Realcast: Don’t delay, funding gap on way, BoE dispirits, but retail and K&C add a little cheer

In the headlines this week…

Real Asset Media’s live sessions included an investment briefing in Schroders Capital’s London office which examined key trends around ESG, digitisation, technology, innovation and how all of that relates to investment.

The audience was warned that a tsunami of regulation is on the way and the real estate market should brace itself but act as soon as possible. ‘Economic circumstances’ are not a reason to delay, there is a real risk that some assets will be ‘stranded’.

The climate resilience of buildings is an issue of growing importance too as weather events become more frequent and more severe and while infrastructure is not up to the job.  Nor will a newly emerged technology save the day – we have the technology it is just not being employed fast enough.

The regulations around ESG are a diverse landscape that can be overwhelming, but it is crucial to investment strategies, to protect values, the audience heard.

Elsewhere, Real Asset Media’s debt finance investment briefing in Frankfurt observed that although there is a funding gap at present, there is potentially another around the corner related to freeing assets stranded by their ESG deficiencies.

Meanwhile, inflation remains one of the overriding topics and many investors in the UK have been disappointed by the Bank of England’s statement that inflation in the UK has been above target again. There are likely to be at least two more 25 bps increases in the policy rate, a fact which is likely to affect market pricing and delay the UK’s recovery. It is also likely to have disrupt investor sentiment.

Two further 25 bps rises are also expected from the ECB, but there are hopes that this will signal the peak of the cycle in Europe.

However, there has been some positive news and the large amount of ‘dry powder’ that investors are sitting on is one reason to be cheerful. There’s still plenty of interest in real estate and this has been demonstrated by the London Borough of Kensington and Chelsea’s pension fund which quadrupled its allocation to real estate from 5% to 20%, very much against the trend.

In the debt market there also is emerging a more collaborative approach to finding solutions for non-performing loans. This time around the banks seem less aggressive and are showing flexibility on loan terms, which has led to less distress in the market.

Lastly, there is now more interest in retail among investors. That may reflect that retail is already at the bottom of the market in investor perceptions, but the sector has not been much discussed for a while.

Click on the video to see the full discussion or listen to the podcast below.