The real estate reset: navigating today’s toughest challenges
Altum’s Clare Hartnell co-hosted a leaders roundtable with Pinsent Masons and BNP Paribas Real Estate to discuss the issues and challenges facing the real estate sector – of which there are plenty. Read our post event highlights that capture the discussion around the table.
One of the key concerns around the table was around the lack of stability in the markets generally. Development is stifled and rents are increasing. Every sector within real estate is facing regulatory and/or policy changes.
Our ageing society means there is more demand for elderly accommodation; and to add to all of that, we have been dealing with the major advancements being made with AI. One question raised was whether we are building the right kind of real estate for future generations. Another concern is around energy independence, heightened by what is happening in the Middle East, along with a new growing concern about our water resilience.
Retail resilience and office recalibration
The retail sector seems to be somewhat more bullish, noting that physical shopping still has demand, despite the growth in on-line retail.
Offices is also a sector that has seen continued demand, partly down to the continued drive to get people to return to the office. With office stock coming back to the market, there is a need to improve the energy credentials for a number of these assets, albeit the most cost efficient option of refurbishing property rather than rebuilding seems more attractive to the industry.
Capital flows meet planning friction
Private equity and private offices still have a good appetite for real estate assets, and there is plenty of debt available in the market.
However the planning system is causing delays – and that in itself is adding to the attractiveness of undertaking refurbishments rather than knocking down and starting again.
It was interesting how future behaviour is driving how real estate is looked at – for example car parks. Will these still yield returns in the future when driverless cars become commonplace? Will people still drive to stations or will the driverless car impact how we commute? Driverless trucks may mean that the current preferred Midlands location for industrial / logistics may wane – albeit the view in the room was that this may not happen. The Midlands still had a good reach when considering these assets, and the general view is that there is a strong tailwind behind them, along with the living sector.
The consolidation with the LGPS market has meant more interest in investing in real estate assets. Some are wary about the US markets, with private equity generally being more concerned than real estate.
A thoroughly thought provoking round table with one key takeaway – the sector wants to see more stability.