GRIUK investment cycle - Up the risk curve, down the deal size?
GRI Club members discussed the macro risks impacting UK cycle & what price correction strategies must be implemented.
November 6, 2018Real Estate
GRI members gathered in London on 31st October to share their thoughts on factors influencing the real estate market, as well as their investment strategies in the coming year.
This meeting was an opportunity to take stock on what macro risks were starting to impact the cycle and to review what price correction and defensive strategies are currently taking place in the UK market.
Simon Durkin, Head of Research & Strategy EMEA at BlackRock Real Assets, teased open the meeting with a concise and engaging presentation on key macro-level factors influencing the market. Ultimately, it was concluded that UK real estate is stable and a potential downturn would not adversely impact the market - a sentiment shared by the majority of members present.
Moderator Shamik Narotam, Head of UK and Ireland Real Estate Investing at Morgan Stanley, wasted no time in addressing the elephant in the room; Brexit. Despite some concerns over the lack of progress and possible European fragmentation, most members were confident that a hard Brexit would be avoided and long term investment into the UK would not be severely affected.
Investments & asset classes
The conversation subsequently turned to the present company’s investment activities broken down by asset class, with retail being first on the agenda. Opinions were divided, with some members investing heavily in retail whilst others were put off by inaccurate pricing. The group concluded that repositioning of assets and new management strategies are needed to succeed in the retail space.
Industrial was the next asset class discussed, and with new builds, build-to-suit and pre-let assets dominating the space over secondary redevelopments, the room unanimously agreed that the industrial market is very much a developer’s game. Members were generally confident in achieving projected returns on industrial assets moving forward. The discussion then moved into closing stages with a brief examination of Office and PRS. Despite a decline in corporate occupancy in London, most expressed confidence in London offices, and as for PRS, our members pointed out the strength of the regions, citing the number of opportunities and potential for attractive returns as a key motivating factor for reducing their London focus.
Based on the sentiments of GRI members, it would seem that the outlook for the coming months is generally positive - the consensus suggests that the likelihood of a no deal or hard Brexit is unlikely, and while there is certainly potential for a downturn, the negative effects can be mitigated through shrewd positioning of assets and finding value in value-add and opportunistic investments.
This meeting was an opportunity to take stock on what macro risks were starting to impact the cycle and to review what price correction and defensive strategies are currently taking place in the UK market.
Simon Durkin, Head of Research & Strategy EMEA at BlackRock Real Assets, teased open the meeting with a concise and engaging presentation on key macro-level factors influencing the market. Ultimately, it was concluded that UK real estate is stable and a potential downturn would not adversely impact the market - a sentiment shared by the majority of members present.
Moderator Shamik Narotam, Head of UK and Ireland Real Estate Investing at Morgan Stanley, wasted no time in addressing the elephant in the room; Brexit. Despite some concerns over the lack of progress and possible European fragmentation, most members were confident that a hard Brexit would be avoided and long term investment into the UK would not be severely affected.
Investments & asset classes
The conversation subsequently turned to the present company’s investment activities broken down by asset class, with retail being first on the agenda. Opinions were divided, with some members investing heavily in retail whilst others were put off by inaccurate pricing. The group concluded that repositioning of assets and new management strategies are needed to succeed in the retail space.
Industrial was the next asset class discussed, and with new builds, build-to-suit and pre-let assets dominating the space over secondary redevelopments, the room unanimously agreed that the industrial market is very much a developer’s game. Members were generally confident in achieving projected returns on industrial assets moving forward. The discussion then moved into closing stages with a brief examination of Office and PRS. Despite a decline in corporate occupancy in London, most expressed confidence in London offices, and as for PRS, our members pointed out the strength of the regions, citing the number of opportunities and potential for attractive returns as a key motivating factor for reducing their London focus.
Based on the sentiments of GRI members, it would seem that the outlook for the coming months is generally positive - the consensus suggests that the likelihood of a no deal or hard Brexit is unlikely, and while there is certainly potential for a downturn, the negative effects can be mitigated through shrewd positioning of assets and finding value in value-add and opportunistic investments.
