Following a period of fresh political headwinds, and resulting new layers of uncertainty spurring market turbulence, the phrase ‘we are all in this together’ has never felt more real to many across the property sector as it does today.
The challenges facing the sector as a collective are indeed vast. Many, however, are cautiously optimistic about real estate and the role it can play in supporting us through this period.
Investors and lenders are thinking carefully as to where they deploy their funds, if at all, and on what terms. With inflation reaching double digits, it’s not an option to tuck it under the mattress. This means real estate investors have a role to play in the long-term fortunes of individuals, including everyone with a pension, and the country as a whole.
At Cain, we remain firmly rooted in our belief that property will continue to be an effective hedge against this volatility. While the economic situation may appear daunting, the investment case remains clear.
Take student housing. Demand far outstrips supply and there is little reason as to why that might change. Universities will continue to accept high numbers of students, particularly international ones, to maintain their income, while the attraction of going to university remains as strong as ever for young people.
Or take the office, and how the role it plays will continue to evolve as we settle into a new normal. In the short term, it’s likely there will be a return to the office this winter due to the rising price of energy. That may lead to a rise in habitual week-round footfall in the mid-to-long term, but it will also give developers time to reconfigure their spaces to reflect how people prefer to work.
Meanwhile, in the logistics sector, as bricks-and-mortar destinations become more experiential, both in their retail offering and increased hospitality and leisure, the need for both vast distribution centres and last-mile delivery hubs will grow.
Investors are rightly more cautious in how they approach the market. The risk is greater, and that needs to be reflected in pricing.
However, by adopting a simple principle, investors can limit their risk: recognise that we’re all in it together. Part of Cain’s business strategy is our enthusiasm for working with partners. On logistics and student housing, for example, our partners are experts at what they do. By recognising that each party has their own strengths, we can make a compelling business argument.
We are indeed all in this together, and we should be investing in our future, carefully, and not cutting back on the things that will inevitably safeguard our long-term outlook.
Daniel Harris is senior managing director and head of European investment at Cain International