This is my third proper recession but fourth in the case of real estate, if you count the early noughties, when the sector was shunned by investors only interested (albeit temporarily) in new-age, tech industries.

Recessions follow a similar pattern: a sharp jolt, turmoil, a collapse in property values and, when the trough has been reached, a period of inactivity as the market readjusts. That is where we are now, providing the background to a roundtable breakfast we hosted earlier this month for clients and friends with associate editor of The Sunday Times, Oliver Shah.

I’d be lying if I said the mood among the assembled was upbeat and inactive markets are no fun for anyone but, as is the wont among real estate professionals, they were talking about the opportunities that would emerge. While most investors continue to focus on beds, meds and sheds, it’s always worth remembering that everything has a price. The retail and office sectors are enduring structural changes that make investing in them a risk, but the opportunities to pick up a bargain in these shunned sectors may be greater.

Property valuations are such a contentious issue, as they underpin bank debt and provide the basis for the level of fees, profits and individuals’ bonuses. A recession is a sobering moment for property owners, as they wonder how in the space of six months the same property is now valued at 25% less. It is a reminder that the value of a property is not what it is worth to you nor what it might be in a year’s time, but that it is driven by the cost of money – something out of the hands of the property owner.

The fact that successful property investment is due to timing – buying and then selling in a rising market – and that a property owner can buy the best property in the best location but still lose money because of external factors suggests that there is in the long run more money to be made and less risk in operating property, or in being an owner operator. This is evidenced by the strong performance of the listed self-storage and student accommodation providers, build-to-rent/private rented sector companies as well as multi-let industrial platforms. If I was to make one prediction for the next property cycle it would be the growing importance of those able to operate and not just own property.

James Whitmore, Director

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