Briefing New York: Beware the ‘unknown risks’ of the new economy

Technology is a great opportunity but also a risk, so investors must be on their guard, delegates heard at Real Asset Media’s European Outlook Briefing, which took place in New York last week. 

‘The real risk in the market right now is the general belief that technology is going to somehow lift values, operationally and financially,’ said David R.Hodes, Managing Partner, Hodes Weill. ‘Investors are really attuned to the known risks, but what I have observed is that if you throw a technology wrapper around a more traditional real estate investment, then a lot of risk gets waved through. A new economy wrapper may hide some of the unknown risks, so investors have to be careful.’

Accessing the market panel, New York, February 2019

Institutional investors are generally very aware of risk, which ensures that ‘wherever we are in the cycle, we are not in a bad place,’ said Robert M.White Jr, Founder & President, Real Capital Analytics. ‘But I agree that all proptech spaces present an element of risk. If there is a bubble coming, it may well be there’.

In general investors are now more risk-averse, said Hodes. ‘There continues to be a pretty wide range of what investors are prepared to do, so there is still some money out there for highly opportunistic platform transactions, but I would say not a lot. The deepest vein of capital is for assets that are demographically driven’.

These can range from ‘regular apartments and housing, as there is a shortage everywhere, or more specific and nuanced asset classes like student accommodation, senior housing, co-living and everything in between.’

There is less risk in the market also because banks have changed their behaviour as a result of the last crisis, said Alexander Fischbaum, Managing Director, AF Advisory: ‘It has been a positive effect of regulation. The lender universe creates a lot of discipline in the investment decision simply by not lending money. In a downturn, this will help contain the damage.’

However, an awareness of risk should not become a paralysing force, he said: ‘If you are really, really prudent then you are never going to buy anything.’

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