and 2.5 per cent loan loss rate, leading to its conclusion that lenders could lose up to €14.5 billion on 2018 to 2021 loans. The projected loss rate is in line with that in the aftermath of the GFC, the company said.
Hans Vrensen, head of research and strategy for Europe at AEW, said: “Despite a projected reduction in eurozone borrowing costs to 3.4 per cent by the end of 2025, we estimate default at 7.5 per cent of the €572 billion in CRE loans originated in 2018/21 and projected CRE losses of up to €14.5 billion for European CRE lenders. The majority of European banks are expected to remain resilient in the face of these losses as, post-GFC, lenders are better capitalised and regulated. There could be a possible exception for some German covered-bond funded banks while some emerging nonbank CRE lenders in Europe will also be tested in the coming years.”
AEW said that 19 per cent of loans now have a loan-to-value of more than 100 per cent across nine key European markets.
• March: London could support 600,000 coliving beds
UK: Research from Gerald Eve has found that, while London’s potential market for coliving accommodation is 600,000 beds, supply is forecast to reach just 11,500 beds by 2027, highlighting the mismatch between supply and demand within the market.
Gerald Eve’s Co-Living Operator Survey provides analysis of the coliving real estate sector, highlighting its increasing appeal in London and beyond.
It says the sector provides significant investment opportunities, particularly in certain areas. Gerald Eve’s survey found that, within Zones 2 and 3, the investment yield for existing coliving stock ranges from four per cent to 4.75 per cent, reflecting a mix of stock, but recent prime funding deals in London are showing yields of between 4.35 per cent and 4.5 per cent.
Students represent between 10 and 96 per cent of coliving occupants, depending on location. However, whilst London has a student population or potential market of 370,000 students, there are just 100,000 PBSA beds, representing a significant gap in the market that co-living is primed to fill.
The research also uncovered key trends pertaining to coliving tenants. In London, the typical tenant is on an average salary of £37,375 per annum, renting for a term of 12 months, with 46 per cent of tenants from overseas. And, whilst the capital’s typical coliving tenant has an average age of 28, the age range of coliving tenants is from 17 to 67 years old.
Jo Winchester, coliving consultant at Gerald Eve, said: “Our research underscores coliving’s potential as a resilient and adaptable housing model in the face of rapidly changing urban lifestyles and housing needs. The sector is clearly experiencing dynamic growth, offering new living solutions that cater to a diverse urban population. Meanwhile, the GLA’s recently published space standards provide helpful guidance for developers and greater flexibility with regards to the provision of communal space.”
• April: Mapletree acquires 8,000=bed UK and German PBSA portfolio
Singapore: Mapletree Investments has acquired 8,192 student housing beds from Cuscaden Peak Investments, in a deal worth £1 billion (S$1.7 billion).
The acquisition brings Mapletree’s student housing portfolio to 33,000 beds across 47 cities in the UK, the US, Germany and Canada, with total assets under management of US$6.2 billion.
It also positions the group as one of the largest owners of student housing in the UK, with more than 17,000 beds.
The portfolio includes assets located in key university cities in the UK such as Bristol, Cambridge, Durham, Edinburgh, Oxford and York, as well as Bremen in Germany, Mapletree said.
“The acquisition is part of Mapletree’s strategy to grow the student accommodation sector in the UK, the US, Europe and Australia, which remain underserved by quality student housing assets,” noted group chief executive officer Hiew Yoon Khong. “The student housing sector is one of the group’s core real estate focus areas due to its fundamental demand-supply imbalance and defensive characteristics,” he added.
The acquisition also includes an operating platform, which provides Mapletree with direct operational control of the newly acquired portfolio.
The Student Castle/Capitol Students platform achieved Platinum certification, the highest level possible under the Global Student Living rating system, which measures PBSA properties for their condition and amenities, value, management and other criteria.
“We will capitalise on the newly acquired operating platform to support our strategic vision of growing as well as enhancing our operational performance in the UK,” Hiew added.
• May: Judge halts Neumann’s WeWork buyback bid
US: A New Jersey bankruptcy judge has rejected WeWork co-founder Adam Neumann’s efforts to buy back the company.
The judge ruled that Neumann’s bid wasn’t feasible because it didn’t address $4 billion of debt on WeWork’s balance sheet. Under the approved $450 million deal, with software provider Yardi Systems as the main shareholder, WeWork expects to exit Chapter 11 bankruptcy by the end of the month.
“For several months, we tried to work constructively with WeWork to create a strategy that would allow it to thrive,” Neumann said in a statement to the New York Times’ DealBook newsletter. “Instead, the company looks to be emerging from bankruptcy with a plan that appears unrealistic and unlikely to succeed.”
WeWork’s bankruptcy litigation had focused on getting money back to creditors and wiping out the billions of dollars of debt on its balance sheet. Although WeWork included a non-compete clause in Neumann’s 2019 exit agreement that prevented him from competing with or soliciting the company, the clause expired last October, and Neumann had been pursuing a takeover bid. His $650 million bid was significantly higher than the $450 million proposal from Yardi and SoftBank that the bankruptcy judge favoured earlier this month.
