One of the industry’s largest real estate conferences, the MIPIM UK Summit, takes place this October against a challenging backdrop for the asset class. This is due to economic uncertainty, particularly in the UK, where a no-deal Brexit is looking more probable.
Yet UBS Asset Management still described investor demand for property across most locations and real estate sectors in Europe as high recently, despite lower confidence in the economy and recession fears haunting markets.
Funds Europe caught up with speakers and delegates ahead of the MIPIM UK event to find out what they had to say.
Jay Kwan, managing director of real estate, QuadReal
Against the current economic and geopolitical climate, is now an attractive time to invest in property? If so, why?
It’s indeed a particularly difficult time to build courage behind any conviction for an investment thesis.
On the one hand, you have a continued accommodative interest rate environment coupled with secular and structural drivers that make certain sectors potentially interesting to wade into.
On the other hand, these tailwinds are fighting against cyclical and political headwinds, with the latter being a wholly unpredictable process by nature.
I don’t want to be naïve and put on blinders, but an uncertain economic and geopolitical climate doesn’t necessarily mean it’s an unattractive time to invest. It’s tempting to allow knee jerk reactions to political cycles drive investing decisions, but I don’t think chasing elections is a particularly robust strategy long term.
Instead, I think what will differentiate investors in this current climate will be resilience of capital structure in addition to adhering to basic real estate fundamentals. Given the high level of uncertainty today, perhaps the best defence is having sufficiently permanent capital to make any short to medium term political changes more benign to overall performance.
So perhaps the short answer is “yes”, but wade into the water with sufficiently long-term capital and the benefit of experience to endure short term waves.
Harry Badham, head of UK development at Axa IM – Real Assets
What trends have you been seeing in the UK real estate market over recent years, and what do you expect to see in the near future?
One of the undeniable structural trends has been the increasing application of technology in the built environment and we expect this will accelerate further as viable technology solutions become pervasive. In addition to the huge potential for solutions which simplify design and construction to lead to faster building, standardisation and off-site manufacture, technology also allows for the more efficient and greener management of real estate, saving time, cost and energy.
However, one of the most profound changes technology can facilitate is the evolution of the multi-use concept and we expect that in the future it will be the norm for real estate to have a number of concurrent uses. This will have virtually no limits; think of a hotel-residential-office-café-showroom-shop-storage-leisure all as one. This is ever more possible with technology and access control solutions (sensors, smart locks, bio-security) as well as the rise of transparent, pay-as-a-service commercial models.
As the UK faces a housing crisis, should real estate investors bear any of the social responsibility?
As supply chains grow longer, wider and more complex, the role of the real estate investor/developer is critical in unifying a shared purpose. Social responsibility and engagement, rather than being a burden, will be critical to engaging both supply chains and customers as well as the wider market.
Joe McNamara, head of Europe, Oxford Properties
What trends do you expect to see unfold in the property industry over the next couple of years?
While the dual propellers of urbanisation and e-commerce growth have been major drivers of the property industry in recent years - and will continue to be for the foreseeable future - the expansion in data consumption looks set to be the next key trend. Fast, reliable connectivity is already crucial to the way we live and do business and the introduction of 5G is likely to double our data use in the coming years. Data centres and the related infrastructure required to support this present a real opportunity for investors looking for secure income streams.
How attractive an investment is global infrastructure for investors at the moment?
The current lower for longer interest rates have made real assets popular with investors across many markets who are in search of positive yields, along with capital protection, during these times of market and political volatility. Infrastructure investment offers reliable demographic-backed returns, with global urbanisation trends focusing this around major gateway cities, as well as in Asia and particularly China, where massive investment in the regions is rapidly expanding the number of opportunities available. Connectivity is already central to our lives and the ambition to create more ‘smart cities’ across the world will also require significant infrastructure investment.
Emma Hendry, chief executive, Hendry Group
What are you looking forward to at this year’s MIPIM UK conference?
I’m very much looking forward to attending and contributing to an event that brings together such a deep array of top-level real estate eco-system members that come from all areas of the built environment. I am most excited to learn, discuss, debate and network with the over 2,300 participants from 40 countries and hearing from the speakers about all things leading in land, buildings, infrastructure, environment, economics, society, culture and technology. The inclusion of themes for diversity and skills & development for the next generation will be welcomed in the agenda, as these are imperative factors to the success of our workforces of the future.
When looking towards the future of UK real estate – what things are keeping you awake at night and what do you think can be done to resolve these issues?
As we are heading into a time of momentous change with diverse and dynamic factors that will impact our world at an ever-increasing pace. It is undoubtedly a moment in time to reflect on how things have been done, and more importantly provides a significant and exciting opportunity to re-evaluate the current operating model of the built-environment and leverage digital & data to create value across the ecosystem. Through optimising the way our current infrastructure operates, there is an opportunity to not only create revenue through new avenues, but move into more efficient, smarter and sustainable asset operations.
Sara Bailey, head of real estate, Trowers & Hamlins
Should real estate firms bear any kind of social responsibility?
Real estate companies have a social obligation. The quality of the built environment has a large impact on our quality of life. The places we live and work have tangible and symbolic importance. There is therefore a direct responsibility for everyone working in real estate to deliver the best places and spaces possible. At Trowers & Hamlins we have recently completed a year-long piece of research titled the Real Value Report, which sets out criteria for developers, investors, public authorities etc to measure the social impact of developments. By qualifying the social value it is possible to understand the long term impacts and benefit to both the development itself and to the wider social context and community. Many practitioners within real estate are now looking at this area, such as the British Property Federation, which has also undertaken research on how the property industry can enhance and communicate its value to society.
Rohan Marwaha, regional director for UK, Reed Midem
What are you looking forward to at this year’s conference?
This year’s MIPIM UK Summit comes at a crucial moment for the real estate industry in Britain. We now know that the first day of our conference will take place at the same time as the Queen’s Speech in Parliament, where she will set out the government’s domestic agenda, including its plans for real estate as well as the crucial Brexit question. For anyone in real estate who wants to understand the implications of this speech for our industry, we will have the government’s housing minister, Esther McVey MP, deliver our keynote speech to open the Summit on the Monday. So our delegates will hear first-hand before everyone else what the government intends to do to boost investment, increase the level of housebuilding and deliver the infrastructure required to keep Britain growing.
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