Investors who assume the real estate sector is set for a universally gloomy 2019 could be proved wrong according to Nick Montgomery, head of UK real estate investment at asset manager Schroders.

Adding the usual caveats around the impact of Brexit, Montgomery paints a much more nuanced picture by forecasting that certain areas will struggle but others will remain far more resilient through the course of next year.

Schroders focuses on cities which have major urban centres enjoying superior employment, economic and population growth such as Edinburgh, Manchester and Bristol.

Montgomery, who also manages the Schroder Real Estate Investment Trust (SREI), tells Shares: ‘Using a football analogy we are in extra time in terms of the property cycle but averages (in terms of performance of real estate as an asset class) are likely to be just as misleading as they’ve ever been.’

He says the problem for retail property is no-one is quite sure how far values need to come down as there has been limited activity in the sector by which to set benchmarks for what assets are  worth today.

Montgomery notes Schroders has less exposure to retail in all of its funds than their benchmark indices and also avoids offices in the City of London, with a bias instead towards regional industrial and office assets.

‘We’re feeling relatively confident on the capital values of multi-let offices in cities where rents and capital values are below historic peaks,’ he adds. The dynamics in these locations are strong according to Montgomery with limited new supply coming on to the market.

He acknowledges the importance of actively managing property assets to meet the needs of clients, with the emergence of flexible office space provider WeWork ‘rippling out into the regions’.

Montgomery also notes that while there is a lot of uncertainty around, there is also plenty of liquidity, adding that foreign investors, which he describes as ‘relatively sanguine’ around Brexit, have a desire to invest in UK assets.

‘If we end up with a “bad” Brexit deal we could see the uncertainty dramatically impact all asset classes, not just real estate,’ he concludes.

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