We may well be heading for a global recession, but there is still plenty of money in the market – and an increasing number of investors ready to pounce on opportunities.
Just a few days back into a socially distanced office and already real estate deals are picking up. The market never completely dried up during lockdown of course, but now agents are back, starting to roam their office floors and get back out, physically, into the market, the chatter around deals and the flow of cash is inevitably starting to pick up.
We would never suggest that agents have a tendency of talking the market up, but there is definitely an air of positivity that deals put on pause a couple of months ago will quickly come back.
And it is not just the agents that are preparing for an uptick in activity. Overnight, SEGRO raised a whopping £680m – some £30m more than it anticipated – to fund its expansion strategy in the UK and continental Europe. It expects to spend £1bn this year and next as it seizes the opportunity brought about by the coronavirus-induced accelerated adoption of technology and e-commerce.
And SEGRO isn’t the only investor in its sector that is preparing to take advantage of the market. LondonMetric is seeking to swoop on investment opportunities “seldom available in a normalised market” while its competitors tend to business issues caused by the pandemic.
In his characteristic, Warren Buffet-style commentary, chief executive Andrew Jones said: “Buying cheap assets is fine, but buying good assets cheaply is better. In this time of uncertainty, we are not only seeing more quality opportunities but also a much less crowded landscape, as competitors remain distracted.”
Since the end of March, the logistics owner has bought £15m of assets, with a further £80m agreed or in legals.
Self-storage company Big Yellow this week said it was also readying to spend proceeds from its £82m capital-raising to “exploit” the opportunities that current uncertainties are presenting.
You’ve got to love real estate for its enthusiasm for a deal. For how quickly it can go from that squeaky bum moment to excitement about opportunities. It’s like a dog wearing a vet-prescribed cone of shame then spotting a squirrel.
Those seeking to capture these opportunities may have to move rapidly, however, as data in these pages this week from PGIM Real Estate (p16) reveals the magic number that yields will have to get to before the floodgates open for all the capital waiting patiently in the wings.
It is great to see real estate behaving like “normal”, but I do hope that it won’t go back to its old ways entirely. We all love deals, we all love the flow of capital and the stock markets looking positive (although they do seem slightly out of kilter with the rest of the world).
But I hope that the sector does not get so distracted by the deal (the squirrel) that it forgets all the things it has learnt in lockdown. All the things that we have talked about in these pages. I hope that it doesn’t forget that kindness and respect can, and absolutely should, go hand-in-hand with doing business – doing good business.
And with that in mind, I just wanted to say a huge thank you to everyone who has contacted me following my words around racism last week, and apologies if I haven’t got back to you yet. I will. And I will do so to share some exciting plans about how together we can make a real difference and make sure that words become – and remain – actions.
To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
