As inflation and interest rates come down, and political promises to boost infrastructure rise, real assets and commercial property in particular are looking more attractive, the head of real estate at TIME Investments has said.
According to Roger Skeldon, the lower interest-rate and inflationary environment has meant cost of financing real assets has reduced, making valuations more attractive.
He said: "As interest rates are starting to drop, and the indications for rates are coming down, the cost of financing assets has also come down significantly.
"With the prospect of it coming down further, this increases people's interest in investing in these assets."
He also commented on the Budget, which is scheduled to be held on October 30. "What government does with planning is going to be one of the most interesting things", he said.
Skeldon added: "Not just in terms of residential [new builds], but also in terms of healthcare and social housing.
"If planning around this gets loosened up, there should be more capital coming into the market and we would see increased inward investment coming into the UK as a result. This can only be positive for the real assets sector and the UK as a whole."
But he said investors needed "clarity" over the tax situation, as the speculation around this was causing a lot of uncertainty.
Skeldon was speaking on a one-hour webinar today (October 16), hosted by FT Adviser in partnership with TIME Investments.
The panel, moderated by FT Adviser features editor Melanie Tringham, discussed the strategic importance of real assets under the current economic and political environment.
They also considered what sectors might be more popular thanks to interest rate expectations and investor interest in alternative asset classes.
What is a real asset?
Panellist Shakhista Mukhamedova, co-head of global manager research, Europe, at RBC Brewin Dolphin, explained: "It used to just mean real estate but now it covers so much more.
"It's the roads you walk on, the bridges you cross, the offices you pass. It's the hospitals, the schools. It's not just commercial property; it's any infrastructure.
"Sometimes these overlap, such as data centres, which are properties and infrastructure. It's data cables. All this is all classed as a real asset and there is a broad range to consider."
Skeldon said the team at TIME Investments liked sectors such as renewables due to the valuations, but added it was important to look at the fundamentals, and to be aware of issues such as wage growth or consumer habits, which could affect some sectors.
He said: "There are challenges - for example, in retail, there are some areas that carry more risk than others, but areas which also offer good returns."
According to Skeldon, shopping centres are one asset class which can provide an attractive return, but where there can be elements of risk around that sector.
He pointed to people's shopping habits, which changed in Covid to favour online shopping. This meant warehouse/logistics were in favour with investors, rather than physical shopping centres, although shoppers have started to come back to physical stores.
