Understanding the obsolescence risk of a real estate asset is important for investors since it affects expected returns and pricing. As buildings age, are affected by changes in occupier requirements or regulatory changes, this has consequential implications for rental growth potential, capital values and returns. All of which can trigger capital expenditure requirements which may have further consequences for the performance of, and returns from, an asset.
Some would argue that capex requirements and obsolescence risks are inherently under-estimated by investors. As tenants demand more from their buildings, especially around ESG and sustainability issues, leases get shorter, costs of refurbishment rise and the operational intensity of real estate assets increases, is this changing how investors should be thinking about obsolescence? In short, is the obsolescence risk profile of commercial property increasing and is this being sufficiently factored into pricing?
In this webinar, the panel will discuss how these issues are affecting obsolescence risks across sectors and countries; how the valuation process is capturing these changes and how all of this is changing real estate investment decision making.
Chair: Dr Robin Goodchild
Speakers & Panellists:
Mark Unsworth, Oxford Economics, Real Estate Economist
Clare Bailey, Savills, Director, Commercial Research
Lee Bruce, CBRE, Head of Fund Valuation
Lucy Winterburn, Savills IM, Director of Investment
Dr Robin Goodchild
Dr Goodchild was a senior director in LaSalle’s Global Research & Strategy team for 20 years, retiring in 2017. During his career, he was responsible for leading on the firm’s investment strategy in Europe and a member of various investment committees whose approval is required for all debt and equity transactions in the region. He now focuses on his advisory roles with Westminster City Council, an Oxbridge College and the London School of Hygiene & Tropical Medicine, as well as consultancy assignments and maintaining links with academia.
Dr Goodchild is a chartered surveyor with over 50 years real estate experience in the UK, continental Europe and Asia Pacific who has been responsible for managing property investment portfolios since 1985. He specializes in identifying the direction of real estate markets and the investment opportunities they offer. In particular, he was closely involved with devising LaSalle’s 5 Step Process for designing international portfolios as well as developing practical ways in which the risk profile of property portfolios can be analysed. He joined LaSalle in 1997 as Research Director and is well known in international property circles as a speaker and market commentator. He was appointed an Honorary Fellow of the UK Society of Property Researchers in 2004 and received an Achievement Award from the European Real Estate Society in 2007.
Mark Unsworth, Associate Director - Real Estate Economics
Mark is responsible for the UK and European Real Estate Economics Service having joined Oxford Economics in 2021 following 6 years at Cushman & Wakefield as Partner - Head of EMEA Forecasting. At Cushman, Mark led the quarterly city-level property forecasting service, produced pan-European property market consultancy reports and authored a range of content on cyclical and thematic issues. Prior to that Mark spent 7 years at GIC Real Estate as an Assistant Vice President in their Global Research & Strategy team focussing on European market analysis, investment strategy and asset allocation.
Clare Bailey, Savills, Director, Commercial Research
Clare Bailey is a director in Savills commercial research team and has written extensively on themes within the regional office markets. Clare has contributes to Savills office magazine ‘Core’, looking at the key ingredients to a happy and productive workplace, as well as writing articles on themes around Social sustainability. Clare was recently commissioned by the British Council for Offices to explore the role of affordable workspaces in the UK. She also presents at a number of industry events, including Savills regional ‘cross sector’ seminars.
Lee Bruce , CBRE, Head of Fund Valuation
Lee Bruce leads the Fund Valuation Real Assets team within CBRE's Valuation & Advisory business. He is responsible for the regular valuation of all types of assets throughout the UK on behalf of UK institutional investors.
Lee joined CBRE in 2005 after completing a Masters degree in Real Estate Management at Oxford Brookes and an Economics degree at the University of Wales – Swansea. Prior to this he spent four years working in commercial finance at Allied Irish Bank.
Lee developed and led CBRE's Long Income team which now values over £20bn every quarter with a focus on Sale & Leasebacks, Income Strips and Ground Rents. Lee also has extensive experience across all forms of commercial investment & development.
Lucy Winterburn, Director of Investments, Savills Investment Management
Lucy is a Director in Savills Investment Management’s UK Investment Team and the Fund Manager for Diageo Pension Fund’s UK property portfolio. This is a discretionary mandate invested throughout the UK across all commercial sectors with a Fund size of c. £850 million.
Her role includes the provision of strategic advice, valuation and performance analysis as well as sourcing and managing transactions. She has a wealth of experience overseeing development projects from inception to completion on both a direct and speculative basis incorporating best in class ESG initiatives to future proof the Pension Fund’s investments and to fulfil the Pension Fund’s Next Zero Carbon ambitions.
Lucy graduated with a first class degree in Land Economy from Aberdeen University and joined Savills as a graduate in 1996. She has worked on the Diageo Pension Fund account for 22 years. She is an award winning Fund Manager with the mandate enjoying healthy returns during her tenure outperforming its Benchmark over every time horizon. She is an active member of the Savills IM Investment and Global ESG Committees and she also chairs the Savills IM UK Management Committee.