By Andrew Hillier
In 2022, just as the build-to-rent (BTR) market was taking off in the UK, investor and asset manager Moorfield Group did something unusual: it sold its BTR portfolio of more than 1,000 homes. The firm had started assembling the portfolio in 2012 but, 10 years on, felt the time was right to cash in on the BTR boom.
Sitting in its London head office, around the corner from the upmarket boutiques on New Bond Street, Charles Ferguson Davie, co-chief executive and chief investment officer at Moorfield, says the BTR sell-off very much epitomises the group’s overall approach.
“We like to be early,” he says. “We’ve got a good track record of spotting sectors, whether that was student accommodation back in the mid-1990s or BTR in 2012.”
It is also willing to exit sectors when the time feels right, says Ferguson Davie.
The Moorfield Group was founded in 1996 and since then has invested more than £5bn in UK real estate. Much of its investment strategy has focused on the ‘beds and sheds’ residential and industrial markets, but Ferguson Davie says it now uses a different name to describe its core areas. “We’ve actually changed it to ‘living and storage’ because we’ve started doing open storage and there are no sheds there,” he quips.
We like to be early. We’ve got a good track record of spotting sectors
The decision to focus on those core markets is simply down to the fact that Moorfield believes this is where the best returns can be achieved in the current market.
“The starting point is that we look for the structural drivers of demand, particularly the need for space,” says Ferguson Davie. It also looks for markets that have a degree of “inflation protection” and tries to avoid those that are “cyclically exposed”.
Investment raise
Last summer, Moorfield successfully raised £330m from institutional investors globally for its MREFV fund, which it will invest in its target markets using a ‘hub-and-spoke’ model. “We think of the fund as being the hub, and then when we want to invest further, we will look to raise additional capital,” says Ferguson Davie. “First, we look to raise capital from our fund investors, but then potentially from other investors who might come in to grow a specific spoke.” Moorfield is hoping to raise an additional £250m to fund these ‘spokes’.
Last year, it returned to the multi-family BTR market by striking a £120m deal to develop 440 homes at Lumina Village in Old Trafford, the Manchester area due to undergo a major government-backed regeneration.
“We were concerned at one point that there might be an oversupply of BTR properties in Manchester, because it was one of the first cities that investors went into,” says Ferguson Davie. “But, actually, because of that fear of oversupply, investors and developers went to other cities.
“We feel right now there’s actually an under-provision of housing. People want to stay there when they graduate and move there because it is a very vibrant and exciting place to live. So, it’s a good time now to go back into the market.”
Some BTR developers have gone down the high-end route – adding facilities such as running tracks on roofs and swimming pools – in order to charge top-end rents and maximise the returns. Ferguson Davie describes Moorfield’s BTR developments as “upper mid-market”, providing facilities such as gyms, workspaces and roof terraces, but without going “over the top”.
Back to BTR: Moorfield returned to the sector last year with a deal to develop Lumina Village in Manchester
He adds: “In the US, there has been a bit of an arms race with amenities. We don’t feel that’s the right way to go.”
Affordability, Ferguson Davie says, remains front of mind. “We need to make sure that our residents can afford to live there and stay there,” he explains, pointing out that high levels of tenant churn ultimately affect the investor returns.
Alongside BTR, Moorfield’s other living sector investment priorities include student accommodation, co-living and healthcare. Last year, it opened its first co-living development, an 81-home scheme in Ealing, west London, while in the purpose-built student accommodation (PBSA) sector, it has opened a 282-bed development in Colchester, Essex, and has a 293-bed scheme in Lincoln under construction.
It is not just focused on the purpose-built market. Ferguson Davie says it has also built a portfolio of 300 houses in multiple occupation (HMO). “We realised we were neglecting the biggest part of the market,” he says. “There were three times as many student HMO beds as PBSA beds. PBSA rents have got to the point where you are heavily reliant on international students.”
