ESG and the UK are likely to be the two big investment themes of 2020, experts told The Real Estate Day.
‘The shift has happened, capital has made the decision that sustainability is key,’ said Richard Bentley, Head of Real Estate Finance UK, Helaba. ‘The investors are ahead because they don’t want to be the ones with buildings that are no longer lettable, and the lenders will follow. ESG will be the biggest thing in 2020’.
There is pressure from below but also from above, as the EU steps up regulation and Christine Lagarde at the ECB, Ursula von der Leyen at the Commission and Mark Carney at the Bank of England have made sustainability a cornerstone of their agenda.
Occupiers are also pushing in the same direction, said Ekaterina Avdonina, CEO & Co-Founder, MIRASTAR: ‘There is such a fight for labour in the logistics sector that landlords have to provide quality spaces and have a good ESG agenda if they want to find employees. It has become a standard package now’.
It’s a win/win situation for tenants and landlords, as occupiers demand energy-efficient buildings which also have lower operational costs. ‘Having an ESG strategy has become a retention issue for key talent,’ said Alexander Fischbaum, Managing Director, AF Advisory. ‘But the demand for quality also drives up rents’.
2020 will also be the year that investors realise UK assets are mispriced and return to what was international capital’s first port of call in Europe.
There is substantial pent-up demand for UK real estate, which is now seen as good value as prices and the currency have declined since the Brexit referendum.
‘A lot of international capital is poised to come back,’ said Richard Divall, Head of Cross Border Capital Markets, EMEA, Colliers International. ‘The investors are sitting on the beaches waiting to come in as soon as the political conditions are right and their investment committees give them the green light’.
Some have sought to exploit the opportunity before others do, he said: ‘In the last couple of months family office money has come back in a big way, looking around the UK because the institutional money is not there and they fear that the pound will go up again after Brexit’.
As soon as the UK leaves the EU and the uncertainty is over ‘the floodgates will open’, said Richard Pilkington, Managing Principal, Head of European Equity, CAIN International. ‘There is so much capital ready to be deployed that it will not wait for the trade deal with the EU to be finalised. As value-add, opportunistic players we see the best opportunities in the residential sector in challenger cities in the North of England’.
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