Study of demographic trends has been a key driver of Moorfield’s investment strategy and in the UK there are some compelling themes that we think present an attractive opportunity.
COVID and Brexit may have changed some of the dynamics in the short term that were apparent previously. Indeed, lower numbers of workers from Europe are causing pressures in many sectors and the Greater London Authority believes that in 2021 the population in London reduced by 1% / c. 86,000 people. However, there are still assumed to be 8.9 million people living in London and the forecast is that over the next 20 years there will be almost 1.5 million more.
COVID has clearly been enormously disruptive to the usual patterns of activity in London (e.g. international visitors to London dropping from almost 22 million in 2019 to not much over 3.5 million in 2020 and the absence of many of the one million people who used to commute into London daily…) but we mustn’t lose sight of the longer term trends and the need to house those 1.5 million additional people.
Looking beyond London, the population of the UK as a whole was expected to grow by 14% between 2018 and 2040 – this compared to 2% for the EU and only 1% for Germany (Eurostat). Migration to the UK may end up being lower than assumed due to Brexit or COVID – the numbers were indeed much lower in 2020, when it is assumed there was a c. 90% reduction to a net increase of 34,000 people, compared to 271,000 in 2019 and the long term ONS forecast of 190,000.
Almost a third of population growth however comes in the UK from more births than deaths and it should be safe to assume there will be many more people living in the UK in the foreseeable future. Just as relevant is the movement to areas with good transport links, good schools and high employment as these locations will continue to attract more people needing somewhere attractive to live.
These factors are going to be supportive of all of our residential for rent strategies; including Build to Rent / Multifamily through our More. Superenting platform, new build family homes for rent and the creation of a PRS portfolio by buying existing houses and apartments using technology in partnership with Bricklane.
There are also interesting drivers when looking at the projected changes by age group. By way of example, the number of 18 year olds is expected to increase by c. 200,000 / 25% over the next 10 years, which represents a dramatic change after falls in numbers over the last decade. This supports growing demand from a domestic student base for student accommodation. This is a key target market for our student houses / HMO partner, We are Kin, as well as more broadly the Purpose Built Student Accommodation sector, which we are investing in through our Domain platform..
Furthermore, the over 75s are expected to increase in number by c. 1.6m or 30%, which is expected to lead to additional demand for specialist senior housing, such as Integrated Retirement Communities as provided by our partners Audley, and indeed unfortunately for dementia care, as provided by Allegra, our nursing home partners.
We also think that these demographics will support investment in the logistics and self storage sectors, which have other additional structural drivers of support and low levels of supply despite strong demand.
Demographics will remain a key part of our research to identify investment opportunities and we will combine that with a focus on technology, ESG, customer service and design to create the environments that will appeal most to our customers.
Charlie Ferguson-Davie, CIO at Moorfield Group