As demographic and lifestyle shifts continue to reshape the UK economy, a fundamental change is taking place in the way younger generations live, work and consume. In the final instalment of this mini-series on the mega trends shaping the next generation of real estate, James Peel, Senior Research Analyst at Gravis Advisory Limited examines the rise of “generation rent”.
This phenomenon is no longer simply a reflection of declining home ownership; it increasingly represents a broader shift towards convenience, flexibility and professionally managed experiences, creating new opportunities across multiple real estate sectors.
The investment case
Like ageing population, generation rent is another mega trend being driven by powerful demographics that intersect with multiple real estate sub sectors.
The number of 18-year olds in the UK is expected to grow considerably by 2030, and with more university-age people in the UK, demand for purpose-build student accommodation (PBSA) is expected to rise.
What’s more, today’s students, having become accustomed to the high quality offering of PBSA providers, become tomorrow’s tenants in the private rented sector (PRS), opting for the convenience of renting from professional landlords over the hassle of buying.
This generation is also spearheading a shift in consumption preferences away from material goods, towards the experience economy.
How to gain exposure to generation rent in the UK
For consumer-facing real estate businesses, where leases can range from a single night to several years, brand awareness and operating platforms are crucial.
These real estate investment trusts (REITs) have thousands of employees, hiring from adjacent sectors like hospitality, and spend millions on back-end systems in order to ensure a seamless experience for customers.
Brand reputations can take years to build. Success is quantified by measures of satisfaction like Net Promotor Scores (NPS), and is often not captured by traditional real estate metrics like net asset values (NAVs).
NAVs also do not reflect the potential value creation from development pipelines, or the fact that REITs can leverage their operating platforms and expertise to manage other peoples’ real estate in exchange for a management fee.
And therein lies the opportunity for investors: access to branded operational real estate, attractive development pipelines and third-party capital management in the tax efficient REIT wrapper.
Studying
Unite Group, for example, is the UK’s largest owner, manager and developer of PBSA, having recently acquired listed peer Empiric Student Property. Unite’s portfolio consists of about 200 properties spread out across 29 cities and can accommodate more than 70,000 students each year.
Some of these properties are held within joint ventures, enabling Unite to leverage its best-in-class operating platform to earn recurring asset management fees while optimising capital efficiency. Although the REIT delivered a soft set of results in 2025, with rental growth at 4% and occupancy at 95%, the higher education sector remains in good shape; the UK’s universities are world class and university participation rates sit above 40%, in line with other OECD countries.
The management team is currently focused on integrating Empiric into the wider group and optimising the portfolio further in order to increase alignment to the strongest universities.
Living/Working
Grainger is the UK’s largest listed residential landlord, with a portfolio of more than 11,000 homes, worth about £3.5 billion.
Like Unite, Grainger’s vertically integrated business model is underpinned by a market-leading platform, which improves operating leverage for shareholders but also enables the delivery of a high-quality customer experience, reflected in Grainger’s NPS of +42.
In the most recent financial year, the REIT completed three development schemes including The Kimmeridge in Oxford, where all 150 homes were let in less than seven months, well ahead of underwriting assumptions. Grainger has a further 4,000 homes or so at various stages of development, which could materially contribute to earnings in future years.
Figure 1 The Kimmeridge
Playing
Whitbread is a leading hospitality company and the owner of Premier Inn, which operates over 850 hotels in the UK and is growing its presence in Germany.
Although not a REIT, Whitbread shares a lot in common with Unite and Grainger, in part because it owns most of the freeholds from which the hotels operate, lending strength to the balance sheet.
Key to the investment case is the Premier Inn brand, which consistently ranks higher than competitors from both a quality and a value perspective.
Whitbread recently unveiled a new slogan for Premier Inn which speaks directly to brand value: “You know what you’re getting”.
Looking ahead
The long term fundamentals across the sectors associated with the generation rent mega trend are healthy and, what’s more, Unite, Grainger and Whitbread are all leaders in their respective fields.
Despite these reasons to be positive, Unite and Grainger are trading at material discounts to their NAVs, and Whitbread’s share price is trading near a five-year low.
This presents an attractive opportunity for investors, and one that hasn’t gone unnoticed. In recent months activists have joined the shareholder registers of all three companies.
No information contained in this article should be construed as providing financial, investment or other professional advice and should not be considered as a recommendation, invitation, or inducement to subscribe for, dispose of or purchase any such securities. Professional investors only. Capital at risk. Past performance is not a guide to future performance.
Main image: rent, jakub-zerdzicki-RVk8EwpRwNs-unsplash
