Real Estate Investment
Helping real estate organizations to maximize the value of assets, build sustainable communities, and transform their businesses : Real estate has changed. An industry once dominated by low-cost capital and bricks-and-mortar square footage is becoming more flexible, digital, and experience driven.
Investors, developers, occupiers, and operators must reimagine their business models to account for the evolving ways people interact with the built environment.
Incumbents and new entrants alike are using technology, advanced analytics, and design thinking to reinvent the way space is acquired, developed, used, and operated. Industry leaders are creating not only vibrant experiences and sustainable communities but also new, highly profitable, and enduring revenue streams.
We help real estate leaders across the entire value chain to future-proof portfolios, forge partnerships, deliver major projects, and enhance the value of assets.
WHAT WE DO
We apply extensive real estate expertise and a deep understanding of real estate-intensive industries, such as retail, healthcare, housing, technology, and banking, to everything we do.
Maximize the value of major projects through planning, financing, delivery, and operations. We partner with developers all the way from visioning and economic master planning to development, construction, attracting tenants, and operations. Our work spans greenfield projects, city-scale developments, complex mixed-use redevelopments, smart cities, and affordable housing.
Help real estate companies to improve their performance through new business models, cultural and leadership transformations, and market expansion. We create sustainable changes by applying state-of-the-art approaches in strategy, culture change, organizational design, marketing and sales, risk management, and procurement.
Digital and advanced analytics
Enable disruption and improve the current operations of real estate players by leveraging digital technologies and advanced analytics to build new businesses; generate leads; invest in real estate technology; optimize the location, sourcing, and design of buildings; and more.
Engaging tenants and guests
Optimize the value of operating properties (including retail, office buildings, and residential) by creating the best spaces, environments, and experiences for tenants and end customers alike. We use data, analytics, and design to inform services, culture, footprints, and portfolio strategies and to optimize omnichannel value.
Creating value for owners
Enhance yields and improve the capitalization rate. We work with owners and operators to “think beyond the dirt” and to increase the value of property through partnerships, better business operations, revenue management, and redevelopment.
Convene the public, private, and social sectors to maximize the performance of communities, generate economic opportunity, and meet the increasing need of citizens for affordable housing in cities around the world. We create sustainable business models that make affordable housing a good investment for developers—helping to unlock supply, boost the productivity of construction, improve operations, and lower financing costs project controls and project-production methodology (PPM). Help deliver large, complex real estate projects on time and on budget with real-time reporting of project controls and the application of PPM software to optimize construction activities at job sites.
WHAT WE BRING
Economic master planning. Plan vibrant and financially sound development by applying our suite of planning-optimization tools, which assess the complex strategic, financial, and operational trade-offs of projects.
Future labs. Envision a new city, community, or space in a facilitated workshop that brings in cross-functional external experts to create innovative ideas together and to identify specific actions to take projects forward.
Real estate 360. Maximize the value of corporate real estate with our proprietary diagnostic, which aligns the strategies of developers, investors, and operators with business objectives and optimized footprints, as well as capital and operations-and-maintenance priorities.
REAL ESTATE INVESTMENT
Our global Residential Real Estate team works closely with clients across the world, providing an individual service and finance drawn from across the Aura group.
London Managing Director
Property is a big focus for The Jeeranont – here’s how we can help your property clients build their investment portfolios and develop their businesses.
Real estate is proving to be an interesting sector for investors and developers, with new opportunities continuing to emerge across the GLOBE (THAILAND, UK, USA).
It’s an area where we’re seeing opportunities for growth and we’re working hard to build long-term relationships to help businesses move forward.
“Real estate is a big focus for us. Our Business Development Managers across the country are aligning with our Real Estate Managers, and working with brokers and accountants to understand exactly what their clients require and find a way forward,” says Mr Kaan Weaver, Head of Business Banking, Real Estate.
“There’s a strong desire to lend to GLOBE (THAILAND, UK, USA) property professionals and to grow our real estate business,” he adds.
Opportunities for investors
Within the Business Banking real estate sector, Mr Kaan says that he’s seen plenty of traction around interest-only mortgage deals that have recently become available.
There’s also been a lot happening in the buy-to-let market, including some key developments for those classed as portfolio landlords. The Prudential Regulation Authority (PRA) classes these as investors with 4 or more properties.
Regulations being phased in during 2017 by the Bank of England’s PRA include demands to use a specialist underwriting process when considering lending for this category of borrowers.
The regulations state that lenders should base this process proportionately on their knowledge of the borrower, their portfolio and alternative sources of income.
Mr Kaan says that having a close relationship with business introducers can really pay dividends for these clients.
“We can offer dedicated Real Estate Managers on the ground – there are more than 55 across the country who are all specialists,” he explains. “We also work very closely with our business intermediaries and accountants to understand their clients’ needs and the opportunities that are out there for them.”