Neumann, who co-founded WeWork as a single coworking space in Manhattan in 2010, ultimately lost the confidence of the company’s board, which ousted him in 2019.
• June: Major UK housebuilder plans 4,000-unit BTR platform
UK: Housebuilder Berkeley Group has revealed plans to enter the London rentals market by establishing its own BTR platform.
In its year-end results, the company said it was adopting a strategic approach to maximising returns from its long-term regeneration sites.
Berkeley chief executive Rob Perrins said: “In the year, we have delivered 3,500 new private and affordable homes, of which 87 per cent are on regenerated brownfield land, and provided over £370 million in subsidies to deliver affordable housing and commitments to wider community and infrastructure benefits. Recognising the strong occupational and institutional investment demand for high quality, well-managed rental homes in London and the south-east, Berkeley is establishing its own Build to Rent (BTR) platform to maximise returns in today’s market conditions.”
He added that Berkeley had identified around 4,000 homes across 17 of its brownfield regeneration sites as an initial portfolio for the new platform.
Berkeley said its move into the BTR market is a “natural extension” of its past activity, which has seen it forward sell 1,000 homes to institutional investors across five sites over the past three years.
“We now believe that adopting a more strategic route to this market will drive best value for these assets by creating a portfolio of scale, professionally managed, with proven income levels stabilised prior to disposal,” the company said.
The establishment of the portfolio will be financed by internally generated funds, debt secured against the rental properties once income generating, and third-party capital.
• July: Major rise in renting among older people
UK: The latest report released by The Mortgage Works has highlighted an 80 per cent rise in private renting for tenants between the ages of 55 and 64 over the past decade.
However, the report also outlines how this phenomenon correlates to an ongoing decline in home ownership among the same age demographic.
According to The Mortgage Workers, there has been a 46 per cent surge in the number of over-65s living in private rental accommodation compared to 2013 figures.
On a regional scale, almost a third [30 per cent] of London households are renting privately. This is in stark contrast to the rest of the country, with the figure coming in at almost double what is seen across other regions in England.
Among the other highlights from the report:
• The proportion of landlords owning five or more properties has more than tripled from five per cent in 2010 to 18 per cent three years ago
• Less than ten per cent of landlords have joined the market in the last three years, as opposed to just over half of existing landlords who have been in the market since 2013 or earlier
• The proportion of private rented accommodations located in urban areas grew from 36 per cent to 43 per cent in 2022
• Suburban locations make up 48 per cent of currently available private rented sector [PRS] stock, and rural areas account for the remaining eight per cent
• Flats and terraced homes are the most popular types of PRS properties, standing at 40 per cent and 35 per cent of all rental dwellings respectively
The report published by The Mortgage Works goes on to suggest that while demand for private rented accommodation will grow in the coming years, rising borrowing costs will continue to exert pressure on the sector at the current rate.
Damian Thompson, director of landlord at The Mortgage Works, said: “Understanding the dynamics of the private rented sector has never been so important. The sector continues to support the lives of millions of people across the UK by providing homes for those who either can’t afford to buy or prefer not to own a home. We look forward to understanding the new government’s plans to create a stronger, fairer PRS, where legislation works for both landlords and tenants.”
• August: John Lewis BTR boss calls for developer tax breaks
Writing in The Telegraph, Katherine Russell said the chancellor “should look at tax incentives… where a developer commits to building right away”. She also urged the government to cut red tape for builders to help the industry meet Labour’s goal of building 1.5 million new homes over this parliament.
The partnership warned that construction has stalled across the country even as “most people accept the drastic need for new housing”. “Many good schemes… still continue to be refused,” Russell said.
John Lewis’s attempts to deliver BTR schemes have faced significant delays in the planning system. The partnership is attempting to build flats on top of Waitrose stores. Its first project in Bromley, south London, was approved last month after a two-year wait. It has launched an appeal on a second scheme in Ealing, west London, over the length of time councillors are taking to decide on the project.
Russell said “cutting red tape” would speed up investment in new housing, as would spending the billions of pounds worth of unused development levies.
Local authorities have the ability to charge developers a tax when they build new properties, with the money meant to be used to fund local infrastructure such as schools and roads. However, research by the Home Builders Federation last year found £2.8 billion was currently sitting unspent. It estimated that the property industry pays more than £7 billion in direct taxes each year.
• September: Green light for coliving scheme on Barbican Estate
UK: Developer HUB and impact investor Bridges Fund Management have secured planning permission from the City of London for a coliving scheme at 45 Beech Street, in London’s Barbican Estate.
The scheme, called Cornerstone, is a conversion of an office building and has been designed by Allford Hall Monaghan Morris (AHMM). It will be the first coliving development in the area.
