Lismore Investors seeking secure assets as weight of capital set to be chasing limited stock in 2021

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Colin Finlayson, Director of Lismore

A SIGNIFICANT weight of capital will be chasing limited stock in 2021, according to new research from leading independent property advisory firm, Lismore Real Estate.

Three quarters of investors surveyed by Lismore plan on being acquisitive during 2021, with the majority of those being funds and property companies. Stock is likely to be limited, as only 6% anticipate being net sellers and 20% remaining neutral.

The research confirmed an appetite for more secure assets and, not surprisingly, the top three favoured sectors were distribution, followed by multi-let industrial, with food stores and residential in joint third place.

More interesting is the tier below with both retail warehousing and offices receiving good interest. Private equity was the strongest supporter of retail warehousing. In the office sector, support came from private equity and investment managers. Funds surveyed do not view offices as a prime target next year.

Hotels and high street retail, which have felt the full force of the pandemic downturn. were the two lowest ranked sectors.

Opinion is split on bank appetite for lending to real estate in 2021, with funds and property companies being more bearish with 25% indicating a decrease against 15% indicating an increase. The overwhelming majority of private equity respondents were supportive of an increase.

Lismore had a significant number of comments confirming that the increase in lending was from a fairly conservative base, and would be focused on the safer sectors of distribution, industrial, food stores and residential.

Colin Finlayson, Director of Lismore, said:

“Against the backdrop of the global pandemic, our research clearly illustrates that there still remains an appetite to invest in resilient sectors in 2021.  The weight of capital towards real estate remains strong and much of it has been patient this year, waiting for some certainty to return.  Outside of the most resilient sectors, transaction underwriting has been challenging this year which has curtailed activity.  But with a successful vaccine roll-out, we expect more confidence and transparency in the market in 2020, leading to an increase in activity.”

The research was undertaken by Lismore during November 2020, with more than 80 insightful and qualitative interviews with a wide range of investors, including funds, property companies, investment managers and overseas/private equity. It forms part of the Lismore Quarterly Review, which also features two in-depth interviews, one with a leading high street lender (RBS) and the other with Aberdeen Standard Investments.