KNOWLEDGE IS WEALTH

Rory Penn and Thomas van Straubenzee from Knight Frank’s Private Office give some much-needed foresight on what the future looks like for clients' real estate portfolios

KNOWLEDGE IS WEALTH

Rory Penn and Thomas van Straubenzee from Knight Frank’s Private Office give some much-needed foresight on what the future looks like for clients' real estate portfolios

The way people want to invest their money has been significantly impacted by major themes over the past years. From ESG to impact investing, they’ve shaped the strategies of wealth advisors and family offices for years to come. But now, in a landscape altered by the Covid-19 pandemic, will these change? What remains steadfast in a value-led practice such as investment and asset management of real estate? Rory Penn and Thomas van Straubenzee, joint Heads of Knight Frank’s Private Office, have put their minds together to tell us what they envisage will define wealth-investment strategies in the coming months, what’s unlikely to change and the values that will always remain integral to their business.

Against the backdrop of The Covid-19 pandemic, what has changed in how you advise or create investment strategies for your clients?

We are in confusing times! With so many opinions and data points, it can be hard for clients, domestic or overseas, to see the wood for the trees. Are the markets going to crash? When will growth return? Is there any liquidity at this price point? Where should we be investing?

The advice sought tends to be divided into two areas: present and future. We try to help clients decide how to respond right now to the current climate (should they buy, hold or sell?), and then the longer term – what the implications are for the evolving real-estate industry.

How has Covid-19 impacted where capital is flowing? Are there asset classes that have been dramatically affected?

In the commercial sectors, there is a longer-term structural shift away from core asset classes (offices, retail, industrial) into the alternative sectors and logistics warehouses. We expect asset allocations to evolve over the next 10 years as both institutional and private capital looks to diversify away from these traditional sectors into emerging ‘growth areas’.

Are we seeing a shift in values? People talk about ‘Capitalism going cuddly’ ­ do you think this is still the case?

Yes. Our clients are diversifying the types of real estate they hold (including alternative sectors) and also focusing on the social impact of these investments. Environmental Social and Corporate Governance (ESG) and impact investing are front and centre of investment decisions nowadays for our wealthy private clients and family offices.

The rationale being that the higher operating costs for sustainable buildings is more than offset by the increase in rental income. The investment case being sound, there will therefore be more capital focused on ESG in capital markets, both equity and debt. The aim is to create a triple win: positive benefits for tenants, landlords (investors) and society as a whole by building and investing with an ESG focus.

How will this impact real estate? Have Residential & Commercial investment strategies changed?

Strategies will continue to evolve. Clients will look to deploy capital into areas of real estate that offer some level of ESG or impact benefit to either the environment or society at large. This could include buying land for forestry/re-wilding, investing into social housing or simply developing environmentally efficient (BREEAM-Excellent) buildings.

Can you tell us why it remains so important to offer a service that is considered discreet in these times?

Many of our clients operate via small and extremely private family offices. Discretion is of utmost importance as they’re not looking for publicity when they invest. Clients need to know they are dealing with a discreet and focused team that can handle all service requirements. This means being contactable 24-hours-a-day and providing constant access to internal knowledge.

What hasn’t changed?

The fundamentals of real estate. Real estate is an investment asset class, like others, that relies on an equilibrium between demand and supply. In real estate, if ‘pricing and product’ are right, there will be liquidity – if not assets will be hard to sell. This being the case, providing ‘best advice’ to clients is the only way that we will foster long-term relationships. Above all, trust remains the most important core value, essential for day-to-day transactions and relationships.

To find out more about how the Knight Frank Private Office can help with your real estate portfolio, | click here


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