In a week when Rachel Reeves restated her ambition that we take more risk with our savings and the FTSE reached an all-time-high, there was much to discuss at our latest real estate breakfast.

Perched in the Duck and Waffle at the top of 110 Bishopsgate (the artist formerly known as the Heron Tower), our gathering of senior private and public real estate markets professionals touched on some of the key issues facing real estate markets.

Future of the London listed sector

Top of the agenda, the impact of M&A on the shrinking London listed sector and what this means for the future. It was broadly agreed that larger, more liquid REITs would be attractive to an increasingly global investor base, but participants were less clear on where the next raft of IPOs would come from as the majority of REITS continue to trade at ‘attractive’ discounts. Fingers pointed to some of the large private equity houses who could do with an exit for their portfolios, but conditions certainly aren’t there yet to support this. In current conditions, they are more likely to seek a portfolio sale, recapitalisation or continuation fund. Interestingly, Peel Hunt real estate analyst Matt Saperia estimates that the asset base of the sector (its GAV) has now breached £100 billion and the average asset base is now c£2.9 billion and rising. Big is beautiful.

Capital allocation

Against the backdrop of one of the toughest real estate fundraising environments in recent years, with large amounts of capital concentrated among a handful of private equity firms such as Blackstone and Brookfield, there was a feeling that real estate was missing out to infrastructure and other private asset classes such as private credit.

Trump’s opening tariff salvo in April didn’t help matters, snuffing out any notion that real estate markets might have been improving in the first quarter of the year. It was interesting to listen to the experience in the room. While investors might be sitting on their hands, they are not passive. They are keenly observing how the geo-political landscape is changing and adjusting their views based not only on what they read in reports, but also on the first-hand experiences of their connections and families working and studying around the world.

Abolition of upward-only rent reviews

The government’s plan to ban upward-only rent reviews on commercial property leases came as a surprise to everyone in the room, although people were seemingly unconcerned by the potential impact on the sector. In reality, most leases range from three to five years before expiry or break, and the days of the rent hike at review are long gone.  

Lack of cranes in London

When the market is challenging, London always remains resilient. From our breakfast viewpoint looking out at the City and beyond, we could see first-hand the lack of cranes and development, reinforcing the favourable supply-demand dynamic in the London office market, particularly in the West End and the City.

– James Whitmore, Director

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