Last week, a number of the Ropes & Gray team attended the Women in Private Markets Summit organised by PEI, which included the PERE 2021 Women in Real Estate Forum. After a thought-provoking couple of days, I thought I would share some of the key points I took away from the forum.
Beds, Meds and Sheds continue to be amongst the most attractive investment opportunities.
Beds. Whilst a hybrid working culture has led developers to re-think designs for their build-to-rent developments, the multi-family model remains popular. Two-bed and three-bed units are understandably in hotter demand than ever before in order to allow for the separation of the home office. However, designers are adding integrated working stations to their one-bed units, to ensure those units also remain popular in this new hybrid world of working.
Meds. Although the UK’s real estate life sciences market is still very much the US’s little sister, there has been an evident surge of interest in the UK. This isn’t an easy sector to enter, however, and it is crucial to pinpoint exactly what part of the broadly defined sector you are targeting – is it R&D, pharmaceuticals, biomedical technology or a wet-lab facility offering, to give just a few examples. The specialist knowledge required for entering the market may present an initial challenge for some, but strong operating partner relationships, with operators already established in the market, help new investors navigate their entry. Although the amount of available land for new developments in the UK’s 'Golden Triangle' (Cambridge, Oxford and London) is dwarfed by comparable areas in the US, re-development of redundant office or retail properties presents an alternative and lucrative option.
Sheds. It goes without saying that logistics is one of the hottest, if not the hottest, sectors of the last few years, with last-mile hubs being the prize catch. But the proximity to urban locations is not all that should be considered. Equally important is the design of, and facilities within, those hubs with the 'campus style' logistics facility becoming increasingly popular to ensure retention of the most desirable tenants. Such tenants are looking to ensure that their workforce have adequate travel connections (bus routes, for example) to their homes, children’s schools and other local amenities. Another popular request by tenants is for green spaces to be included within the facility design.
But the topic that came up at almost every discussion at the conference? ESG of course.
There has been a seismic shift in the importance of ESG in the real estate industry over recent years, as more investors are specifically hunting down growth opportunities underpinned by ESG factors. ESG now plays a much more prominent role throughout the asset classes and real estate life cycle. Following a global pandemic, increased climate-change related actions and a greater appreciation of social inequality, people from across the real estate sector, from investors to tenants, want to see action.
That call to action has been heard and I think we all should be very excited to see what happens next.