| Real estate opportunities arise despite ongoing uncertainty
Uncertainty is the 'new normal' for the commercial real estate (CRE) sector, according to a new report from M&G Real Estate this week, which examines how the pandemic is causing investors to grapple with significant, unforeseen economic upheavals, and the major shifts in work/life balance, which may in time force investors to repurpose their assets.
"Our attitudes towards future investment decisions must be guided by the new environment in which we are all operating and we must accept that a high level of uncertainty will continue for some time," says Jose Pellicer Head Investment Strategy at M&G Real Estate.
It's not all pandemic doom and gloom though, with Knight Frank predicting that the UK healthcare property market will see record quarterly transaction levels for both M&A and fixed income in Q4 2020, with investment volumes in 2020 YTD already 25 per cent higher than last year.
And corporate sale and leaseback deals are in rude health too, according to another Knight Frank study, which says that transactions will raise GBP2 billion this year, the highest total since the global finance crisis back in 2008.
“The art to a successful sale and leaseback is structuring the transaction so that both parties’ interests are aligned in the long term,” says Henrie Westlake, Senior Partner at Knight Frank in Leeds. "For corporates it can be a very effective way to release capital from real estate, to invest in operations, bolster balance sheets and pay down debt."
A new report from Savills meanwhile, says the operational residential investment (which comprises multifamily, student housing and senior living assets) is on the up too, with the sector accounting for 27 per cent of global real estate investment in the first nine months of the year, up from 16 per cent a decade ago. And there are opportunities in the real estate special situations credit sector too, according to investment and advisory Rivercrown, whose analysis of GBP4.5 billion of special situations deals since March reveals that the greatest demand is from hotels (36 per cent), and residential (26 per cent).
"A lot of the lending market has been closed or limited for new business, but the significant volume of special situations deals we are seeing means that attractive opportunities exist for alternative lenders with the right resources to identify the strongest prospects," says Charles Archer, Rivercrown’s head of debt.
With Germany having been widely prised for its handling of the coronavirus crisis, at least during the first wave of infections, it's perhaps no surprise that the country's real estate sector is recovering strongly. Whisper it in London, but according to new research from Savills, German real estate investment activity now accounts for 34 per cent of the European total – up from 29 per cent – while UK market share has fallen from 27 per cent to 20 per cent…
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