In mid-2010, many observers are concerned that the global economy and financial system is faltering, and that the way forward is unclear. In this article, we look at how far we have come in the past two years and consider the prospects for the future and the role of real estate in that future.
From the Current Issue
Metric Property Investments Plc was formed earlier this year as the latest in a number of new property companies that have been launched in the United Kingdom over the past couple of years to take advantage of perceived opportunities following the downturn in the market and the repriced environment. Metric was founded by Andrew Jones, Valentine Beresford and Mark Stirling, who all previously held senior positions on the retail side at UK-REIT British Land and, prior to that, at Pillar Property, which was acquired by British Land in July 2005.
REITs, real estate investment trusts, have become the investment of choice for many investors in the United States, Australia and Asia. Europeans, however, have been less enthusiastic about the structure. Those who eagerly awaited the passing of REIT legislation in the United Kingdom, Germany and Italy in 2007 were sorely disappointed by the lacklustre IPO and investment activity that followed — even before the recession hit.
Even a cursory review of the current contents of property industry journals, conference brochures and educational programmes reveals the extent to which interest in “responsible property investment” has risen in the last 10 years. Having been involved in this area over that period, I have certainly witnessed attendances at related events go from small gatherings of the converted to standing room–only events full of “show-me-the-money” fund managers.
What do commercial tenants want? Here’s a clue: often, rent reduction isn’t the top request. In fact, a survey of more than 1,200 tenants across the United States and Europe says that hands-on service, communication and fixing problems drive satisfaction. Most importantly, tenant satisfaction translates directly into higher renewal rates.
Given that the survey was examining plans for the next three years, this is a staggering amount of capital to invest in real estate. Most surprising, perhaps, is that only Ä1.2 billion in new allocations is planned, taking total real estate investment to a planned Ä85.9 billion — it is worth noting, though, that these figures do not allow for capital growth in institutions’ multi-asset portfolios or for liquidity shortages that may prevent investors from fulfilling their real estate investment targets. This could have far-reaching implications for industry participants and the people working for them.