Insights

Sticking to your Strengths – Real Estate Investment Strategy

10/08/2020

It is not uncommon to hear Mark Twain's adage "buy land, they're not making it anymore" quoted during investment discussions. However, difficulties are arising in real estate investment currently due to the global health crisis, political uncertainty on both sides of the pond and the availability of suitable assets for investment. This was the topic of Howard Kennedy's recent webinar featuring Egbert Perry of The Integral Group, Heidi Learner of CBRE Global Invesors and Jonathan Goldstein of Cain International.

Those in the real estate industry, from developers to investment firms, are scrutinising their approach and looking to take advantage of their respective expertise in order to minimise risk whilst maintaining profitability during these unpredictable times.

If Covid-19, Brexit and the upcoming Presidential election in the US were not enough, a significant hurdle for real estate investors currently has been the inability to physically visit property whether it be locally or internationally. Historically, it has been important for those looking to issue capital to be able view a potential investment opportunity as well as to build relationships with the developers. Increased use of technology, such as Zoom video calls and virtual viewings, does go some way towards overcoming this issue but does it go far enough? Investors will inevitably be more prudent in their approach because of this meaning that investors and developers will need to identify their strengths and exploit them to ensure continued success in the current economic climate.

The strategy for many investors will be to look to use tried and tested routes rather than pursue new opportunities which are not backed up by experience. By way of example, whilst logistics has clearly been a strong sector in which to invest in both countries, in the US in particular metropolitan areas have historically been viewed as having the ability to hold their own due to the quality of life that can be enjoyed by those that work or live in the region. This is likely to continue particularly post COVID with the population increasingly wary of public transport and investors desires to incorporate social impact as well as sustainability into requirements.

All investors will have been through periods of learning over the years. It is unlikely investors will want to invest in unfamiliar asset classes which may be seen as high risk strategies over in the next 18-24 months. Instead ensuring past success and mistakes are identified and, where necessary, alternative approaches are adopted to the given situations will ensure greater stability for the investors. Ultimately, strong foundations at home will assist in taking advantage of opportunities that arise in the future.

But this does not mean that investors should be rigid in their approach. By utilising expertise, investors will have the opportunity to be innovative in responding to evolving consumer trends. Continuing on from the example of a metropolitan area, developers are already modifying designs of residential properties to provide improved space for working from home. Commercially, there is increased interest in working hubs across the commuter belts as consumers place greater value on a shortened commute. Further, research firms are already being relied on more heavily than before in order to assist investors to be agile and reactive to the desires of consumers due to travel and other COVID restrictions. It follows that research firms will have an increasingly important role to play moving forwards, especially whilst travel nationally and internationally is limited.

The future economic landscape is uncertain. It remains to be seen what will be the impact on the real estate sector as governmental support for businesses is slowly taken away. Nonetheless, investment opportunities in real estate will remain. It is vital now more than ever for real estate investors to identify their strengths and invest accordingly whilst remaining flexible to consumer demands.

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