Property, as anyone with even the vaguest passing association with the industry knows, is a people business. Conversations that could easily take place over the phone or via video conference are, more often than not, done in person. Investors like to meet with those charged with managing their money and vice versa.

Breakout area

Source: Shutterstock/ Jacob Lund

It is therefore no surprise that the onset of the Covid-19 pandemic made doing business very difficult indeed for property funds. Professionals used to either flying out to woo potential international investors or playing host found that meetings soon dried up – and that was the case whether you’re talking about institutional investors, high net worth individuals or anyone in between.

Quite simply, funds struggled to attract investors without being able to see the whites of their eyes. The basic fact that international travel was severely curtailed acted as a drag anchor on the industry in the early months of the pandemic.

However, property investment – like other parts of the economy – soon adapted to the new reality. Necessity, after all, is the mother of invention and investors reinvented traditional ways of working to deal with the new reality, even if all that meant was jumping on Zoom or Teams rather than an international flight. The necessary people may not have been able to shake hands – or even bump elbows – but they could still connect.

Exactly what funds and the money behind them have been happy to invest in over the past year also changed. Clients may not have been investing in different assets as such, but they are seeking to do different things with them. A more mixed-use approach, already a trend before the pandemic, has become more pronounced. Standalone retail or office assets are no longer so desirable.

Investors are moving into areas they may not be familiar with

Mark Eade, Smith & Williamson

The same sort of thinking is apparent even within traditionally single-use spaces. Offices are a prime example. With few people predicting a return to working in the office all day, five days a week, funds are seeking to repurpose workspaces to become more collaborative. People need an added incentive to come into the office and many employers are desperate to have them back, at least part time, so property owners need to respond.

Funds are also seeking to diversify their portfolios further, with student accommodation a beneficiary. That may sound surprising, but funds tend to look to the long term, and high-quality student accommodation is seen as an asset that will remain in demand beyond the pandemic.

Such moves may well prove to be smart plays, but it means that investors are moving into areas they may not be very familiar with. As a result, they may need to think about structuring their businesses differently to maximise tax efficiency. Getting the structure right from the start is important as there are many variables that need to be considered.

Mark Eade, director, business tax, Smith & Williamson