Although the market appears exuberant and displays some of the characteristics of a bubble, the weight of capita seeking to invest in real estate as an asset is continuing to sustain the market. Some long-term traditional sources of capital, such as traditional life insurance products and defined benefit pension schemes are maturing however, new sources of capital are entering the market to replace them. Some investors are looking for new opportunities with safe long-term returns. For many investors, traditional Real Estate funds have lost their appeal and they are looking for more diverse, collaborative, tailored and safe investments. These were some of the key messages from the recent ULI Real Estate Funds Seminar in Edinburgh.
Moderated by John Forbes the Real Estate Funds Seminar explored current real estate investment trends with direct insights provided by a leading panel of experts which included David Paine -Standard Life; Simon Jones – Hymans Robertson, Peter Macpherson – Patrizia and an audience of property professionals.
The seminar highlighted that with the weight of capital in the market, many investors were looking beyond prime assets in capital cities to find attractive opportunities. Secondary cities in Europe are attracting attention. The panelists concurred that investment opportunity areas for Scotland and the wider UK market were shifting away from traditional assets and focusing on PRS, Leisure, Healthcare and Student Housing. Global cities however remain the prime interest areas for sovereign wealth funds and the market overall is favouring a more tailored approach with a specific focus on market segments, joint ventures and small clubs.
Market uncertainty has limited investment in PRS for Scotland but this is likely to change as the political situation stables. Political reform of the Pension market has also influenced more collaboration a trend that has also been reflected in how Fund Managers work more collaboratively with clients to meet their needs often designing new funds where Real Estate forms part of the overall offering.
Capital is also forecast to continue growing due to the currently un-allocated sovereign wealth funds from countries such as Malaysia, Japan and Canada entering the market. Edinburgh is seeing an increased investment yet the seminar highlighted that UK cities other than London this investment is not solely focused on real estate and increasing interest is being placed on infrastructure. Although many of the larger investors want to deploy their capital directly or through joint ventures, for those lacking the size or expertise, this is not practical. Investment via funds is also therefore recovering.
Opportunities may exist for collaborative real estate and infrastructure investment funds which combine city regeneration opportunities with property value uplifts. Edinburgh’s Tram is a proven case study in this area and further regeneration of city centres across Scotland could provide new opportunities.
The Real Estate Funds Seminar forms part of ULI Scotland’s annual real estate programme. For further details about ULI Scotland visit ULI Scotland or to become an active member of ULI Scotland, please contact ULI UK Coordinator Agnes Gomori.
More photos of this event can be viewed by clicking on the above images.