With the staff attrition rates we have seen in real estate teams and related products in the last year you would be totally in your right to think real estate is over. However since January, we have seen there have seen ‘green shoots’ of real estate returning. They’re doing so not in the traditional format of the Big Banks and the traditional Advisory and PE businesses, but in new and exciting start-ups and other businesses.
They have looked at the market, seen the gap, and are now expanding into it. This is not only in debt restructuring but general real estate advisory. Will these start ups and new businesses really be able to take advantage of where the market goes and will it go the way they are expecting?
The debate seems to focus on when debt will come back to the market, where it will come from and who will be in a position to arrange that debt (client side). Right now, banks are unwilling to make loans and lack the associates and analysts to structure finance for their clients (I heard a rumour that one particular bulge bracket missed a deadline by two week due to lack of resources).
At the same time, the clients and PE houses do not have the resources (or the desire) to pull all the information together (the due diligence, the memos and the term sheets). Both these areas are ripe for start-ups to exploit. Equally, the source of funding has changed from the European Banks to the US Banks (admittedly only a few), the sovereign wealth funds, newly raised funds and private investors (due to the low value of sterling and subsequent decrease in the price of Central London Property for overseas investors). This is all creating demand for a new breed of real estate professional.
The new market needs people who can not only understand the financing and the numbers behind the funding, but can also operate from a cost saving perspective. In my opinion, therefore, real estate is coming back: New businesses out there that are going for it. And I suspect that established banks which have cut to the bone will be hiring like crazy into their real estate teams in Q1 2010.
