The EG Interview: Fiera’s Alex Price on a checklist of change for real estate

​Covid-19. Brexit. Advances in technology. Climate change. The biggest challenges and opportunities that Alex Price sees ahead in the real estate markets all come back, in one way or another, to these four issues and the ways in which the built environment and investment are shaped around them.

“We are in a period of massive change,” says the head of UK real estate for asset manager Fiera Real Estate. “In the real estate team in London, our ages range from 22 to 72, and none of us have seen this much change in such a short period of time. Coronavirus is an immediate change but next up we face Brexit. Medium term, technology is changing our world but finally, the largest change we face is and will be climate change.”

Price and colleagues are trying to ensure Fiera and its clients can keep pace. The revamped company – formed as Palmer Capital in 1992 and bought in 2018 by Canada’s Fiera Capital Corporation – is raising and investing its fifth UK opportunity fund, targeting residential, logistics and offices. It reached a first close last November.

“The worst thing you can do now is to buy that standing investment with ‘x’ years left on the lease and assume that at the end of the term, you’re just going to re-let it at a greater rent to a new company and then be able to sell it for the same price that you bought it for,” Price says.

“The world is changing so fast that we think you’re safer to accept transition, safer to accept that many buildings will become obsolete and that you may need to repurpose them. Like King Canute, don’t try to hold back the tide.”

BTR’s boom

Price and the Fiera team are zeroing in on several opportunities that they say can bring patient investors returns. Front of mind for Price is the residential market, which Fiera hopes to tap into via its new platform Packaging Living. He expects build-to-rent to boom and for residential developments to provide an exit for owners of offices and retail assets.

“The biggest opportunity, although it is a societal threat as well, is the growing overdemand and undersupply for somewhere to live,” he says. “The growing mismatch between low wage growth and the faster growth in house prices will be a challenge and force more people into rental property.”

Logistics still offers huge potential, he says, as the pandemic changes the way people shop. He points to the explosion of growth in supermarket group Tesco’s online delivery business as an example of the kind of acceleration that will drive investment.

Retail suffers from “some real challenges” on the high street but has scope for new residential, leisure, storage or logistics developments, he adds.

And then there are offices. Price has been happy to return to Fiera’s Mayfair home and points out that his vested interest in the “survivability of offices” means he and colleagues are “turkeys who don’t want to talk about Christmas”.

But he admits that he is probably on the more pessimistic end of the spectrum when it comes to predicting how the coronavirus pandemic will impact take-up and the market.

London vs the regions

“We [as a market] will probably, in the medium term, need maybe as much as a third less office space in the coming years than we previously expected we would need,” he says. “I think every company will move to a more flexible approach to office working for their staff.”

That will mean take-up inevitably falls, and a growing chasm between the best and worst in class when it comes to office space.

“The good quality offices will thrive and do better,” he says. “The poor quality ‘chicken factories’, where workers turn up to lay that proverbial egg for their employer, are going to really struggle as we need places staff want to go to work.”

Price expects regional city office markets to benefit more than London’s as companies and their employees shift the way they work and where they are based.

“I’m a bit nervous about central London offices at the moment, because I can’t see how you can access them without using public transport, just because of the scale of the city,” he says.

“Conversely, I think regional cities and towns will continue to thrive as a company will be saying to itself, ‘rather than one major hub in London, should we have a number of slightly smaller hubs across the UK, and a smaller one in London?’”

Opportunity knocks

Price is clearly set on finding opportunities even in the current troubling environment. Lockdown reminded him of the financial crisis of 2008 and 2009 he says, prompting fast and focused problem-solving as companies adapted to a radical shift in markets. The speed of that response impressed him, not least within his own business.

“People are more receptive to the concept of the need to change today than they would have been 12 months ago,” he says. “They can see the coronavirus impact on the market, such as the acceleration in online sales and remote working, and even middle-aged men like myself can see that the investment our business made in technology has worked.”

Good quality offices will thrive and do better. The poor quality ‘chicken factories’, where workers turn up to lay that proverbial egg for their employer, are going to really struggle

He is realistic about the likelihood of tough times to come. He says a “resurgence” of coronavirus in the coming months seems “almost inevitable” without a cure or vaccine, and predicts more local lockdowns.

The effect on households and the economy has some way to play out yet, he adds: “At the moment business and, particularly, government have shouldered the financial burden. Households haven’t really felt the financial effect, but in October it’s likely that the furlough scheme will stop, at which stage we’ll start to see more of an impact economically.”

But, upbeat in conversation, Price’s optimism wins out. “Long term, I’m enormously positive about real estate and about real assets,” he says. “If you can borrow for free, or you have to pay to put your money in a bank account, then everybody’s going to want to own income-producing assets.”

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Originally published by EG in August 2020.