Whilst it may be too early to talk about a definitive market recovery, the uptick in activity that we are witnessing here at Investec, coupled with improving sentiment across both the public and private markets, suggests we may have turned a corner. The ECB’s decision to cut rates in June was followed by the BOE in August, with the Federal Reserve’s 50 basis point cut in September the most recent, and clear, sign that we are at the start of a major easing cycle.
Domestically, the new government has announced several new measures. These include a pledge for all homes in England to achieve EPC rating of at least C by 2030 and the Renters’ Rights Bill. At the same time, the UK higher education sector remains in the spotlight, both in terms of funding and overseas student numbers. Whilst the industry considers learnings from the 2024/25 academic cycle, occupancy figures across schemes supported by Investec Real Estate overwhelmingly remain strong. The purpose-built student accommodation sector remains one of our high conviction asset classes, evidenced by recent deals, but we remain alert to wider challenges facing the sector.
The recent collapse of ISG served as a stark reminder of the impact that the high inflation period has had on the construction sector and the fine margins many of these businesses are working off. And nervousness around the upcoming Autumn Budget, where major changes to tax and planning policies have been mooted, is leading investors to be extra cautious.
As we start looking ahead to 2025, our core focus areas remain unchanged. The Living and logistics sectors remain top of investors’ wish lists, and continue to benefit from supportive global megatrends. We also expect to see select offices offering relative value.
Despite what pockets of media might have you believe, the sector has shown its resilience – recent Real Estate Capital data showed it was where the most debt finance was deployed in Q3. We also expect growing appetite for our transitional lending solutions, driven by both regulatory pressure, but also occupier requirements.
Encouragingly, after a quieter summer, in line with the wider market, we are on course to close commitments in excess of £300mn in the final quarter of the year. With growing empirical evidence that values have bottomed out, the building blocks are very much in place for a strong 2025.