'Uncertainty Brings Opportunity': 5 Big Hitters On State Of The London Market In 2020
The next 12 months will be one of the most important and fascinating years in UK commercial property history.
Britain will, probably, at some point finally agree a deal to leave the European Union. London's largest office tenant is undertaking a major restructuring. And the city is coming to the end of an unprecedented period of growth in capital values.
Ahead of the London State of the Market event 14 November, Bisnow asked five property heavy hitters from different sectors what 2020 has in store for real estate in the UK capital.
All were optimistic, most thought we would still be talking about Brexit (sorry) and all thought technology would continue to radically alter an industry ripe for disruption.
Nick Leslau, Chairman, Prestbury Investments
Sum up the state of the London real estate market in three words. Still attractive but softening (four words!).
Will we still be talking about Brexit in a year’s time? No. It will be consigned to a mere blip on the graph of the UK's economic history.
Which person or company is going to be making the headlines in 2020? WeWork. The impact of certain geographic failures will reverberate across London.
If you had to spend £100M, in what sector and/or location would you spend it? Best-in-class long income. With the “Japanisation” of Europe, maybe for many years, and unprecedented negative yields, it’s the only area you can get sustainable, reliable, long-term income not dependent upon the performance of the economy.
What technology will have the biggest impact on real estate in the next five years? The technology which covers the entire market, shows individual properties with absolute clarity online, taking the letting agent out of the equation and which allows all-inclusive leases to be signed online, removing the lawyer from the process, and makes property transactions seamless.
Joanne McNamara, Head of Europe, Oxford Properties
Sum up the state of the London real estate market in three words. Resilient / Talent-rich / Global-leader
Will we still be talking about Brexit in a year’s time? It is a generational defining event we will be talking about for decades. The uncertainty created presents challenges because of volatility but also offers opportunities to invest. The bottom line is the UK remains attractive due to the strong fundamentals, demand and structural demographic drivers.
Which person or company is going to be making the headlines in 2020? I can't predict anyone in particular but the rise of tech companies in the last decade has led to a series of companies or individuals featuring in headlines. I suspect this will continue.
If you had to spend £100M, in what sector and/or location would you spend it? UK multifamily, where there are extremely strong supply/demand dynamics, an opportunity to take part in the institutionalisation of the sector, providing much-needed homes and communities for multigenerational living. Although, £100M won’t buy you much … we believe in scale and have strong conviction in our asset allocation strategy.
What technology will have the biggest impact on real estate in the next five years? My sense is that it will come down to increasing the level of intelligence of the buildings themselves and our ability to then significantly improve both the end user experience (card-free access, buildings that anticipate our needs, activating the community within the building, connection to the city around the building for transit, life safety, etc.) and the landlords’ operability (predictive maintenance, energy optimisation, cybersecurity, etc.). This comes down to the combination of digital twins, upgraded building systems and some industry standardisation around interoperability.
I see this as a catalytic shift that will open up many different avenues of value, some that we don’t even yet know. Our industry is quite far behind on this and it is the key area in which we need to catch up. However, it is very challenging given the sheer size of the built world. The teams that crack this and leapfrog their peers will have a significant advantage.
In addition, other tech advancements outside of the sector such as driverless cars will have a big impact on the real estate industry. Ultimately we are in the business of space and as people’s way of using/consuming space is changing, everybody will need to adjust. Again, there will be challenges and opportunities that arise from this.
John Mulryan, Managing Director, BalLYmore
Sum up the state of the London real estate market in three words. Uncertainty brings opportunity.
Will we still be talking about Brexit in a year’s time? Yes. Deal or no deal. Leave or remain. Brexit is a mess that is going to take a long time to clean up. We have still not left the EU so all the practical changes that affect us in both our work and personal lives are still not being felt. We have not yet had to deal with business issues such as putting a customs border in the middle of our supply chain, or personal matters like students having to apply for a work visa to spend their summer in Greece. As these changes start to impact day-to-day life they will undoubtedly be a hot topic.
Which person or company is going to be making the headlines in 2020? The mayor of London. The election next year will focus debate on how London needs to deal with violent crime and housing in particular.
If you had to spend £100M, in what sector and/or location would you spend it? London housing. Despite Brexit, London is still the best city in the world to invest in property and housing is less susceptible to market disruption than most other sectors.
What technology will have the biggest impact on real estate in the next five years? Driverless and electric vehicles. Areas currently suffering from lack of major public transport interventions could become viable for development if we can provide cost-effective access via existing road networks with major advances in driverless cars and buses, electric scooters, etc.
Andy Gulliford, Chief Operating Officer, Segro
Sum up the state of the London real estate market in three words. For our sub-sector: demand outstripping supply.
Will we still be talking about Brexit in a year’s time? Sadly yes, either over the actual trade agreement if we’ve left or a continuing row over democratic dereliction if we haven’t.
Which person or company is going to be making the headlines in 2020? The Greater London Authority and mayoral team as the new London Plan comes into force. It contains many interesting ideas, particularly over land use protection and intensification, but also creates challenges to the property industry which will begin to play out next year. And of course it’s Segro’s centenary next year so you’ll see plenty from us.
If you had to spend £100M, in what sector and/or location would you spend it? We already have and would like to continue spending in last-mile, London urban logistics. The themes of urbanisation, digitalisation and e-commerce continue to override economic uncertainty and the lack of available facilities, largely through land loss to other uses, creates rental growth for investors.
What technology will have the biggest impact on real estate in the next five years? Automation and robotics — already a mainstream feature of the logistics industry, its impact on the need for labour has yet to be fully understood. In five to 10 years it would be autonomous vehicles and how they might change location choices and urban landscapes.
Sally Jones, Head of Strategy and Investments, British Land
Sum up the state of the London real estate market in three words. Resilient despite uncertainty.
Will we still be talking about Brexit in a year’s time? [Jones swerved this question.]
Which person or company is going to be making the headlines in 2020? Investment in PropTech is growing considerably and this looks set to continue despite the travails of WeWork. There are lots of really exciting, emerging PropTech companies emerging and so it is difficult to pick just one. I’ll have to go for one we’ve recently invested in, WiredScore, which in many ways is the antithesis of the move fast and break things approach we hear so much about. It provides a service people clearly need, its business model is surprisingly simple, it’s really asset-light, it’s building real competitive strength and it has a clear path to profitability.
If you had to spend £100M, in what sector and/or location would you spend it? London remains a great place to invest in commercial real estate despite Brexit. It has remained resilient, and looking to the longer term, its strengths as a global hub — including its access to talent — will continue to attract world-leading companies and investment. In terms of location and types of asset, simply we believe in ultra-well-located mixed-use real estate.
What technology will have the biggest impact on real estate in the next five years? Smart buildings and cities are going to have a significant impact. While the concept of “smart” is not necessarily new, the application of it has come increasingly into focus as companies face public and regulatory pressure to reduce their carbon footprint.
Smart essentially will do three things — help us and our occupiers understand how space is being used, operate space more efficiently and, probably more importantly, provide a better experience for the people who use the buildings and spaces around them.
For society, smart is a crucial pillar of sustainability in being able to minimise energy costs of operating space and supporting a cycle of continuous learning around how to create high-quality, sustainable buildings.
In addition, the rise of the circular economy presents opportunities in the space, with companies looking at ways to improve resource efficiency within real estate, through the use of sensors, big data and AI.