Private sector rental
The government has placed housebuilding at the heart of its economic recovery plan, promising to bring forward 1.5 million new homes within five years. UK governments have previously encouraged home ownership over renting, using mechanisms such as the Help to Buy scheme, while recent legislation such as the Renters’ Rights Act has made letting properties more expensive for many landlords.
Ferguson Davie says government housing policy needs to support the private sector rental market. “There is an enormous amount of institutional investor demand for rental products and the government needs to make sure they don’t scare that off,” he adds. “It is a very easy way to help spur on more housing development, by making it more attractive for those institutional investors.”
The self-storage market has been very resilient, and generally rates have been going up
In the storage space, Moorfield has amassed a self- and open-storage portfolio with a gross development value of around £300m. With the latest funding, it plans to invest in six self-storage schemes, including one under development in Acton, west London.
Ferguson Davie says Moorfield partners with self-storage company Storage King, believing it makes sense to work with an established brand. “We like working with specialists,” he adds. “That way we don’t get too distracted and exposed to some of the risks and costs. It means we can focus on the real estate and make the right real estate decisions, particularly on when to sell, without being conflicted.”
The UK self-storage sector has grown rapidly in recent years as demand for storage space has grown, both from households and businesses. The Self Storage Association UK’s 2024 annual study reveals that in 2023, the sector’s turnover topped £1bn for the first time, at just under £1.1bn.
However, there have been some signs that the market is slowing down. In January, the Big Yellow Storage Company reported its occupancy rate had fallen in the final quarter of 2024 and said it planned to make job cuts in response to the government increasing National Insurance contributions for employers.
But Ferguson Davie sees no reason self-storage won’t continue to grow. “The sector performed exceptionally well during the Covid period,” he says. “There’s been a bit of a resetting. We’ve also had quite a weak housing market – so fewer housing transactions and therefore moves in and out. But it has still been very resilient, and generally rates have been going up and schemes have been performing well.”
Undersupplied market
Ferguson Davie adds that investors continue to want to get into the UK self-storage market because it is relatively undersupplied compared with more mature markets such as the US. “There’s a lot of opportunity for more facilities as the consumer is getting more used to and aware of the product,” he says.
Similarly, he points to rising demand for industrial open storage (IOS) space. Moorfield has partnered with Peloton Real Estate to create joint venture First Land and now operates sites ranging in size from around one acre up to 15 acres, mainly around larger cities such as Birmingham, Leeds and Liverpool.
“Storing outdoors has been around forever, but it has really been gathering momentum in the US,” says Ferguson Davie. “Lots of capital has been raised for specific IOS strategies and we’re starting to see that in Europe as well.”
As IOS investment is still in its infancy, Ferguson Davie believes there is strong potential for growth. “You’ve got a big range of potential occupiers – from building material, parking or shipping container firms, but also now electric vehicle charging,” he says. “Then you’ve always got the theoretical option to develop sites as well.”
Ferguson Davie joined Moorfield almost 20 years ago after initially working in corporate finance. He says he has stayed at Moorfield for so long because of the culture and evolving nature of his role. “We’re very aligned with each other, but also with our investors,” he explains. “We’re always innovating and trying to find new sectors and new ways of doing things using technology. That’s motivating.”
That’s not to say there aren’t challenges. The UK property investment market has been tough ever since Brexit, he believes. “It’s been a long time and we’re sort of hardened by all of the experiences that we’ve lived through: the political upheaval, the negative news, Covid and then the interest rate reset,” he says. “It’s no wonder that we all feel a bit negative. It’s actually quite hard to have growth when we’ve got interest rates at the level that they are.”
Broadly, Ferguson Davie remains optimistic about the future. “Once interest rates calm down, consumers and businesses will feel bit a bit more positive,” he says. “I just hope we don’t see too much volatility or negative impact in the UK from all the changes in the US under [Donald] Trump – and that the Labour government is able to foster this growth environment it keeps talking about.”
But ultimately, he is reluctant to blame or rely on government. “We need to make our own way,” he says.
“We need to be the best we can be.”