In sporting terms, half time is traditionally the moment for either reflection or a change in direction.  I turned 40 last month and my thoughts turned to the notional 'second half' of my career as an investment agent and to how the property landscape has changed. 

Property news stories over the past two decades have been dominated by the continuing surge of London. This is despite the fact that 85 per cent of the UK population is located outside London along with 65 per cent of the value of commercial property. Ironically, having rather unadventurously spent my past four decades in the capital, I do find the London-centric nature of the industry rather embarrassing. One of the great by-products of being employed both in the property industry and in a national role is that it gives you a professional reason to get to know the geography of the UK well, to understand what drives or threatens particular towns.  I am not sure how many people are now afforded this opportunity, given the pressures of workload.

I am convinced that a narrow sector specialism too early in anyone’s career is harmful. Without a cross-market perspective, I do not understand how anyone can offer advice on relative value across sub markets, let alone put property in the context of other asset classes. Readers may recall that sector specialism was a trend driven by the agency practices themselves in the early noughties, with the vast majority of clients remaining generalists to this date. A wider perspective also happens to make you a better lunch companion.

My own take is that the biggest influencers of market direction reside in the UK institutions. They tend to trade at the prime end of the sub sectors and as a consequence drive prime yields. There is an emerging group of a dozen fund managers who are (to date) publicity shy, under 40, more likely to be female and control more UK property than the big three UK REITS combined. Perhaps there are some comparisons to draw between the “shy Tories” of the 2015 election, who were small in voice and huge in influence and the largest group of owners of UK property.

Similar characteristics were evident with the arrival in the UK of a number of Canadian and Australian pension funds, which have chosen partnership with an established domestic player as their access point. Historically, one of the key reasons these groups have been attracted to our markets is the lease structure. It was a truism when I started my career that the UK had the best lease structure in the world (from a landlord’s perspective), as leases were generally for terms of more than 20 years and had upwards only rent reviews. 

It strikes me as odd then that lease lengths have broadly halved (from 12 years in 1998 to five in 2015), with very little change in valuation methodology or the prevailing yield required for investment. A logical deduction from this would be the emergence of a rarity value attached for medium-term (10-year plus) leases which does not currently exist.

So, at my half time I made the relatively easy decision not to change direction. This is largely because to my mind investment agency is akin to watching live sport versus televised sport. You get to 'feel' the market through the number of projects worked on and the depth of offers received which are at least as good an indicator as the prices paid. 

Another factor in my decision not to change direction is the increasing agency M&A activity. It is not just the nostalgic side of me that laments the recent consumption of another competitor. I hear an increasing frustration from clients over a lack of choice on the advisory side, a by-product of which is an increasing incidence of conflict situations. This is of course great news for the high-quality independents remaining.

Further information

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