1

 Mismatched supply and demand

The property sector is in a really interesting position, particularly in London’s residential market where there is insufficient supply and demand at the same time in different areas. On the one hand, there is a supply challenge: despite the Mayor calling for a target of more than 42,000 homes to be built per year, we do not appear to be nearing this target and the Capital lacks the accommodation it needs for workers who drive the economy. At the same time, there has been a noticeable slowdown in demand for £2 - £10m properties.

On the investment side, there is still some conservatism around projects that carry inherent risk. Securing funding for trophy assets – buildings like the Shard – is relatively straightforward, but anything outside the West End or City of London remains difficult.

However, this does appear to be shifting. More institutional capital is being put to work in the regions and the industrial sector, as well as a number of previously under invested sectors, like student accommodation. Banks, pension funds and other providers are now looking for higher rates of return and that means secondary locations outside of London. Quite simply, real estate investments are able to produce the higher return that investors are looking for and therefore, the market looks set to continue apace.

2

 The need for talent

These market developments are impacting the demands on candidates in three areas:

First, people with a strong knowledge of the London market are increasingly prized. Those that understand how to get deals done, gain planning consent, and engage with local authorities, development partners and providers of capital are sought after. The demand means that basic salaries are going up and bonuses in some instances have become astonishing with project bonuses and LTIPs providing opportunity for genuine wealth creation.

Second, there has been a growing aspiration to attract expatriates back to the UK. When the development market died in 2008, many very good people went to the Middle East and other markets. Attracting those people back, with their experience of delivering large mixed-use schemes is important. While they may not have that local UK knowledge, they do have the requisite delivery experience.

Third, the ability to move throughout the UK and understand various asset classes is key. For instance, outside of London you need to understand the different assets of real estate such as retail, private rentals or industrial real estate. People who have an asset class specialism are in demand.

3

 Building for the future

In the next few years there are several themes I expect to see. It’s likely that the real estate market will continue to be buoyant and develop through 2016 and into 2017. A stable UK government will help the sector but we need to sort out the Europe question quickly to bolster investor confidence. Consistency rather than interference is usually more favoured by the sector. That said, the focus in the UK on addressing the housing shortage and stimulating the private rental sector through schemes, like the Housing Guarantee Scheme, will continue to be important.

Regions away from London will continue to become increasingly important and we’ll see more investment in the “Northern Powerhouse” cities like Liverpool, Manchester and Birmingham. One of the big drivers for growth in offices and housing is transportation links and with Crossrail on its way and the generally positive perception of High Speed 2, regeneration along the route will continue to grow.

The market today is a different and constantly changing place from a few weeks ago. Despite Britain’s tentative shift from Europe, post-election, there is optimism and strong areas of growth for the property market.

About Odgers Berndtson

Odgers Berndtson has evolved over the last 40 years and is now present in 29 countries spanning The Americas, Europe, Middle East & Africa and Asia Pacific. The organisation is characterised by private ownership and national knowledge, but with all the advantages of global reach and mutual understanding borne of specialist practices operating worldwide and so servicing a number of client relationships internationally.

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