Westminster was the venue for EPRA’s annual 2024 Insight conference this week. An appropriate venue in a year when the UK and the US go to the polls, along with around 60 other democratic nations around the world. As the first major event of the real estate calendar, it’s always interesting to hear what some of the UK listed company CEOs have to say, especially given the rough ride that the sector has been on since interest rates started rising in March 2022.

Panellists

A strong lineup of panellists debated a range of topics :

– Colin Godfrey, Tritax Big Box CEO

– Helen Gordon, Grainger CEO

– Paul Williams, Derwent London CEO

– Harry Hyman, Primary Health Properties CEO

– Simon Robson Brown, Morgan Stanley & Co Portfolio Manager

Moderator: Bart Gysens, Morgan Stanley & Co Managing Director

Labour viewed as business friendly

It was noteworthy that the panellists didn’t even entertain the prospect of another Conservative government, preferring instead to discuss the relative merits to the real estate market and business generally of a Labour-run administration gunning for a two-term mandate. They were broadly positive on what they’d seen and heard so far from Rachel Reeves, shadow chancellor, and hoped that the party wouldn’t allow itself to be hijacked by the far left when it gets into Downing Street.

Inflation and interest rates outlook much more positive

For a capital-intensive sector, this has been and continues to be the topic ‘du jour’. The panellists were keen to acknowledge that they weren’t about to say anything that hadn’t already been chewed over at great length in the media and around boardroom tables. The glass, though, was half full for Simon Robson Brown,  who relayed the Morgan Stanley house view that the Bank of England could start reducing rates as early as May.

Panellists were also eager to point out that the UK listed sector was in a much better position than its European peer group, with much healthier balance sheets and significantly lower LTVs. They also pointed to the relatively better performance of the listed sector last year compared to the private sector.

Consolidation in the UK REIT sector

The panel agreed that the process of consolidation was already well underway, citing the most recent examples of LondonMetric and LXi, as well as the attempted merger of Picton with UK Commercial Property REIT last year as evidence. They also agreed that M&A activity was likely to continue into 2024 and debated some of the advantages of having fewer, larger REITs in the market, mentioning the advantages of internal management over external management and the importance of scale and liquidity for some of the larger institutional investors.

What does this mean for communications?

It was widely acknowledged by all that the real estate sector had entered a new phase and that now was potentially a great time to invest. The challenge for many established real estate businesses, as we see it, is how to make sure that investors and the wider market understand what they’ve done to adapt their strategies and how they plan to create shareholder value in a higher interest rate environment – when many are stuck trading at significant and persistent discounts to NAV.

James Verstringhe, Partner

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