The outlook for UK, European and Global real estate
While the topic of house prices and buying your first home is a conversation favourite amongst us...
Last week, LinkedIn was all a buzz about whether the government was considering creating a legal right to work from home (WFH). Ultimately, should employers be made to prove having staff in the office is essential? As someone who has worked from home for 18 months now, I have to say face-to-face communication and chats in the kitchen are surely missed, but I’m not convinced they are essential for a job well done.
“Home work grew up and became work from home.” — CA Vikram Verma, author
Investing in property is often associated with buying property – either your own a house or you rent out a second property. And I have some experience of this. While I’m a renter rather than a home-owner, before I worked at FundCalibre I was a property manager for a private landlord. He had a portfolio of both residential and commercial properties, and it was a lot of work. But you don’t need to become a landlord to reap rental benefits. You can invest in property funds or trusts instead. These vehicles invest in all sorts of commercial buildings and companies linked to the property sector. But what kind of impact has the pandemic and growing WFH culture had on this area of the market?
In a recent interview, Roger Skeldon, co-manager of TIME:Commercial Long Income said there’s been “a growing appetite towards operational real estate, including healthcare, social housing and logistics in the UK.”
But what about other parts of the property market and offices in particular? At the start of the pandemic, Marcus Phayre-Mudge told us that we might have already seen the last skyscraper…
More recently Marcus, who also manages BMO European Real Estate Securities, said “the return to the office is currently one of the most hotly contested debates within the real estate community. Smaller cities with shorter commuter times are experiencing rapid increases in office utilisation such as Oslo, Stockholm, Milan, Berlin, Frankfurt and other large German cities. The largest office markets of London and Paris, where commute times are longer (and often partially underground), have much lower take up rates.”
Ainslie McLennan, co-manager of Janus Henderson UK Property, has also looked outside of London for opportunities, “Our office exposure is all low rise and easy to safely access for occupiers. The largest office exposure is a fantastic multi-building, multi-tenanted office park in Cambridge which continues to go from strength to strength and with plenty of asset management to do. Other than that, we have our newly refurbished office in Wimbledon, which keeps creating the new highest rent being paid in the location as it lets up – it is has been a success and very well located but good space.”
According to a survey on LinkedIn, 31% of users believe WFH is not practical, 60% are all for it and 9% are unsure*. Like many, I believe the new work life will be flexible – a mixture of both. As Alex Ross, manager of Premier Miton Pan European Property Share, told us last year, he believed there would be 10-20% less office space moving forward. But at some level there will always be a need for offices, as such the fund continues to have 21%** invested in offices.
Although a government spokesperson has now denied any plans to introduce a legal right to work from home, they did confirm they’re consulting on how to make flexible working easier.
The bottom line: whether it’s at home or in an office, staff will continue to work. Telling people who are working to get “back” to work adds nothing to the discussion. The flexible working revolution is happening.
*Source: LinkedIn New UK open survey with 1,590 responses at time of writing
**Source: fund factsheet, April 2021