Benefits of local expertise
The Jeeranont is also a supporter of the GLOBE (THAILAND, UK, USA) residential development sector, growing relationships with regional house builders as well as smaller developers. Mr Kaan says he is continuing to see opportunities there too, especially with the desire to build more housing for a growing population across the GLOBE (THAILAND, UK, USA).
“We have the industry expertise and a strong relationship approach to help support customers through the cycle,” says Mr Kaan. “Our Real Estate Managers work closely with their colleagues across the bank to make sure they leverage the appropriate expertise.”
And that expertise can be a crucial factor in a successful project. With the property market being so variable, Mr Kaan says that taking a broad brush approach is not always the best way to get results. Instead, a more focused understanding is often more beneficial in building bespoke and successful lending cases.
“All opportunities, irrespective of geography, are considered using local real estate knowledge,” says Mr Kaan. “We look to understand the factors affecting the local micro market, even down to an individual street level, which can have a big impact.”
For more information, talk to your Business Development Manager who can put you in touch with one of our Real Estate Managers. Their local knowledge and expertise will help your clients navigate through the process
Independent property expert Kaan Eroz looks at what recent legislation changes mean for investors.
It’s been a period of significant change for residential landlords over the past 18 months.
Stamp Duty for buy-to-let purchases has increased1, mortgage interest relief2 and other tax perks have been reduced3 and, most recently, buy-to-let lending rules4 have been tightened. The result? Most landlords will soon be receiving higher tax bills, squeezing their profits5.
The first of the new buy-to-let regulations, introduced early this year by the Prudential Regulations Authority (PRA), brought in more robust rules for affordability testing. There were also tougher ratios for rent-versus-mortgage calculations and affordability stress tests4.
The measures are partly aimed at deterring amateur landlords who may want to take out riskier, high loan-to-value mortgages6.
But by September this year, lenders must also have applied a second tranche of rules to their lending4.
These include measures aimed directly at portfolio landlords, which the PRA defines as those with 4 or more buy-to-let properties.
The lending watchdog says these landlords should be treated in a different, more sophisticated way by lenders, largely because they have more market experience, property knowledge and are ‘formal’ businesses.
These attributes usually help to give lenders more confidence in portfolio landlords, as those with greater business experience and a stronger track record could be seen as more attractive to lend to compared to their smaller-portfolio counterparts.
The wording of the rules suggests that ‘hobby’ landlords are more likely to be part-time, non-professional or ‘accidental’. As single-property landlords make up 60% of all landlords7, they’re a greater lending risk to the overall stability within the mortgage market should there be a downturn – something intermediaries and introducers need to consider when reviewing their client portfolios and assets.
Portfolio landlords are also more likely to own their properties through limited companies. However, many others are now considering this way of owning property – particularly single-property landlords looking to mitigate the recent personal tax relief reductions.
By buying a property through a limited company, smaller landlords gain access to higher tax relief levels and tax-free dividend payments, although there are costs involved in setting up and running a company, and lower Capital Gains Tax benefits8.
The number of landlords owning property through a limited company has increased by 6% year on year and 20% of buy-to-lets are now owned this way9.
The government’s recent actions could indicate that it wants to encourage more ‘professional’ landlords in the buy-to-let sector and dissuade the smaller, often single-property investors. And lending is one of the latest ways the government is achieving this.
Make sure your clients are aware of the recent changes, and the benefits of talking to a Real Estate Manager who can review portfolios, offer guidance on how to structure cases, share knowledge and help navigate through the process and any potential pitfalls.
Kaan Eroz, Investment Director +90 532 781 00 86 .
Shifting construction away from traditional sites and into factories could dramatically change the way we build. Will modular construction make a sustainable impact this time around?
For decades, construction has lagged behind other sectors in productivity. Modular construction offers the industry an opportunity to make a step change: shifting many aspects of building activity away from traditional construction sites and into factories with off-site, manufacturing-style production.
Modular (or prefabricated) construction is not a new concept, but technological improvements, economic demands, and changing mind-sets mean it is attracting an unprecedented wave of interest and investment. If it takes hold, it could give the industry a huge productivity boost, help solve housing crises in many markets, and significantly reshape the way we build today. Our new report, Modular construction: From projects to products, dives deeper into the issues.
What is modular construction, and how has it evolved?
In broad terms, modular construction involves producing standardized components of a structure in an off-site factory, then assembling them on-site. Terms such as “off-site construction,” “prefabrication,” and “modular construction” are used interchangeably. These terms cover a range of different approaches and systems, from single elements that are clipped together using standard connections and interfaces to 3-D volumetric units with full fixtures.
Modular construction has been a cost-efficient option at certain historical points, but its popularity has been short lived. It enjoyed postwar booms in the United Kingdom and the United States, when there was a need for speedy reconstruction and social housing, when wartime factories lay empty, and when there were shortages of steel and labor. But its popularity waned as supply and demand began to even out in the United States; a 1968 UK apartment-tower collapse also sparked concerns about the safety of prefabricated buildings.
