Real estate sector set to gather pace: Adrian Bland, head of real estate at international law firm Wragge & Co, looks at the opportunities and challenges for the sector in 2014...
After a few years of very challenging trading conditions, the real estate sector is moving from a spell of mere survival to one of upturn. This momentum is set to gather pace in 2014 as demand fuels growth. This is likely to be characterised by increased investment, a rise in capital values, heightened deal activity and job creation – all indicators of a strong, healthy performance not seen since the start of the global downturn in 2007.
The UK continues to be an attractive proposition for investors. It’s a safe, stable, well-researched and a legally secure environment; and its economy is in the midst of promising growth. Combine this with the sheer weight of global investors seeking opportunities and the improved demand for property – from corporate investors and occupiers – and the signs are very encouraging.
With optimism come opportunities. Sectors such as logistics are expected to enjoy further growth thanks to a growing appetite for online retail. This will translate into more instructions for distribution centres, warehouses and parcel hubs, boosting real estate activity in the UK.
The housing market is also showing signs of improvement. Limited supply, the introduction of government incentives and, at long last, institutional investment in the private rented sector have all helped demand for new build to pick up.
London continues to be the gateway city for investment and a magnet for global capital; particularly for those in search of trophy assets. But 2014 will be distinguished by investors increasingly eyeing up property deals outside the capital.
Core cities – the likes of Birmingham, Bristol and Leeds – offer investors great opportunities for good income with strong tenants at relatively low prices.
While this certainly paints a positive picture for the real estate market, 2014 will present its challenges.
Capacity in the construction industry continues to struggle with the legacy of recession. For developers, this may pose serious problems in terms of simply getting projects done. Though the banks have indicated they are increasingly willing to lend on real estate, they are being held back by the overhang of underperforming assets.
A number of major cities are facing a shortage of the grade A space needed to attract top occupiers. For those who are willing to take the risk on speculative build, (they are few and far between) plans are likely to be hampered by the struggle to find finance.
Overall though, 2014 is looking to be a promising year for real estate. The main investors are more confident about the prospects and the ability to grow profits.
Real estate is at the heart of Wragge & Co’s planned merger with Lawrence Graham in May 2014. The joining of complementary skills and strengths will create an even greater force to be reckoned with. We have been actively recruiting in real estate for all of the last year; this is set to continue.
For those looking to further their legal career in real estate, these are exciting times. The positive impact will be felt across the sector, and this will drive increased recruitment opportunities. Business confidence; a broad range of complex and high-profile work; this is a year of great potential for those who are technically strong, commercially-minded and passionate about property.