If 2016 has taught us anything, it is that predictions are not humanity’s forte. Few in the professional industries wished – or expected – both Brexit and Trump to prevail in 2016. As disbelief and disappointment slowly give way to acceptance of reality, attention is turning to the future – and how to make more informed decisions about the year ahead.
A number of sensitive political events and elections remain scheduled in 2017, and politics has moved up the monitoring agenda across the property investment landscape. For as long as uncertainty continues to dominate the political system, investment markets will see further polarisation towards the prime segment, the property equivalent of gold. As the investment wheel keeps turning, prime yields will remain low – a trend further exacerbated by low interest rates in Europe.
The shift to prime will continue both within markets and across markets, with profit-sensitive and judgement-prone Western investors preferring liquidity and Emerging Market investors preferring current returns over long-term fundamentals.
The sharp drop in investment activity in 2016 across many markets will have a profound impact on business strategy too. Even a strong rebound in investment – however desired but unlikely – would not remove the need for a fundamental strategic rethink of operations and business plans. Of more concern than the fact that the property industry lags significantly behind other professional industries in the adoption of new technologies, is the industry’s refusal – or fear – to accept that change is needed. Property technology is only starting to receive its due attention in the property press. And the attention it is getting mainly focuses on the start-ups which are improving the process of property leasing, search and investment, disregarding the more significant likelihood of proptech completely replacing many of the tasks advisors today regard as their bread and butter.
The political shift to the right that began in 2016 will spill over from international and national policy-making into corporate busi
ness strategy. As the ‘Free World’ potentially starts to shun globalisation and trade in exchange for greater levels of domestically-borne investment and consumption, corporate occupiers could be tempted – or forced – to rethink their international expansion and investment plans and mitigate for prolonged political uncertainty. For property this could mean 2017 marks the beginning of a new investment cycle – one driven more by domestic capital origination and investment than international financial flows.