Demand for residential property among institutional investors is on the rise as the sector continues to deliver attractive returns, PRUPIM has announced.

The real estate investment management arm of M&G Investments recently exchanged contracts to acquire a £105.4 million residential portfolio on the belief that the supply and demand dynamics of the residential property market in London and the South East will remain favourable for investors, with continued strong demand for quality properties.

The portfolio, owned by the Berkeley Group and partially funded by the Homes and Communities Agency (HCA), consists of 534 private rental units in 13 locations across Greater London, the south east and southern England. PRUPIM will take on the management of the portfolio on completion and Berkeley will become a minority co-investor, with the day-to-day management of the properties to be undertaken by Savills.

Chief executive of PRUPIM Alex Jeffrey, commenting on the deal, said: “The expanding residential rental property market, particularly in London and southern England, is gaining in appeal for institutional investors. We believe that returns from the sector – which have historically outpaced commercial real estate – will continue to be attractive as demand increases.

“For institutional investors, the challenge of the residential rental sector has been two-fold: can you acquire property in sufficient scale and how will you ensure the units are managed to a high standard? This deal meets both aspects of that challenge.”

The properties were developed under the 2009 Private Rented Sector Initiative, a scheme designed to attract more institutional investment to the UK housing market.

Managing director of the Berkeley Group, Rob Perrins, commented: “The Private Rented Initiative was a pioneering way to provide high quality, professionally managed and affordable rented homes across London and the South East. This announcement is an excellent example of a public and private partnership working together to deliver against an ambition to attract long term institutional funding into the private rented sector.”

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