Macroeconomic concerns drive institutional investors to specialist property development finance firms, Downing research shows

1/2/24
5 min
Property finance
News

Our research is showing that rising concerns about tough UK economic conditions are reshaping how institutional investors engage with property development finance firms.

Around half (45%) of institutional investors we questioned said they are very concerned about the impact of macroeconomic factors, such as the cost-of-living crisis and rising interest rates, on the property development finance market. The other 55% said they are quite concerned.

Their worries are changing the way institutions invest in senior debt for property development finance as an asset class, the study with UK institutional investors responsible for around £405.6 billion assets under management found.

Around 88% of the private sector and public sector pension funds, family offices and insurance asset managers questioned say economic concerns are driving institutions to cut the number of property development finance firms they work with and concentrate on specialists with a strong track record.

Downing’s Specialist Lending team recently announced it has passed the £500 million milestone for commitments to residential property developers.  

Its study found that stability of income is the most important benefit of investing in residential property for institutional investors. Around 41% chose that compared with 36% who highlighted the diversification benefits of residential property investment compared with equities and bonds. Around a quarter (23%) said the key benefit was the level of yield or income from investing in residential property development.

Parik Chandra, Partner and Head of Specialist Lending, Downing said: “The current tough economic conditions in the UK created by rising interest rates and inflation have understandably concentrated minds among institutional investors.

“It is instructive that they are not losing faith with property development finance as an asset class but recalibrating their strategy to focus on specialists in the sector who can demonstrate a strong track record.”

To download the full property report, please complete the form below

Contents
See full contents

Our research is showing that rising concerns about tough UK economic conditions are reshaping how institutional investors engage with property development finance firms.

Around half (45%) of institutional investors we questioned said they are very concerned about the impact of macroeconomic factors, such as the cost-of-living crisis and rising interest rates, on the property development finance market. The other 55% said they are quite concerned.

Their worries are changing the way institutions invest in senior debt for property development finance as an asset class, the study with UK institutional investors responsible for around £405.6 billion assets under management found.

Around 88% of the private sector and public sector pension funds, family offices and insurance asset managers questioned say economic concerns are driving institutions to cut the number of property development finance firms they work with and concentrate on specialists with a strong track record.

Downing’s Specialist Lending team recently announced it has passed the £500 million milestone for commitments to residential property developers.  

Its study found that stability of income is the most important benefit of investing in residential property for institutional investors. Around 41% chose that compared with 36% who highlighted the diversification benefits of residential property investment compared with equities and bonds. Around a quarter (23%) said the key benefit was the level of yield or income from investing in residential property development.

Parik Chandra, Partner and Head of Specialist Lending, Downing said: “The current tough economic conditions in the UK created by rising interest rates and inflation have understandably concentrated minds among institutional investors.

“It is instructive that they are not losing faith with property development finance as an asset class but recalibrating their strategy to focus on specialists in the sector who can demonstrate a strong track record.”

To download the full property report, please complete the form below

We are delighted to announce that Mark Gross, Partner and Head of Development Capital, has been named Equity Investor of the year at the HealthInvestor Power List 2024 Awards.

Following Mark’s achievement last year when he won the “Leading Investor” award at HealthInvestor’s Power50, this year’s win further highlights his continued success and expertise in investing across the healthcare sector. 

The judges praised Mark for finding success both in value and volume this year, delivering good returns and growth. They were impressed by how Mark has continued to strengthen a strong track record with further growth in the team and new funds securing further backing. We extend our thanks to Mark and the Downing Development Capital team for their continued dedication and support in expanding our healthcare investment activities with a focus on quality, performance and reputation. 

Congratulations Mark!

Development Capital  

Downing Development Capital is an award-winning investor focused on investment opportunities into asset-backed operating businesses with downside protection. Typical sectors they invest in include healthcare, specialist education, hospitality, leisure and IT infrastructure.

Learn more about our Development Capital team

Our research is showing that rising concerns about tough UK economic conditions are reshaping how institutional investors engage with property development finance firms.

Around half (45%) of institutional investors we questioned said they are very concerned about the impact of macroeconomic factors, such as the cost-of-living crisis and rising interest rates, on the property development finance market. The other 55% said they are quite concerned.

