Emerging trends in real estate finance

Jayne Backett and Richard Gibbard from European law firm Fieldfisher share some of the themes that came out of the recent CREFC Europe Autumn Conference.

Data

Data sharing and collating data around the use of space is becoming more critical to investment and to predicting the trends for end-users, ultimately, keeping end-users happy. There is much more of a directional shift to shaping space for end-users. This goes hand in hand with research on how lease lengths have shortened significantly.

Property owners need to integrate 5G technology into leased space to facilitate the growing demand for high volume 'always-on' interconnectivity. Availability of high-speed data connectivity will transform the end-user experience as retailers start to incorporate augmented and virtual reality into the high-street shopping experience. There will be a challenge in overcoming in-building reception for 5G and this has cost implications that require factoring in.

Public-private collaboration

Regeneration is heavily contingent on public and private collaborations and making schemes viable whilst treading a fine tightrope around politics and stakeholder engagement.

Oversupply leads to re-purposing

There is a tremendous oversupply of retail space (particularly department stores) and research indicates that this will drop dramatically over time with many being “re-purposed”. Already some early movers are acquiring obsolete centres and transforming them into logistics hubs.

LIBOR shock

The market remains operationally and educationally unprepared for LIBOR discontinuance at the end of 2021. Until the structural issues with near risk free rates are resolved, we are unlikely to see a significant roll-out of loans based on current non-LIBOR alternatives. Existing loan agreements based on LIBOR will need to accommodate be transition to appropriate alternative rates before the deadline. Market participants are encouraged to reduce their LIBOR exposure generally and prepare in earnest for non-LIBOR alternatives, including aligning any finance-linked swaps.

Shift to electric vehicles

Electric vehicles are going to have a big impact on real estate and infrastructure. For example re-purposing of service stations and where and how to site charging points around the country. Power supply will need to account for the grid connections as well as to facilitate the growth of the electrification.