31 January 2013 | InterContinental Hotel, Park Lane, London

EY Real Estate and Hotels Workshops

‘Setting a course for the future’

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Put your strategy into action

No one can dispute that we are in a different market today. Many strategies from previous times are no longer relevant and/or workable. However, new opportunities are out there for those with imagination and ambition.

Seize opportunities in social enterprise

At EY we are seeing social enterprise as a new way to do business that will drive opportunity and the change society needs. The EY Entrepreneur Of The Year® program has shown a significant shift in social investment, and our "Social Entrepreneur award" has evolved to recognize exceptional social enterprise for promoting growth and providing value to the economy and society as a whole. We believe that by adopting imaginative approaches and embracing social enterprise concepts, the real estate sector can help to create thriving communities and achieve enhanced returns, as well as open up new investment opportunities.

“What I am interested in is how you take the capital investment and trigger social and economic activity.”

Lord Mawson
Member UK House of Lords

In an inspiring interview, the highly successful social entrepreneur Lord Mawson, Member UK House of Lords, joined us to illustrate one example of how this approach is establishing new opportunities for real estate — closing the gap between the macro and the micro by working on local, practical projects to transform communities.

Lord Mawson explained that achieving change, in his experience, was about “people and relationships — not structures, processes and systems.” He said: “It’s about realizing the solutions are often with the people who are already there. The future is about business and social entrepreneurs taking action, and the public sector creating the conditions to let this happen. What people at high levels think communities want and what they really want and will pay for might be quite different.”

Make the most of London

“As the current top location for global real estate investment, it is no coincidence that we decided to hold our conference in London,” said Dean Hodcroft, United Kingdom & Ireland (UK&I) Real Estate Leader at EY.

Although pension funds indicate they can only generate their required returns if they increase their allocations to emerging markets, 67% of conference participants did not believe this competition for institutional monies would disadvantage established markets. London, in particular, looks set to continue attracting investment.

London is experiencing huge levels of investment, including massive ongoing development around the 2012 Olympic Games site and the £15 billion (US$23 billion) Crossrail project to link east and west London. Recent regulatory relaxation relating to the planning and provision of social housing has been framed to trigger further real estate activity.

As Mike Hussey, Chief Executive of Almacantar, highlighted, given London’s strengths as a global city with a growing population and attractive cultural and legal characteristics, “It’s a no-brainer that it should be part of someone’s portfolio, whether you are an investor or an occupier.”

However, real estate fundamentals — understanding supply and demand, and not over-paying on entry — still apply. “People overpay all the time in places like the City of London because they believe they can price on the basis of the income they are getting from a building, but they don’t think about what happens when the income comes to an end. That needs to be priced in at the front.”

While there is strong investor interest in residential property, there are risks attached to huge developments, such as that currently taking place on London’s South Bank. Could Nine Elms Lane become the Dubai of London?

“There has been a major shift in people looking to London as a place to live and to operate from, a place for their capital to rest safely.”

Mike Hussey
Chief Executive, Almacantar

The way forward could depend on real estate stakeholders taking a more imaginative approach focused on developing not just property, but also a supportive environment where communities can thrive. Focusing on community needs could ultimately provide greater investor comfort and generate higher long-term returns for both developers and investors.

“I believe that Crossrail could be one of the biggest drivers of value in London between now and 2018–20. I would put my own money into buying residential apartments in and around where new Crossrail stations are coming in. I buy the story where you can purchase new builds at £500 (US$750) per square foot and can travel from Ealing Broadway to Canary Wharf in 26 minutes.”

Rishi Bhuchar
Partner, EY, UK