Bisnow Real Estate Outlook – trends for 2023 and the road ahead

1. Where are we in the investment cycle? There has been a c20% reduction in pricing, presenting a golden buying opportunity.
2. Institutions are struggling with the economic pace and see further falls in value, with core inflation still at its highest level in 25 years.
3. 2024 could be the year of the private investor, with a lot of activity – private investment is unlocking opportunities in the market.
4. The next part of the Real Estate economic cycle is likely to be about debt, forcing decision making and values due to interest rates.
5. For those with options of how to deploy capital, credit returns are more attractive currently than equity.
6. ESG remains of key importance, moving from a risk issue to a value driver. Occupiers demand / expect it and it is good for employment and reputation. Britain is leading the way in ESG. Can we learn more from the Nordic countries where this is embedded in their culture? There is still a lot to do. There is an increased requirement and need in alternative materials, such as cement (the third largest industrial source of pollution).
7. The UK has had a faster rebalancing of pricing than in Europe and investment volume still c2x that of Germany.
8. Power supply is a new defining reality of Real Estate. eg. Some house building is not possible where the grid cannot support it.
9. Asia remains a key source of interest in UK RE. 90% of worldwide middle class growth is in SE Asia (as quoted). Hundreds of new family offices in Singapore are managing Chinese money. The UK still has a positive reputation.
10. The UK remains a simple market to access with no prejudice as to investor type or length of intended hold.
11. The ‘pivot point’ will come when debt rates and prime yields equate. 2024 may be static, but there is hope for 2025.
12. Green premiums are being paid in rents for offices (c15% for best in class). Investors remain cautious in the office market sector. There is rental growth in some parts of the market and occupiers are demanding a best in class service.
13. For debt, higher interest rates and lower values are proving a challenge.
14. Retail is fundable again.
15. The market is currently c20% acquisition finance and the rest for refinancing.
16. Funders are looking more for value add than stabilised assets.
17. 2024 may bring more ‘consentual’ sales of assets.
18. In financing, new structures are being implemented and there is a greater level of communication between borrower and lender (key metrics: income, demand, future supply, value added).
19. There are questions as to whether we are too focussed on short term gains, and if we should be more focussed on medium to long term gains.
20. On the planning front, there is a need for more clarity, consistency and expertise.
21. BTR, leisure, logistics, senior living, affordable living, self-storage, and student accommodation continue to be robust and growing sectors. They are good hedges against inflation, have high operational efficiencies and are resilient in a volatile market.

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