COMMENT Although MIPIM is now in the rear-view mirror, there will have been two themes from the week in Cannes that stick in people’s minds.
The first is the weather, so legendarily bad that it will become a reference point for future editions. The second is the extent to which the entire UK real estate sector recognises the logjams in the development process, particularly when it comes to navigating regulatory processes.
And yet, although both themes may seem gloomy, there is an undeniable optimism in the industry right now. That is, I think, because we in real estate are unusually united in recognising the challenges facing us – including the solutions needed to overcome them – and that is because of the evolving make-up of our next generation. That is, how many of us taking our places in UK property companies’ boardrooms have cut our teeth in strikingly volatile times and have emerged as a generation in which resilience, creativity and collaboration over competition are baked into what we do.
That’s why, in many ways, it feels like 2025 will be one of the greatest years we have seen in some time for opportunities to arise.
A buying opportunity
The gateways are undeniably a challenge to all of us in the industry who build in densely populated places, particularly those of us in the purpose-built student accommodation market, where a delay of even a few weeks in the delivery of a scheme can challenge its viability altogether due to missing the start of the academic year.
That said, although we strongly believe the government needs to engage with the industry on increasing the resources of the Building Safety Regulator to get Britain building and to ensure safety retains and gains all the attention it requires, we do not believe the challenges are insurmountable.
Due to the regulatory landscape and the market environment, which are collectively causing delays to delivery timescales and, in turn, deterring developers from committing to new sites, there is plenty of room for experienced developers (and the investors backing them) to thrive. While no one wants uncertainty, if the risks are carefully evaluated, now is as good a time as any to buy sites and to press “go” on the development process.
If you have a long-term commitment and a team that can handle the UK’s simultaneously snail-like and volatile planning regime, then you can add significant value.
There is real appetite from private and institutional investors, despite the challenges, which has only picked up through the first few months of the year.
Capital is keen to deploy funds into the living sectors, but only for the right deals, which often comes down to location, affordability and timing. Given the regulatory environment, it’s unsurprising that stabilised assets are more in favour relative to development funding – but there is appetite, and opportunity, for the latter in the right locations with a proven developer and a successful track record.
In the PBSA sector in particular, the outlook remains bright, despite the challenges due to its fundamentals in relation to its peers. Canada’s new visa regulations are making it difficult for international students to come in, Trump’s America is not exactly welcoming them with open arms, and Australia has also upped its entry threshold for would-be students. All of this means the UK is likely to remain the most attractive destination for PBSA investment.
Reasons to be cheerful
And finally, the industry’s next-generation leadership should give us reason to be optimistic. The professionals increasingly taking on responsibility and seats in the boardroom are those who entered the industry shortly after the global financial crisis. In those 15 or so years, we have seen the reshaping of UK higher education from the coalition government’s increase in tuition fees, the impact of Brexit and political volatility from all major parties, a global pandemic, the first major war on European soil for decades, and economic instability from the Truss mini-budget.
This generation of real estate professionals is one that has had an accelerated education in the ups, downs and all-arounds of what capital markets have to show. For that reason, we are instinctively opportunistic and collaborative, seeking to find common solutions to shared problems. That should encourage anyone into investing in the UK’s built environment.
Ben Henry is director at Fusion Group
