PERE Women in Real Estate Forum 2022: Our key takeaways

In a time of economic uncertainty, one message which overarched many discussions at the PERE Women in Real Estate Forum 2022 was to “expect the unexpected”. But might the impact of the current macroenvironment also offer opportunities for real estate investors?

Here, we share our key takeaways from this year’s Forum. Importantly, it seems opportunities can still be found, provided forward-thinking investors remain nimble when seeking out those opportunities and remember a well-known phrase – “location, location, location”.

Logistics

The shifting sands of the logistics landscape may reveal certain treasures, particularly in the UK, Ireland, Spain, Czech Republic and Poland. Investors will, however, need to be mindful of the cost of materials and debt. Consequently, many will require a signed lease from the proposed tenant before commencing a new development. Acquiring developed, or part-developed, logistics facilities is an alternative, but it is important that the facility design reflects the (often bespoke) requirements of anchor tenants who offer long-term value.

Private rental sector

Other sectors in flux include the private-rental sector, which is expected to grow. As a consequence of the high price of debt, people are turning towards the rental market rather than purchasing their own homes, particularly those in UK cities. As the FT notes here: “add to this the opportunity to provide solutions to growing environmental, social and governance problems, and the private rental sector quickly starts to look like the next darling of institutional investors struggling to find inflation-beating yields and stability in the stock market.”

Offices 

With the rise in working from home, employers are under pressure to offer something more than just a desk to their workers. There is an increasing focus on sustainability, health and wellbeing in the workplace, collaborative working spaces and central locations. Offices benefiting from these attributes will be increasingly attractive to tenants and also avoid the significant capex expenditure which their less environmentally-friendly counterparts will inevitably require.

The rise of the ‘Social’ in ESG 

As touched on above, the impact of COVID-19 has drawn social considerations centre stage, as occupants of residential, office and retail space all started to demand more from their assets. Investors and tenants alike are now increasingly aligned in their desire to protect the health and wellbeing of occupants, manage risk, and deliver value for society. 

Within this increased sense of community, there is a common objective to ensure that the built environment is fit for all. This focus on ESG as a long-term value creator is especially important to recognise given the current economic headwinds and the historic tendency to treat it as a seasonal ‘nice to have’. Indeed, there is no doubt that those who stay the course stand to gain significantly over the coming decades.

Repurposing assets

As ESG becomes an increasingly mandated strategy, it is likely that the existence of a ‘green premium’ will rise with owners of older, ‘brown’ buildings struggling to keep pace. There may, however, be opportunities for those investors willing to spend time assessing ‘brown’ assets for redevelopment and potential repurposing to a new, or mixed, use. 

Caution will be needed when approaching such investment opportunities to ensure that any redevelopment and/or change of use would be legally and practically possible, as well as financially rewarding. 

Indeed, not all assets will be suited to repurposing. As one example, repurposing redundant office buildings into life sciences assets is on-trend, but it is important to remember that laboratories used in the life sciences sector are bespoke and the space needs to be precisely designed for the end-user. The cost involved in repurposing such a space is high and likely only attractive if there is a specific tenant already lined up. Location is, again, crucial in this sector, as many life sciences tenants will focus on assets in, or at least in good proximity to, the ‘Golden Triangle’ of London, Oxford and Cambridge.

Conclusion

Whether it be responding to COVID-19 or the current economic headwinds, it was a widely-held view at the Forum that transparency, inter-dependence and collaboration – across use classes, organisations and individuals – is here to stay. There is still value to be found where investors are willing to search for existing well-placed assets or assets with development potential.