The year in review: big change, big deals

As the sun sets on 2024, EG looks back at the year when a new government was voted in, the market began to express some optimism and big deals were done.  January [caption id="attachment_1172069" align="aligncenter" width="847"] Photo © National Cancer Institute/Unsplash[/caption] After a tough 2023, the year starts with some reason for optimism. A third of respondents to the RICS UK Commercial Property Monitor believe the market has bottomed out – only a third, but that’s the largest amount of respondents across the fourth-quarter survey. Mergers and acquisitions are on the agenda from the jump, with LondonMetric and LXi agreeing the terms of a tie-up and Custodian Property Income REIT and Abrdn Property Income Trust launching plans for their own (spoiler alert: ill-fated) merger. Life sciences real estate is hot, with predictions from Cushman & Wakefield of sector real estate investment across the Golden Triangle picking up pace and industry experts welcoming the Labour Party’s willingness to engage with stakeholders on its investment strategy for the sector. WeWork’s international business is still struggling with the fallout of its US parent group filing for Chapter 11 bankruptcy protection. Plans filed with the City of London Corporation for Perennial Group and Stanhope’s 1 Undershaft, EC3, see the Square Mile’s tallest office tower moving forward. February The M&A rush continues. Urban Logistics REIT makes a rival bid for Abrdn Property Income Trust, arguing its all-share offer values the target at a premium of around 13% to Custodian’s offer, and is therefore a “superior proposal”. Tritax Big Box and UK Commercial Property REIT agree terms for an all-share merger which would create a shed-led portfolio and the UK’s fourth largest REIT. Investment bank Berenberg crunches the numbers and finds that the number of listed real estate companies on the London Stock Exchange has hit its lowest level in more than two decades, with many of the remaining REITs now “uninvestible” unless consolidation continues. Among those looking increasingly precarious is the troubled Home REIT, which now faces an investigation by the Financial Conduct Authority. Marks & Spencer begins its High Court battle against Michael Gove’s decision to block the multi-million-pound redevelopment of its Oxford Street headquarters, while British Land launches its own redevelopment plans to turn offices formerly occupied by Facebook owner Meta into life sciences space. March [caption id="attachment_1229269" align="aligncenter" width="847"] Image © Loïc Thébaud[/caption] Real estate leaders are disappointed by a Spring Budget that stops short of a meaningful boost for the industry. Chancellor Jeremy Hunt sets out measures that include levelling-up funding for Canary Wharf, more devolution and more investment in life sciences, as well as changes to capital gains tax and empty rates relief. But experts criticise a failure to focus on stronger measures to elevate housing delivery. Abrdn Property Income Trust shareholders knock back the Custodian deal, with plans announced for a wind-down. WeWork founder Adam Neumann makes a $500m offer to buy back the company from Chapter 11 protection as it exits several of its London sites. And MIPIM attendees are in relatively good spirits as the week-long event draws to a close. But even with several industry figures adamant that the country is at the start of the next cycle rather than the end of the last, some are still concerned that the Palais des Festivals et des Congrès acted as an “echo chamber” for those hearing what they wanted to hear. April [caption id="attachment_998787" align="aligncenter" width="847"] Image © Paul Gillis/Shutterstock[/caption] There are some gloomy stats as first-quarter figures are totted up: UK build-to-rent investment falls by almost two-thirds year-on-year; South East England office investment falls by even more; and real estate funds see their highest quarterly outflows for more than a year. For some firms, the challenges of the period prove the proverbial straw that breaks the camel’s back – Balanced Commercial Property Trust launches a strategic review and invites takeover offers, its team pointing to “significant challenges” in the real estate market. Among those seeing new opportunity is Blackstone boss Jonathan Gray, who says on the firm’s earnings call: “The recovery will not be a straight line but we are not waiting for the all-clear sign to invest.” Putting the firm’s collective money where its mouth is, Blackstone lines up a deal to buy the site formerly earmarked for Britishvolt’s £3.8bn gigafactory in Northumberland for a massive data centre development. May [caption id="attachment_1202013" align="aligncenter" width="847"] Image © Adam