IFA Magazine’s latest webinar in July, in partnership with TIME Investments, highlighted emerging trends and opportunities in real estate investment. Chaired by Ian Aylward, former Head of Manager Selection and Responsible Investment at Barclays, the event featured insights from Fund Managers Andrew Gill from TIME Investments and Matthew Norris from Gravis, addressing key questions and future prospects for the real estate market. Here’s a closer look at the highlights from their conversation.
Why real estate? Why now?
The macroeconomic environment plays a significant role in real estate investments. Speaking before the Monetary Policy meeting in August, Andrew Gill pointed out, “From a macro perspective, obviously I think we’re most likely at the point of peak interest rates.” This peak indicates a potential stabilisation or decline in interest rates in the near future, creating a favourable condition for real estate investments. Gill elaborated, “We’ve seen a lot of indicators over the last week that inflation has at least steadied.”
Matthew Norris echoed this sentiment, emphasising the positive outlook for real estate and predicting the cuts we saw in August. “The next move from the Bank of England will be a cut to the policy rates. That’s great news for real estate,” he said. This potential reduction in rates is expected to stimulate rental growth, driven by a growing economy.
The recent change in government also brings new dynamics to the real estate sector. Norris highlighted Labour’s focus on planning reform and improving tenant rights, which could benefit both residential and commercial real estate markets. “Planning reform is great news for the type of businesses that we invest in at Gravis,” Norris noted. These reforms could expedite development pipelines and enhance the quality of rental properties.
Investing in real estate
When it comes to investing in real estate, there are several avenues to consider: physical real estate, Real Estate Investment Trusts (REITs), and a hybrid approach. Each has its own set of strategies, opportunities, and threats.
Investing in physical real estate involves direct ownership of properties. This traditional approach offers tangible assets and potential rental income. However, it also comes with challenges, especially regarding liquidity. As Gill mentioned, “Direct property funds have changed significantly over the last few years. They’ve had their challenges, but there’s still a huge amount of demand for really good strategies and well-structured products.”
REITs offer a more liquid form of real estate investment, allowing investors to buy shares in a portfolio of properties. This approach provides access to high-quality real estate assets and the potential for steady income. Norris emphasised the quality of assets held by listed players: “Some of the best quality commercial real estate is in the listed space. Private equity loves that next-generation asset.”
A hybrid approach combines elements of both physical real estate and REITs, providing a balanced approach to investing. These funds can offer the stability of physical assets with the liquidity of REITs. Gill explained the structure of their hybrid property offering: “Our approach is for the TIME:Property Long Income & Growth fund to go two-thirds for REITs and one-third for directly owned assets with long income, largely inflation-linked.”
This hybrid model helps mitigate volatility while still providing growth potential. As Gill noted, “It’s been stress tested, and it really has done what it says on the tin in terms of reducing that volatility down.”
What does the future hold?
Looking ahead, both Gill and Norris are optimistic about the future of real estate investments. The combination of a favourable economic backdrop, supportive government policies, and the strategic interest from private equity firms creates a compelling environment for real estate.
One of the key trends shaping the future is the digitalisation of real estate. Norris highlighted the impact of this trend: “Within the stock market, you can get access to some really powerful megatrends. Digitalisation is one megatrend, driving demand for e-commerce fulfilment and logistics space.”
Sustainability and responsible investing are becoming increasingly important in the real estate sector. Investors are looking for assets that not only provide financial returns but also contribute to environmental and social goals. As Gill pointed out, “I think you’re going to see an opportunity in real estate for it to distinguish itself from other sectors and watch it demonstrate to investors how it is making a difference for the good.”
The strong interest from private equity firms also bodes well for the sector. These firms are drawn to the quality and predictability of income from real estate investments. “Private equity loves that next-generation asset,” Norris noted. This interest is likely to continue driving growth and innovation in the real estate market.
Government policies, particularly around planning and tenant rights, will play a crucial role in shaping the future of real estate. The new Labour government’s focus on these areas is seen as a positive step. “If Labour are indeed successful at improving the planning environment, that would be very welcome,” Gill said.
Conclusion
Overall, the session underscored the importance of staying informed and adaptable in the face of changing market conditions. With new opportunities and challenges emerging, investors are better equipped to make strategic decisions that align with the latest trends and long-term sustainability goals. By embracing alternative assets and prioritising sustainability, investors can achieve a more resilient and diversified portfolio that is well-positioned for future growth.
The webinar concluded with a sense of optimism and anticipation for the future. As the real estate market continues to evolve, the insights shared by the panellists will undoubtedly help investors navigate the complexities and seize the opportunities that lie ahead. Whether it’s adapting to current market trends, exploring alternative assets, or committing to sustainable investing, the future of real estate investment looks promising and full of potential.
You can find the full webinar recording by clicking here
About Andrew Gill, Fund Manager
Andrew has over 9 years’ experience in REITs and investment trust research and 13 years in financial services. Andrew joined TIME in October 2022 and is a Co-Fund Manager for TIME:Property Long Income & Growth and TIME:UK Infrastructure Income. Previously, Andrew was a sell-side Equity Research Analyst at Jefferies for over 7 years primarily covering European listed real estate and REITs.
Prior to Jefferies, Andrew spent nearly 4 years at PwC where he qualified as a chartered accountant (ICAEW) and he is also a CFA charterholder.
Click here to learn more about TIME Investments
About Matthew Norris
Matthew is the Director of Real Estate Securities and a Fund Manager at Gravis. He is responsible for the oversight of the VT Gravis UK Listed Property Fund and the VT Gravis Digital Infrastructure Income Fund.
Matthew has more than two decades’ investment management experience and has a specialist focus on real estate securities and digital infrastructure investments. He served as an Executive Director of Grosvenor Europe where he was responsible for global real estate securities strategies. He joined Grosvenor following roles managing equity funds at Fulcrum Asset Management and Buttonwood Capital Partners.
Matthew graduated with a degree in Economics & Politics from the University of York. He is a CFA charterholder and holds the Investment Management Certificate.
About Ian Aylward
Ian Aylward, previously Head of Manager Selection and Responsible Investment at Barclays.
Ian was most recently Head of Manager Selection and Responsible Investment having joined Barclays in 2016. He led a team of ten covering equity funds, fixed income funds and liquid alternative funds as well as being responsible for all aspects of ESG investing within the business. The team won many awards; the most notable for Ian as an individual was twice being voted Citywire’s leading fund selector in the UK.
