Which UK real estate sectors offer opportunities to diversify?

There is currently US$1.5 trillion of new capital targeting global real estate from institutional investors, private equity and emerging new sources, which will boost demand for UK property assets as capital-rich investors chase yield.

As competition intensifies, investors are balancing their portfolios with properties across a range of sectors at varying levels of maturity. Understanding the full spectrum of UK real estate can help to ensure your portfolio includes the right sector mix.

The Established sectors such as offices, logistics, retail, residential, affordable and student housing stand to benefit most from this influx of capital in the coming years. They are the most accessible asset classes and continue to attract the largest proportion of investment dollars in the UK. Their appeal is supported by sound demographic fundamentals and long-term trends that impact how people work, live and shop in Britain’s major towns and cities.

Mature property sectors, however, are growing fast and becoming an increasingly important part of many investors’ portfolio mix, particularly build-to-rent, healthcare, care homes, flex space and serviced apartments, which are experiencing an increasing number of transactions.

Meanwhile, assets within the later living and automotive sectors – classed as the Semi-Mature sector – are increasingly accessible and abundant in supply, albeit among a narrower pool of investors.

Specialist investors will explore niche asset classes such as caravan and holiday parks, co-living, higher education, cemeteries and marinas. These properties are in limited supply and represent the least liquid corner of the UK real estate market.

Understanding the range of alternative asset classes that make up the UK real estate landscape can help you to diversify in the most appropriate places and guard your portfolio against future social and economic risks.