Their worries are changing the way institutions invest in senior debt for property development finance as an asset class, the study with UK institutional investors responsible for around £405.6 billion assets under management found.

Around 88% of the private sector and public sector pension funds, family offices and insurance asset managers questioned say economic concerns are driving institutions to cut the number of property development finance firms they work with and concentrate on specialists with a strong track record.

Downing’s Specialist Lending team recently announced it has passed the £500 million milestone for commitments to residential property developers.  

Its study found that stability of income is the most important benefit of investing in residential property for institutional investors. Around 41% chose that compared with 36% who highlighted the diversification benefits of residential property investment compared with equities and bonds. Around a quarter (23%) said the key benefit was the level of yield or income from investing in residential property development.

Parik Chandra, Partner and Head of Specialist Lending, Downing said: “The current tough economic conditions in the UK created by rising interest rates and inflation have understandably concentrated minds among institutional investors.

“It is instructive that they are not losing faith with property development finance as an asset class but recalibrating their strategy to focus on specialists in the sector who can demonstrate a strong track record.”

To download the full property report, please complete the form below

The Strait of Hormuz: Conflict and the impact of the UK construction material supply chain
Learn more

Torsten Mack, Investment Director at Downing, said:

"We are proud to support this exceptional management team, whose strong track record positions them well to build a new business in dementia care. This needs-based sector is underpinned by a lack of quality supply and we are investing in Fortava Healthcare to set and deliver high standards, and to help make a difference."

Johann van Zyl, CEO at Fortava, added:

"I’m thrilled to be working with Jamie, as we share the same values. We plan to grow Fortava into a leading provider of dementia care over the next five to seven years. But growth isn’t our primary focus—our goal is to deliver outstanding care and foster a joyful, supportive environment for both residents and staff. We’re delighted to be partnering with Downing who also share our values and we look forward to this journey with them."

Jamie Stuart, CFO at Fortava, commented:

“For me, it's about being more than just another care home provider. While dementia care in the UK is generally of a good standard, we want to set ourselves apart with a fresh approach. That’s why, after over 25 years in banking, I chose to partner with Johann and Downing on this venture.”

Our research is showing that rising concerns about tough UK economic conditions are reshaping how institutional investors engage with property development finance firms.

Around half (45%) of institutional investors we questioned said they are very concerned about the impact of macroeconomic factors, such as the cost-of-living crisis and rising interest rates, on the property development finance market. The other 55% said they are quite concerned.

Their worries are changing the way institutions invest in senior debt for property development finance as an asset class, the study with UK institutional investors responsible for around £405.6 billion assets under management found.

Around 88% of the private sector and public sector pension funds, family offices and insurance asset managers questioned say economic concerns are driving institutions to cut the number of property development finance firms they work with and concentrate on specialists with a strong track record.

Downing’s Specialist Lending team recently announced it has passed the £500 million milestone for commitments to residential property developers.  

Its study found that stability of income is the most important benefit of investing in residential property for institutional investors. Around 41% chose that compared with 36% who highlighted the diversification benefits of residential property investment compared with equities and bonds. Around a quarter (23%) said the key benefit was the level of yield or income from investing in residential property development.

Parik Chandra, Partner and Head of Specialist Lending, Downing said: “The current tough economic conditions in the UK created by rising interest rates and inflation have understandably concentrated minds among institutional investors.

“It is instructive that they are not losing faith with property development finance as an asset class but recalibrating their strategy to focus on specialists in the sector who can demonstrate a strong track record.”

To download the full property report, please complete the form below

Please fill out the form to download the full report

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Sign up to stay up to date with the latest insights and investment opportunities
Learn more

Downing LLP does not provide advice or make personal recommendations and investors are strongly urged to seek independent advice before investing. Investments offered on this website carry a higher risk than many other types of investment and prospective investors should be aware that capital is at risk and the value of their investment may go down as well as up. Any investment should only be made on the basis of the relevant product literature and your attention is drawn to the risk, fees and taxation factors contained therein. Tax treatment depends on individual circumstances of each investor and may be subject to change in the future. Past performance is not a reliable indicator of future performance. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 545025). Registered in England No. OC341575. Registered Office: Downing, 10 Lower Thames Street, London, EC3R 6AF.

VAT Number: 112 940 149