Community and neighbourhood stakeholders were actively engaged in the consultation process through a series of targeted workshops and events. This included the local business community and Barbican residents.
The development will provide enhanced public realm with additional greenery, and ground floor amenities including a café and coworking space that will be open to the local community.
In alignment with HUB and Bridges’ mutual commitment to reducing carbon emissions, Cornerstone utilises as much of the existing building as possible. This approach is projected to achieve a 34 per cent reduction in total embodied carbon compared to a new build of equivalent scale. The scheme will also significantly improve the energy performance of the building, and targets BREEAM Excellent and EPC A.
• October: Citra hits 5,000 home milestone and rebrands as Lloyds Living
UK: Citra Living, the BTR arm of Lloyds Banking Group, has grown its portfolio to 5,000 units and rebranded as Lloyds Living.
In a recent deal, it acquired more than 800 SFR homes from Gatehouse Living Group, which helped it to reach the milestone. The stabilised homes from GLG are situated across nine schemes in Greater Manchester, Merseyside, and the West Midlands. Completed in phases from 2018, the acquired homes comprise a mix of two-, three- and four-bedroom homes, alongside 72 low rise apartments.
Occupancy of the homes currently stands at 99 per cent, with residents benefitting from convenient access to local amenities and with many of the homes having an EPC rating of B, putting them in the top 10 per cent of UK homes for energy-efficiency. Under the terms of the deal, property and leasing management will continue to be undertaken by Ascend.
CEO Andy Hutchinson said: “While our focus remains firmly on increasing the number of rental and shared ownership homes available, the secondary market for such homes is important and developing. By taking an active role in this, we can ensure that these homes don’t just remain in the private rental sector, where they are very needed, but give their residents an ongoing landlord they know and can trust to deliver the service they need.”
“The first three years of Citra have been thrilling and satisfying. We have built a growing business that is playing a part in improving standards and changing the perception of private rental homes and of what it means to be a provider. By focusing on customer outcomes, we are helping more people live in the home they want, where they want. Working under the Lloyds Living brand helps achieve two things – it ties us even more closely to our group’s overall ambitions of helping more people meet their housing needs irrespective of tenure, and it brings an immediate association to our customers and partners with one of the most trusted brands in the country,” he added.
• November: The Social Hub to open 1,250 units in early 2025
Europe: Hybrid hospitality brand The Social Hub will make its first entry into the Portuguese market and double its footprint in Italy amid plans to open three venues in early 2025.
The new properties are in Porto, Florence, and Rome. The move will bring the B Corp certified owner and operator’s portfolio of hubs – comprising hotels, student accommodation, and coworking spaces all under one roof – to 21 across 19 major European cities. These include Amsterdam, Barcelona, and Paris.
The Social Hub Porto, which will open in the historic centre of Portugal’s second largest city, will be the brand’s first in the country ahead of further expansion into Lisbon planned in the coming years. This will also be the first The Social Hub venue to include long-stay apartments as the brand’s hybrid hospitality proposition evolves.
New four-star hubs in Florence – The Social Hub’s second in the city – and Rome, will “accelerate the impact of the brand’s pioneering community-centric, hybrid hospitality model in neighbourhoods across Europe”. Both projects are part of company’s commitment to regenerative projects, helping transform disused and empty sites into “vibrant spaces for people from all walks of life”.
The Social Hub Belfiore, Florence (550 rooms) will open in February 2025, followed by The Social Hub Rome (392 rooms) in March. The Social Hub Porto (310 rooms) will also offer 39 fully equipped residential apartments of up to two bedrooms for long-stay rent when it opens in spring 2025.
• December: Troubled co-working company to call in administrators
UK: Second Home, a London-based coworking company, has applied to appoint administrators, according to court records.
Second Home was founded in 2014 by Rohan Silva, a former policy advisor to ex-prime minister David Cameron. It raised more than £60 million, and grew to four sites in London — in Spitalfields, Clerkenwell, London Fields and Holland Park; one in Lisbon and one in Los Angeles.
Its backers included LocalGlobe co-founder Robin Klein; president of Tencent, Martin Lau; Israeli billionaire Yuri Milner and European VC firms Index Ventures and Atomico.
In H1 2024, its Los Angeles, Clerkenwell and London Fields sites were removed from its website. The move to appoint administrators follows an October 2022 deal that saw Silicon Valley billionaire Riaz Valani become the majority shareholder.
Valani paid £7.8 million for a controlling stake in Second Home via his private equity firm Global Asset Capital. The company had a valuation of £130 million valuation in 2019. Revenue fell from a high of £9.8 million in 2019 to £6.6 million in 2021, according to its accounts for that year. Accounts for the latest financial year are overdue at Companies House.
Silva’s directorship was terminated in February this year. In April, he took up a new role as chair of Founders Factory in Australia.
In August, Second Home was issued a winding up petition by the UK Insolvency Service, which was later withdrawn.
