June 9, 2020
This article originally appeared on CoStar on 9 June 2020.
A poll of nearly 300 investors, lenders and investment managers has shown that almost half are planning to invest in UK commercial property during the next three months.
The survey, carried out at a webinar held by Acuitus, Knight Frank and IPSX, showed that 45% were planning to invest, 28% would not be, and the remaining 27% were undecided.
Commenting on the findings, Roger Clarke, Managing Director of IPSX, the securities exchange dedicated to commercial real estate, commented: “I think this is both a reflection of commercial property’s long-term ability to deliver income oriented returns and also the difficulties that other asset classes are facing. The equities market is seeing a raft of dividend cuts and the returns from government bonds are close to zero.
“Against that backdrop, property becomes increasingly attractive, but transparency and the ability to evaluate the strength of an asset becomes of paramount importance. This is what we believe we will deliver with our platform.”
The webinar looked at how investors could enter today’s disrupted market and how they could proceed without the context of reliable valuations.
Richard Auterac, Chairman of commercial property auction house, Acuitus, commented: “The auction room is somewhere which gives investors immediate access to the market at today’s prices. Against a backdrop of uncertain valuations, it will provide the pricing information that helps the market to start moving forward again.
“Real estate often experiences an over-correction at times of economic disruption and our analysis of transactions and investor behaviours during previous seismic events such as the 2008 financial crisis, the dotcom crash and Black Wednesday bears this out.”
Jeremy Tham, Head of the Bank Lending Valuations team at Knight Frank says: “As the lockdown eases, there will be a steady return to investment activity, as volatile equity markets and low bond yields reinforce the case for real estate, particularly in an uncertain environment. Notwithstanding practical barriers for investors, liability matching investors and other investors looking for income will likely seek a flight to quality in safe haven and liquid locations.
“We have seen availability of transactional evidence now appearing, combined with stronger buyer demand, and accordingly, the Material Uncertainty Clause has been lifted for a narrow band of properties.”
He adds, “Sentiment is starting to improve and the debt market is also gradually stabilising, albeit at a rebased level but there may be challenges with obtaining debt, so - when it comes to accessing new investment opportunities in the market - cash is king.”