The way we provide capital markets services has changed.
Our clients are now looking for advisors who don’t just buy and sell assets but someone who understands the full 360 of a deal, from understanding how buildings operate and how customers behave, to providing funding and financing solutions at different stages on the investment lifecycle.
A siloed approach in terms of both services and sectors now isn’t the most successful way to approach the market if we want to add value to our clients’ businesses, and we have recently launched our Operational Markets service line in order to provide an integrated 360 degree offering to clients.
Within this are more established and growing sectors, including student accommodation, build to rent (BTR), co-living, affordable and social housing, hotels, senior living and healthcare real estate.
What makes our offering unique is the depth of knowledge and expertise we have behind these sectors, from transactions including debt and funding advisory, valuations, asset management advice, research and data.
What is happening with the weight of capital looking at operational real estate?
Fundamentally we are driven by the desire to help both our existing and prospective clients at any point in the business or investment cycle. Operational real estate is a sector that is gaining significant traction and we are seeing many investors looking to scale up their exposure to the various bed sectors in particular. This is even more true now. The hiatus of transactional activity in the early part of the pandemic has led to pent up demand, especially now the various sectors have displayed how they react to adversity.
An investment world already liquid from global quantitative easing and now looking for investments that meet increasing ESG criteria and provide a potential hedge for inflation, is now looking at how it can scale quickly in these sectors. The pressure to scale is not just from the necessity to put capital to work, but also to create efficiencies in portfolios to ensure returns are optimised.
What makes operational markets an attractive investment proposition?
What makes these sectors unique is the direct exposure to underlying customer trends and behaviours, underpinned by the fundamental need for a bed, in whatever form it comes. Even with increasing digitisation and disintermediation, as human beings we all need to sleep in a warm, dry space within a 24-hour period, whether that space is rented, shared or owned. On top of that, these sectors can be highly agile and adaptable, allowing strategies to be adapted rapidly to fully optimise returns.
Of course, whichever asset type an investor chooses will come with its own set of challenges and opportunities in many of these sectors are underdeveloped. The real value will be extracted from having best in class management partners. However as we see early mover advantage fall away there will be an uptick in institutional investors and existing platforms creating partnerships to be able to generate real scale as transparency around performance increases.
One of the journeys we are also on is to really understand the true value of brand and product differentiation, and we will look to lessons from the retail and hotel sectors in how they turn true customer understanding into profit.
What is the big trend you expect to see in 2022?
I expect that in 2022 as the need for scale continues, we will see consolidation in areas of the market, with investors either looking for market share within their own verticals i.e. BTR or student accommodation, or potentially realising that differing uses can co-exist within one operational platform under multi-brand strategies.
About the author
Paddy Allen is Head of Operational Capital Markets, he has over 16 years of real estate experience, advising a range of investors and developers on transactions, joint ventures and operations predominantly across student accommodation, build to rent and co-living in the UK and Europe.
To contact Paddy, email Paddy.Allen@colliers.com.