Vaughan/EPA-EFE/Shutterstock[/caption] Prime minister Rishi Sunak calls a general election for 4 July. “Now is the moment for Britain to choose its future, to decide whether we want to build on the progress we have made or risk going back to square one with no plan and no certainty,” he says. British Property Federation chief executive Melanie Leech says the election, called earlier than many commentators had expected, will be “a golden opportunity to reset the relationship between the real estate sector and the next government”, adding: “Investors need certainty. An earlier election will give us that.” Real estate professionals expect the housing crisis to dominate political manifestos, with Barratt chief executive David Thomas for one saying the issue should be “front and centre in this election campaign”. London landlord GPE becomes a net buyer of real estate in the capital for the first time in a decade, with chief executive Toby Courtauld saying the market is “at or around its trough and is turning in our favour”. And Adam Neumann drops his attempt to buy back WeWork, as the co-working company says it expects to exit Chapter 11 bankruptcy protection under a new restructuring plan within weeks. June That bankruptcy exit for WeWork under new chief executive John Santora marks “a pivotal moment” in the company’s history, says new investor Yardi. Santora says: “I firmly believe that flexible work is no longer just an option, but rather a strategic imperative for companies wanting to maximise the efficiency of their real estate footprint, as well as their dynamic workforce.” The overhaul is massive. In the UK it wraps up lease negotiations, leaving it with 39 sites. In the US it exits its own HQ, which is promptly taken over by flex rival Industrious. Home REIT runs into further troubles, telling shareholders it is unable to refinance its debt with Scottish Widows. And real estate pays tribute to Sir Howard Bernstein, who dies at 71. He was chief executive of Manchester City Council from 1998 to 2017, and council leader Bev Craig says: “Sir Howard served Manchester with remarkable distinction. He will be remembered as a driving force in the city’s turnaround from post-industrial decline to the growing, confident and forward-looking city we are today. He leaves behind an incredible legacy in the transformation of the city.” July [caption id="attachment_1252099" align="aligncenter" width="847"] Photo © Adam Vaughan/EPA-EFE/Shutterstock[/caption] Labour achieves a landslide in the general election, leaving real estate leaders hopeful of a “game-changing” new government. William Beardmore-Gray, senior partner and group chair at Knight Frank, says: “We are hopeful that this election result ends the long period of political uncertainty which has negatively impacted the real estate sector. Both our domestic business leaders and those considering investing in the UK need a stable policy footing that addresses a myriad of challenges.” Housing and infrastructure are at the heart of the King’s Speech as the country’s new leaders vow to unlock stalled development projects across the country and change the National Planning Policy Framework to increase housing delivery. The real estate correction is over for core assets, says Abrdn, and the UK leads the recovery post-election, with residential, retail and industrial all likely to outperform. Lots of good news, right? Not for Home REIT, which says it will put a wind-down to a shareholder vote. And not for Stanhope, which sees the 1 Undershaft project decision delayed after complaints from “corporate nimbys” irritated by the tower’s design. August [caption id="attachment_1147973" align="aligncenter" width="847"] Photo © Louise Haywood-Schiefer[/caption] As the second-quarter earnings season kicks off, the team at JLL says it is hopeful about deals picking up in the remaining months of the year. “We are cautiously optimistic for an acceleration in transaction activity in the back half of the year, as macro and geopolitical risks remain key factors in the timing and shape of sustained recovery,” says chief financial officer Karen Brennan. Brookfield too sees an upturn, with its top team saying “the opportunities for well-capitalised investors to acquire premium assets at attractive prices are significant”. And at Derwent London, chief executive Paul Williams says the company is ready to buy. “We always want something that is under-loved so we can add our love and skills to make it really good,” he says. “To turn it into a silk purse.” Save Britain’s Heritage, a campaigner for historic buildings, urges communities secretary Angela Rayner to reject retailer Marks & Spencer’s Marble Arch plans, which are back for review after M&S’s legal challenge to Rayner’s predecessor. And tributes pour in for retail and leisure agent David Coffer, who dies at the age of 76.  