BUILDING RESILIENCE

In an uncertain environment with a backdrop of a health-led global economic shock, positioning for resilience is key for real estate investors. Resilience in real estate entails assets which are able to sustain tenant demand and support rents, underpinning capital values and ultimately returns for investors. It is these types of assets which are best-placed to weather shocks and benefit from the recovery and wider structural changes. So what makes for resilient real estate, and where can it be found? Resilience can be considered geographically, by looking at innovation-led cities which will attract and retain the population and wealth needed to support well-functioning real estate markets. Resilience is also driven at an asset level by considering the sustainability of buildings and tenants. Sustainable buildings are more resilient to climate change legislation amendments, have access to new pools of finance and increasingly, align with the corporate ethos of tenants. Tenant resilience is often considered by looking at covenant strength. However, governance, in terms of how business decisions are made, and the checks and balances in place and acted on, also play a significant and growing role. Finally, market resilience relates to the ability of assets to attract financing, a crucial consideration as lenders become even more discerning. Resilience in this sense involves real estate that has the appropriate characteristics to support lending, be that in terms of location, asset quality or increasingly, sustainability credentials.