The changing face of the property market means investors need to continually alter their approach to their investment strategies. Speaking as part of a Property Week webinar, director of real estate and finance at CB Richard Ellis (CBRE) Rod Lockhart explained it is important to constantly assess risk, as well as to bear in mind new legislation that could affect the way in which the real estate investment sector operates.
He cited examples such as Basel III, the Alternative Investment Fund Managers (AIFM) directive and European Market Infrastructure Regulation (EMIR), commenting: "Rightly or wrongly, this legislation will change the way that real estate funds and portfolios are owned, financed and structured." Head of property multi-manager at Aberdeen Asset Management Richard Gale also participated in the webinar and agreed there are many changes investors need to be aware of. He highlighted pension funds as one sector that is altering its approach to investment, in part due to the reduced income currently being generated by real estate portfolios.
Mr Gale added there has been a flight to quality, not only in the property investment sector, but across all asset classes. In the UK's real estate market, this risk aversion has been characterised by the increasing polarisation between the performance of property in London and stock in the country's regions. A recent report from Lambert Smith Hampton (LSH) revealed the capital accounted for 61 per cent of the value of all transactions in the first quarter of 2012. LSH chief executive officer Ezra Nahome pointed out this is well above the ten-year average for activity in London, which has previously taken a 35 per cent share of the UK's real estate investment transactions.
Looking ahead, Mr Nahome predicted investors will not return to the country's regional markets until the economy stabilises and the outlook becomes more positive, noting this is unlikely to occur before 2013. He concluded until the availability of debt financing improves, equity buyers will dominate the market and prime property will continue to be the main focus for the majority of investors.
- Monday 30 April 2012