The UK operational real estate investment market could potentially exceed £750bn if current investment trends continue, according to a new report produced by Macfarlanes.
In its ‘Operational Real Estate’ report the law firm says the shift towards operational assets – where income and capital values are linked to the performance of the underlying operator – has been one of the most significant structural changes to the property market in recent decades.
Market analysis undertaken by Montfort Communications for the report estimates ‘OPRE’ assets – which are largely synonymous with alternative real estate sectors such as build-to-rent, life sciences and cold storage – have a current value of around £240bn in the UK, but the market could “comfortably exceed” £750bn.
Nicole Mitchell, head of real estate strategy and policy at Macfarlanes, said: “OPRE is one of the most important structural changes affecting the property market at the moment. Many of our clients’ assets are increasingly and inextricably linked to operational platforms and the end users of the real estate that they serve.
“It’s a huge opportunity for asset managers and investors to change how they hold assets – moving beyond passive ownership – to create more resilient returns and investment models more in sync with the performance of the people that occupy and underpin assets.”
“At Macfarlanes, we recognise this structural shift requires us to adapt as advisers. Over the past six months we have interviewed a variety of market leading stakeholders, investment managers, operators, advisers and lenders and collated their perspectives and insights. The result is a deep dive into today’s operational real estate market, and how such investments may be accessed and an overview of some of the key structuring and governance issues being grappled with.”
Robert Porter, senior consultant at Macfarlanes, added: “Operational real estate models have grown alongside investment into the alternative real estate sectors, which has been led by private equity investors willing to take on management risk to secure returns.
“A key part of those strategies has been de-risking the running of those assets to make them more suitable for institutional markets. This report is a comprehensive exploration of the lessons learnt and the models emerging.”
