Investors must
reposition their
capital and product
strategies for a vastly changed world
Could a change in your capital or product strategy uncover returns, reduce risk and deliver value, even during volatile periods?
"JLL has truly set a new industry benchmark in Europe not only acting as a pure broker, but as a real advisor in its best possible sense.”
Recalibrating strategies
The role of real estate has fundamentally changed. Working, living and shopping habits have shifted irreversibly in recent years and the pandemic
has accelerated major, long-term trends that were reshaping the way investors approach real estate as part of their broader ambitions.
Investment and capital strategies that suited the UK property landscape pre-2020 may no longer prove profitable in this new world.
Navigating the current real estate market
The UK real estate market is experiencing unprecedented conditions, bringing both short term challenges, but longer term opportunity to drive value.
“UK commercial real estate has never looked more attractive compared to other assets. Demand from global investors, driven by a wider range of structural factors, will remain strong over the coming year – as is already evident in the investment market.”
Recovery and Renewal
Rather than dampen demand for UK real estate, the most recent period of volatility, brought about by Brexit and the coronavirus pandemic, has increased investor appetite for the UK property sector.
Interest rates remain low across major economies and global investors continue to allocate capital to commercial real estate with the UK maintaining its position as a top five global investment destination. JLL predicts that investment volumes for UK real estate in 2021 will total between £50 billion and £55 billion, up around 50 percent on 2020.
Although the pandemic brought about a brief retrenchment in investment activity, the next two years to 2022 are expected to see resurgence.
Workers are eager to return to the office and pent-up demand is expected to propel retail sales. Alternative sectors such as living, logistics and life sciences are seeing a surge of activity, and sustainability initiatives are forging ahead.
Smart investors will use this time of transformation to creatively reposition their capital and product strategies to prioritise long-term consumer trends over short-term profit.
Reasons to reposition
- With the low-rate environment expected to persist in the coming years alongside government stimulus, allocations to commercial real estate will continue to rise.
- Competitive markets require more creative investment strategies such as joint ventures, re-capitalisations and platform investments.
- Historically, environment and corporate responsibility strategies lose momentum during downturns as companies focus more intently on the bottom line. But investors have ramped up their sustainability efforts.
- Assets and portfolios with a focus on sustainability, health & wellbeing and technology will rise in demand.
“Since 2018, JLL’s European Debt Advisory team has closed 178 financings with 94 lenders across 15 European markets –demonstrating JLL’s ability to access a wide array of capital sources.”
- Real estate investors are increasingly turning to alternative lenders to help meet their financing needs and a deeper pool of non-bank lenders has opened up new financing options, including debt products, particularly in Europe and parts of Asia.
- Innovative financing and refinancing methods will mitigate economic headwinds and varying valuations as the market continues its recovery.
Case study: Shearings Hotels
First insolvency and restructure of a major UK Hotels Group post Covid-19.
Role
Lead advisor to Senior Lenders through loan and restructuring advice as well as execution
Deal type
Restructure and Refinancing alongside Hotels Advisory
Sector
Hospitality – UK
Deal size
Undisclosed
Shearings Hotels owned and leased 40 hotels throughout the UK with over 3,100 keys to an operating company. The business had been profitable, achieving EBITDAR of over £19m in 2019, but ran into financial difficulty following the Covid-19 pandemic and the enforced closure of its hotels. The operational company ran an accelerated sales process but failed to secure an acceptable offer and subsequently went into administration. With the hotels effectively handed back to Propco, JLL advised on the restructuring and refinancing of the business with the lenders whilst undertaking detailed cashflow management and contingency planning, including devising an enforcement and asset realisation strategy.
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