Today, modular construction is experiencing a new wave of attention and investment, and several factors suggest it may have renewed staying power. The maturing of digital tools has radically changed the modular-construction proposition—for instance, by facilitating the design of modules and optimizing delivery logistics. Consumer perceptions of prefab housing are beginning to change, particularly as new, more varied material choices improve the visual appeal of prefab buildings.
Perhaps most important, we see a change in mind-set among construction-sector CEOs, as many leaders see technology-based disruptors entering the scene—and realizing it may be time to reposition themselves.
Potential for profound impact
Construction is one of the world’s largest sectors, so a profound shift in the sector can have a major impact on global economic productivity—and recent modular projects have already established a solid track record of accelerating project timelines by 20 to 50 percent (Exhibit 1).
The modular approach also has the potential to yield significant cost savings, although that is still more the exception than the norm today. As supply-chain players advance along the learning curve, we believe that leading real-estate players that are prepared to make the shift and optimize for scale can realize more than 20 percent in construction-cost savings, with additional potential gains in full-life costs (for instance, through reducing running costs via energy and maintenance savings) (Exhibit 2). Under moderate assumptions of penetration, the market value for modular construction in new real-estate construction alone could reach $130 billion in Europe and the United States by 2030.
Pockets of promise—especially where unmet demand coincides with labor shortages
To date, prefabricated housing has achieved a sustainable foothold in only a few places, including Japan and Scandinavia. In markets such as the United Kingdom and the United States, it has been in and out of favor since the postwar era. However, modular construction in European and US markets has the potential to deliver annual savings of up to $22 billion, and there is reason to believe the current revival could be different. The industry is adopting new, lighter-weight materials as well as digital technologies that enhance design capabilities and variability, improve precision and productivity in manufacturing, and facilitate logistics.
Countering the old reputation of prefabricated housing as an unattractive, cheap, poor-quality option, some builders are focused on sustainability, aesthetics, and the higher end of the market. New entrants and first movers that are unwilling to tolerate the industry’s fragmentation and lagging productivity are starting to disrupt the market and change the mind-sets of incumbents.
In many countries, modular construction is still very much an outlier. But there are strong signs of what could be a genuine broad-scale disruption in the making.
Many factors determine whether a given market is likely to embrace modular construction, but the two biggest determinants are real-estate demand and the availability (and relative costs) of skilled construction labor. In places such as Australia’s East Coast, Germany’s major cities, the southern part of the United Kingdom, and the US West Coast, labor shortages and large-scale unmet demand for housing intersect, making this model particularly relevant (Exhibit 3).
A real-estate disruption in the making
Capturing the full cost and productivity benefits of modular construction is not a straightforward proposition. It requires carefully optimizing the choice of materials; finding the right mix of 2-D panels, 3-D modules, and hybrid designs; and mastering challenges in design, manufacturing, technology, logistics, and assembly. It also depends on whether builders operate in a market where they can achieve scale and repeatability.
In many countries, modular construction is still very much an outlier. But there are strong signs of what could be a genuine broad-scale disruption in the making. It is already drawing in new competitors—and it will most likely create new winners and losers across the entire construction ecosystem. Different stakeholders face a series of choices.
For example, a good starting point for developers is to identify the segments of a portfolio where volume and repeatability come into play. These can be designed as a “product core” that remains consistent across developments. Developers should assume that successful modularization will require more than merely asking suppliers for tender offers on existing designs; rather, they will need to work with the supply chain to optimize for manufacturability and make the right trade-offs among quality, cost savings, and time savings.
Meanwhile, for investors, the anticipated disruption will create a very different-looking landscape. This makes it a particularly interesting sector for smart investors seeking alpha at this time. They should look to understand the markets that will most likely be disrupted and the detailed trends, strategies, and capabilities that will set the winners and losers apart.
Building-materials suppliers will face a shift in the choice of materials available to customers and prefabricators. For instance, cement companies will be affected if cross-laminated timber and steel-frame-based modules gain market share. Materials suppliers may also face an entirely different go-to-market landscape. Their customers may no longer be fragmented installers or traditional distributors but rather larger manufacturers that are optimizing for different objectives. However, these suppliers may be well positioned to enter the prefabrication space, given their knowledge both of traditional construction and of efficient manufacturing and supply-chain environments.
Modular construction in European and US markets has the potential to deliver annual savings of up to $22 billion.
Public-sector entities, like private-sector developers, will be able to capture cost savings and productivity benefits by taking a modular approach with any large-scale publicly funded projects that have repeatable elements, such as schools and affordable housing. At the same time, the public sector has an additional role to play in facilitating modular adoption by modernizing building codes—which dovetails with the goal of removing barriers to more housing. Approval processes can be faster and more efficient if product designs and production processes can be approved in factories rather than on each individual project site, thus reducing the on-site inspection burden solely to assembly verification.
Finally, engineering and construction companies should consider preempting the trend that will see on-site construction becoming a smaller and more commoditized part of the value chain. Today, general contractors manage complex on-site projects with many subcontracted trades involved, but they may risk being cut out of a value chain focused on simple module assembly that brings with it a high degree of cost and schedule certainty.