The EG Interview: Duncan Owen and real estate’s greatest opportunity in a decade

“It was probably as haphazard as it appears,” says Duncan Owen of the collection of roles he has taken on since quitting as Schroders’ global head of real estate in late 2020. “It wasn’t strategically planned,” he adds in an on-stage interview at EG’s MIPIM pavilion in March. Instead, his roles at Belgium’s Immobel, flexible office operator Workspace Group and now Shard developer Sellar came about through “good fortune, recommendations, people I’d worked with at Schroders”. It’s classic Owen, self-effacing and eager to give credit to others. It’s also not entirely true – little about Owen’s journey through the real estate industry so far has genuinely seemed haphazard. Now, wearing his numerous new hats, he thinks he can find a common thread that could mean his next chapter sees him make his biggest impact yet. High mileage Owen had joined Schroders in 2012 when it acquired Invista Foundation Property Trust, which became Schroder REIT. He still admires his former team. “They are in every way a world-class company, and the best credit I can give them is that it’s the sort of company I wish my children would work for one day,” he says. But by that time, Owen had worked through three decades of what he now calls “quite high mileage”. “The last 10 years were at Schroders, but before that I had been on the board at LaSalle, I had set up my own company, we IPOed it, we created Invista and Schroders bought it,” he says. “That doesn’t sound much, but it’s 30 years’ work condensed… That does take its toll on you.” Schroders’ real estate business had grown fourfold and moved from operating in a handful of countries to operating in 16. It was a “monster”, Owen says, albeit a “nice, friendly, cuddly” one. “I thoroughly enjoyed it,” he says of his time there. “I had built exactly what they wanted. But I think there’d have been someone better to manage it.” (He handed the reins to Sophie van Oosterom, who moved from her role as chief executive and chief investment officer at CBRE Global Investors.) Owen has since been chief executive at Immobel Capital Partners, a London-based investment business established by Belgian developer Immobel, is incoming chair at Workspace and chair of Sellar. “Having the experience of a green, world-class giant office developer, a flexible office operator and a developer wanting to build an investment business were varied and great fun,” he says. “But they also all feed into one another.” How? Because they are all going green. The sums behind schemes Improving the environmental credentials of tired, older offices is “the best opportunity in the real estate market since logistics and distribution 10 years ago”, says Owen. Consider Immobel Capital Partners’ acquisition of a stake in White Rose Park in Leeds, home to tenants as varied as HSBC and MI5. “It has old offices which we can make dark green, and the occupiers desperately want them to be dark green,” Owen says. “Financially, we took a bet that the income return, and as a consequence capital value, could be improved by 20% or 25% by making it dark green and having the right social amenities. We thought rental income could be proven to be 20-25% higher than it was, and it is a brilliant example of a green premium.” He catches himself. The notion of a “green premium” doesn’t quite do justice to the enormity of the shift Owen sees happening around environmentally sustainable real estate. “I’m not sure now that the phraseology of green premium and brown discount is relevant – I think it’s just a chasm,” he says. “Ninety-nine per cent of occupiers want green, sustainable, perfect renewable energy, social amenities – and only 10% of office properties provide that. That’s why there’s the opportunity. That’s why there’s polarisation in the markets.” What constitutes dark green? It is about pushing each element of a scheme that bit further than others might. Yes, acknowledges Owen, some of that is a case of certifications and clunky acronyms – an Outstanding BREEAM rating, a CRREM pathway to net zero. An EPC rating of A, of course. But there’s more – there is alliteration. “I call it the four S’s,” Owen says. “People want their offices and assets to be strategically important. They must be sustainable, dark green, world-class. They must be safe, and that does mean 24/7 access, but post-Covid it also means the right air ventilation systems. And the fourth is a smart building.” Miss those and you risk your asset becoming a fifth S – stranded. The challenge for investors such as Owen is working out the sums that will dictate which sites can be saved and which he and his teams won’t want to touch. “It’s maths,” he says. “Some assets you can [improve in terms of ESG] for £60-£70 per sq ft, relatively cheaply. In other assets, it can cost you as much as it costs to build a new building. We looked at one in the City of London recently and one in Paris and they were, including fees and finance costs, £300 per sq ft. I have built offices in central London and Paris for two-thirds of that, brand new, including the demolition.” That circle can only be squared if values drop – which they are. “The only release valve to this – and I know people that have big office portfolios currently don’t necessarily welcome this – is about 25% off the valuations of a year, 18 months ago,” Owen says. “It’s different in different markets, it depends on the rent you achieve and the cap rate that people will use at exit and all those sorts of things. But as an average, the common denominator seems to be if an office is capable of being acquired at 25% lower than its previous year-end valuation, you normally can buy it and have enough ability for capex to make that a world-class, green office.” Evolution occurs Owen’s new role at Sellar – to which he was already an adviser – will see him involved with a notable regeneration scheme in the capital, namely the £1.5bn redevelopment of Liverpool Street station. Owen says he can rattle off 20 examples of ways in which the project will set new benchmarks for smart sustainability, but he has his favourite. “The Hyatt Hotel has a pool on the 10th floor, open air,” he says. “The pool will be heated by the excess heat from the office [elsewhere in the redevelopment], and then in summer air is pumped through the pool and back in to cool the office.” Owen clearly takes pleasure from that kind of innovation, and in working with the Sellar team to bring it to fruition. “I say this completely genuinely – the last two years as an adviser to Sellar have been an absolute joy,” he says. “I’ve got to know an excellent team and I’ve got to understand their corporate strategy and what they are trying to do. James had a great father in Irvine, who is legendary. Sadly, our parents pass away – mine have passed away, his passed away. Evolution occurs. And James has been looking for a strategy to take the business forward, to evolve it, at the same time as being incredibly focused on ESG, not wanting to demolish things and wanting to have a positive impact on the society around it.” Now helping to build new teams, Owen is bringing his years of management experience to the next challenge. Is it different driving something more entrepreneurial than a big institutional fund manager? Yes, but there are “golden rules”, he says. “You have to be authentic. You have to be honest to yourself, whether you’re in a big or small company. Don’t ask anybody to do something that you wouldn’t be prepared to do yourself. Treat people with respect, those sorts of things are a given,” he says. “It gets harder the more regulated you are, but it is very important that people really have the confidence to take risk and not get electric shock treatment if they fail. You don’t want people to make the same mistake twice. That’s not good. But you do learn a lot when people make mistakes… I think if you have that, it’s actually a pretty good environment. “Never say that to my kids, though.” To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Photo © Loïc Thébaud