Market UpdateDecember 6 2019

Fortnightly Thoughts: Real Estate and Corporate Finance Market Updates

2 mins read

Our fortnightly market commentary from members of our Senior Management team provides valuable insight into the latest trends, opportunities, and views on the current marketplace. Read about recent events this week within the Corporate Finance and Real Estate markets.

Corporate Finance

Paul Staples

M&A market sentiment in the short term remains heavily influenced by the outcome of the UK General Election. Whilst we continue to see a relative number of transaction opportunities being reviewed by our clients, there can be little doubt that an element of nervousness has emerged during recent weeks. This in part reflects the plethora of manifesto commitments and policy announcements that have been compressed into the ongoing campaign, indicating a meaningful shift in government economic policy. It is becoming harder to argue with a watchful, wait and see approach as far as navigating current market conditions.

Real Estate

Robert Stokely

This week we heard the news that one of the UK’s biggest property funds, M&G, had suspended withdrawals from their £2.5bn Property Portfolio after significant withdrawals over the past year.

Whilst the timing of this news took most people in the property industry by surprise, the difficulty of matching long term property investments with short term liquidity has always been a difficult circle to square and the need to maintain high levels of cash to fund redemptions acts as a drag on the performance of many funds.

For M&G, this problem was accentuated by owning a significant number of the property sectors’ current laggards, namely shopping centres, reported to comprise more than a third of the fund’s value.

Whilst we at Sandaire Real Estate recognise the role of funds in the overall investment allocation for many investors, for those with substantial wealth who are able to invest directly we often forecast better returns and greater liquidity from investing directly in commercial property, although as with all investments market conditions are variable and impact both performance and liquidity.

The result of next week’s General Election could potentially have a significant impact on the UK Real Estate market with a Conservative majority being the most likely to trigger renewed interest in the sector.