Safe as houses? The return of real estate

If you were to summarise what was going on  in the commercial property market in one  word, you could do worse than to alight on  ‘renaissance’. At least as far as the pensions  industry is concerned.

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If you were to summarise what was going on  in the commercial property market in one  word, you could do worse than to alight on  ‘renaissance’. At least as far as the pensions  industry is concerned.

“In my view, this is a very shortsighted  attempt  to retain office blocks, and a refusal  to accept changing habits of shopping and  work. They need to give up on a 1980s model  that doesn’t work any more.  “The Help to Buy scheme makes PDR even  more compelling as it creates a ready market  for these projects.”

Increase the supply

Of course, local authorities may be resistant  to conversion as change of use to residential  will reduce the rateable value of the land and  they may wish to halt any erosion of this  income.  Habib believes PDR – “frankly the best planning  policy I’ve seen in my career” – could be  used effectively to generate institutional  scale for residential property portfolios,  including  the very kind of stock that local  authorities  need for social housing.

However,  the government needs to take  greater steps to increase supply rather than  focusing on stimulating demand.  “The government should apply Help to Buy  to small developers who can take taking  advantage  of PDR and really get things  moving.”  As more vehicles become available, it seems  inevitable that pension funds will invest into  this sector, but it won’t be an overnight hit,  says Cordea Savill’s Patel.

“There is interest and a lot of bodies are  trying  to make it happen. Some are starting  to invest, so that momentum will continue to  grow.”  He feels the industry is innovative whenbreaking  down barriers of execution and  scale and more money will go into residential,  but it is starting from a very low threshold.  “This may be 1% to 2% in time but will  remain  very small and in 10 to 15 years, this  may be heading towards a mainstream asset  class.”

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