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The London real estate professor (and old City hand)

My World 2021

My World: June 2021…

This is part of a series of articles where our contributors describe how they think things will look a year from now.

As coronavirus becomes endemic, life will never be the same. For property, it’s about repurposing assets to reflect those changes

It is now 18 months since we first heard the word coronavirus’. Looking back, it seems impossible to imagine that at one stage we believed the world would return to a pre-pandemic norm. Not for the first time, mean-reversion advocates have been forced to revise their assumptions. Benoit Mandelbrot is now regarded as a visionary, and his classic text The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward is required reading on finance courses, which now all feature chaos theory as a module.

Looking back, how did we get here, and how much was predictable?

The starting point is why we never escaped the clutch of covid to return to our pre-2020 state. There were attempts, of course, but every time the final barriers were brought down there were reports of another possible pandemic and restrictions were quickly reimposed. No politician wants to be accused again of ignoring the warning signs of covid-N+1. Some restrictions on freedom of movement for the benefit of the greater good are now regarded as an acceptable price to pay.

So, what is the new normal for real estate? 

Offices: In terms of working practices, very few people who used to work in an office now go in five days a week. Staff work on a rota/quota system. Ironically, this hasn’t reduced the demand for office space as much as expected, since instead of hot-desking staff are allocated their own desk to reduce the risk of transmission.

Transport: As a result of the restrictions and the increase in flexible working, those who do commute report that the journey on the recently renationalised rail network is far more civilised than pre-2020.The reduction in passenger journeys combined with social distancing requirements made the franchises no longer economically viable, so the government took ownership as part of its emergency Infrastructure Bill.

Alternative uses: The other major change has been the swift response of the real estate industry to repurpose assets to reflect the change in demand. Whereas larger shopping centres were previously looking just to swap out department stores, the revised plans now are for wholesale use change – with science parks or medical testing labs preferred. This is looked on very favourably by the government, and planning restrictions are being reduced significantly. 

Similarly, a number of budget hotels and secondary student accommodation blocks are no longer seen as fit for purpose and the owners are seeking change of use to residential. The previously preferred specific market, co-living, however, is not regarded as feasible for obvious reasons.

My predictions for June 2021:

UK in recession: Yes

Sterling vs US dollar: Lower

Sterling vs euro: Lower

My World 2021

About Alex Moss

Alex Moss

Alex is responsible for developing the newly created Centre for Real Estate Research at Cass Business School. He also runs Consilia Capital, a research and advisory firm, which specialises in the performance and strategies of real estate, infrastructure and real asset funds, work that combines academic research with practical applications. He has been involved in research and transactions in the global real estate sector for over 30 years. His career has encompassed sell side research (BZW, Macquarie), investment banking (CSFB), private equity (Apax Partners Capital), and fund management (M&G and Investec). He is Chairman of the EPRA Research Committee, a member of the EPRA Advisory Board, and Chairman of the Investment Committee for the Investec Global Real Estate Securities Fund, where he acts as a consultant. Alex is best known for his academic and commercial work in the area of Global REITs, and their use in investment strategies. In 2013, with Professor Andrew Baum they produced two innovative papers for EPRA which received wide acclaim, looking at whether listed real estate was managed as part of the real estate allocation, and the wider use and applications of listed real estate securities in asset management. His work with Kieran Farrelly on combining direct and listed property for Defined Contribution Pension schemes won a Best Paper award at the 2014 ERES conference. A particular area of interest is the use of Smart Beta and automated trading strategies, most notably Trend Following and Momentum, and his work in this area with Professor Andrew Clare and Professor Steve Thomas has been widely cited. In 2017, with Reitsmarket he produced two multifactor Global REIT Smart Beta indices, which are listed on Euronext, and marketed by Goldman Sachs. Most recently he has been concentrating on the use of listed real estate within real asset strategies.

Articles by Alex Moss

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