P F P C A P I TA L
Innovation, disruption and change in the world of real estate investing By Alexandra Notay Drones and disruption The word ‘drone’ has become something of a standing joke with my colleagues, alongside ‘customer expectations’ and ‘storage’ as a sort of Buzzword Bingo for those poor souls who have heard me mention them in almost every meeting since 2015. I was an early adopter of mandating inclusion of drone delivery pads in our larger residential building specifications and had been giving all sorts of ‘Future of Residential’ presentations to real estate conferences from Australia to MIPIM for years so this was to be expected. One of the many areas of change in current UK planning policy is around how to safely accommodate the proliferation of drone and other robotic deliveries and their related infrastructure as our appetite for deliveries shows no sign of abating. It is unsurprising that the wider real estate industry has remained stubbornly analogue until fairly recently. The pre-eminence of a tried and tested model focussed on ‘bricks and mortar’ assets in core locations delivering reliable IRRs over long-term leases seemed utterly dominant, until it suddenly wasn’t. Tech has certainly been a key disruptor across every real estate asset class; first the threat of online shopping vs in-store retail, then the advent of working from home and demand for flexible office space challenging the historic fixed office model, AirBnB and short-term lets pushing hotels into a far more competitive mode and, of course, the ultimate curveball of Covid-19 disrupting everything in its path. In parallel the evolution of Corporate Social Responsibility (CSR) and sustainability policies from an oft-dismissed ‘greenwash’ sideline to established Environmental, Social and Governance 6 | www.propertyfundsworld.com
(ESG) metrics that are absolutely core to investment allocation have forced multiple waves of change across every business sector. Larry Fink’s annual letters to BlackRock investors have heralded that change, highlighting that “climate risk is investment risk” and that financial performance without “social purpose” was no longer deemed to be good enough. Space as a service and the crystal ball Real estate investors, developers and operators are now grappling with the need to be innovators, disruptors and futurists, all the while maintaining successful portfolios and growing stable returns. As real estate and technology strategist Antony Slumbers notes: “it’s not the case that everything you already know about real estate is no longer important, it’s just no longer sufficient.” We are now dealing with buildings that are still inherently illiquid assets at a time where flexibility and adaptability are the top priorities and the previously rigid lines between asset classes are increasingly blurry. Ten years ago the ULI/PwC Emerging Trends survey didn’t even count residential as a major asset class, instead listing it under ‘Alternatives’ yet now residential investment is the fastest growth area with a proliferation of new offers from PBSA and BtR to co-living, senior living and a whole range of affordable or shared ownership products. A much-heralded ‘wall of institutional money’ is shifting across from traditional office and retail investors seeking the stability of residential rental returns – before finding that the complexity of dealing with homes comes with vastly greater regulation, differentiated risks and that THE FUTURE OF PROPERTY IN FOCUS | May 2021