September [caption id="attachment_1052713" align="aligncenter" width="847"] Image © Nti Media Ltd/Shutterstock[/caption] In a high-profile moment in the long-running “office versus WFH” debate, tech giant Amazon says it will require all staff to come to the office for five days a week from the start of 2025. “When we look back over the last five years, we continue to believe that the advantages of being together in the office are significant,” chief executive Andy Jassy says. Real estate debt software company FinLoop says European real estate lenders have not reached annual lending targets for the year and are “chasing” deals and competing on loan-to-value terms for the final months. Deals keep coming as the outlook improves: Redical Holdings is revealed as the frontrunner to buy Nuveen’s stake in the St James Quarter shopping centre in Edinburgh for £75m; NewRiver finally agrees a takeover of mall owner Capital & Regional; Starwood makes a recommended offer for BCPT; and Blackstone pushes on with its massive £10bn data centre plans. October [caption id="attachment_1262439" align="aligncenter" width="847"] Image © James Veysey/Shutterstock[/caption] The UK shoots ahead of rival European destinations for real estate investment, buoyed by big deals including LondonMetric’s takeover of LXi REIT, Tritax Big Box’s purchase of UK Commercial Property REIT and Blackstone’s acquisition of 33 hotels from KSL Capital Partners. London dealmakers are hopeful of a strong end to the year with a number of big-ticket assets coming to market, and the top team at Blackstone say it is ready for the “most fun” stage of the investment cycle. Who’s spending? British Land on a £441m retail park portfolio from Brookfield, and Brookfield itself, outbidding SEGRO to pick up Tritax EuroBox. Others are looking for buyers, including PRS REIT, which hoists the “for sale” sign over itself. And is the honeymoon period over for the new government? Real estate industry professionals find Rachel Reeves’ Budget lacking, saying that if the government is to deliver on its 1.5m homes pledge it needs to go “much bolder and much further”. November The latest results from the big agencies suggest a corner has been turned, with third-quarter revenue in their long-suffering capital markets businesses up by $230m (£178m) compared with a year previously. “You’ve had four years of headwinds,” Newmark chief executive Barry Gosin tells analysts on an earnings call. “Once the discovery of pricing [is achieved] and the appropriate amount of capitulation on values, there will be a lot of trades, and we are seeing that now.” Goldman Sachs Asset Management warns there could still be challenges, saying that although recovery is under way, a “painful” period of adjustment for some assets will need to be endured. Deals launched as the year draws towards an end are the marketing of L&Q’s PRS portfolio, a potential £1.2bn transaction for which chief executive Fiona Fletcher-Smith expects to receive “global interest”,  and the remaining assets owned by Home REIT as it winds down, which are to be marketed as a single portfolio. December [caption id="attachment_1265705" align="aligncenter" width="847"] Image © Telling Photography[/caption] Communities secretary Angela Rayner clears Marks & Spencer’s Marble Arch store redevelopment. Rayner concludes that refurbishment of the scheme is “so deeply problematic” that it would be unviable, and notes the impact of M&S leaving the site if planning permission was refused. Stuart Machin, M&S chief executive, says it can “now get on with the job of helping to rejuvenate the UK’s premier shopping street through a flagship M&S store and office space”. Not all parts of London feel so placated over planning. City of London Corporation planning and development director Gwyn Richards says heritage body opposition to major projects in the Square Mile is “the single biggest risk to the City”. He adds: “The last thing that we want is a call-in on a major strategic site, which would send shock waves across the industry. What worries us more is this constant criticism and objections from Historic England that are undermining developer and investor confidence to be able to go to an investment board and say we’re in a good place.” Having started the year striking the terms of its API takeover, the team at Custodian says it is still hunting for corporate deals. And EG itself becomes the story, confirming that the title will close in 2025. Writing on social media, editor Samantha McClary praises the platform that the business has given the team “to showcase the power and impact that our wonderful world of real estate has, to poke where necessary, but to mostly be your champion”. Main image © iStock