After a turbulent couple of years, UK Living Sectors appear to be entering a more stable and expansionary phase. According to Knight Frank’s NextGen Living 2025 report, institutional interest in the sector remains strong, with over £10 billion invested in 2024 alone — representing a quarter of all UK real estate acquisition activity.

The fundamentals underpinning demand are unchanged: demographic shifts, student growth and evolving lifestyle preferences continue to drive long-term need for purpose-built rental housing. But what’s notable now is the confidence with which capital is being deployed. Knight Frank’s survey of institutional investors (representing £60 billion of UK Living assets under management) found that nearly half plan to increase exposure by 80% or more over the next five years, with a collective £45 billion of new investment planned.

This momentum is playing out across all three major sub-sectors. Single family housing (SFH) leads the way — 71% of investors expect to have exposure by 2029 — while seniors housing is seeing increased interest, with rental stock forecast to grow by 150% over five years. In the student space, there is a clear opportunity for repositioning, with 65% of PBSA stock built before 2012.

The report also points to a shift in investment strategy. Joint ventures and forward-funding deals have overtaken stabilised asset acquisitions, with a clear appetite to move earlier in the development cycle. Investors are focusing not just on London (still the top-ranked city), but also regional hubs like Bristol, Manchester and Edinburgh, particularly for SFH where suburban demand is driving growth.

Of course, challenges remain. Construction cost inflation, planning delays and affordability constraints are all highlighted as key barriers. But with build cost pressures easing (inflation down to 2.9% from a peak of 15.5% in 2022) and a more benign interest rate environment on the horizon (hopefully!), the outlook for 2025 is far more constructive than it has been in recent years.

The takeaway? Living is no longer a fringe strategy. It’s a core allocation for institutional capital — and increasingly a space where investors are not just chasing stability, but actively creating value.