Commercial property investing has changed forever according to this real estate fund manager

George Shaw, fund manager of the Abrdn Real Estate fund, believes the game has changed for commercial property investing - and there’s no going back.

Shaw, who has been managing the fund for 19 of its 20 years running, has seen it all when it comes to giving retail experts access to investment in premium-grade commercial real estate.

In a recent article for This Is Money, Shaw stated his belief that the industry of investing in retail and office space is on the cusp of a “seismic shift”.

Real Estate in the Last Two Decades

Shaw looked back on many of the biggest challenges for commercial real estate in the last two decades. Most notable among what he mentioned were the double-digit returns offered in the best years, as well as the unforeseen fallout from the global financial crisis, not to mention the onset of the Covid-19 pandemic.

Shaw pointed to the biggest challenges of Abrdn’s fund being its suspensions. The unprecedented result of the Brexit referendum in 2016, as well as the global 2020 pandemic, meant a lot of dealing requests were suspended in order to preserve the fund’s integrity. Shaw described commercial property investing as a “rollercoaster ride”, but Abrdn’s fund has remained steadfast throughout this period.

However, in the UK, there are still some big changes afoot when it comes to investing in commercial real estate. The Financial Conduct Authority (FCA) is mulling over the implementation of notice periods on funds with more than half of their assets in illiquid assets like physical commercial property rather than shares in real estate companies.

A New Hybrid Model for Investing

Shaw said Abrdn has long believed its retail investors deserve flexibility and choice when it comes to their investing decisions in commercial real estate. To that end, Shaw’s fund is evolving into a ‘hybrid’ structure. Not only will this allow Abrdn to own commercial stock, but it will also enable the fund to buy shares in real estate firms across the UK and beyond.

Freedom and flexibility are readily offered when buying and selling in the residential property sector. Aside from buying and selling on the open market, it’s possible for property owners to capitalise on their assets in cold, hard cash. There is a select group of fast cash house buyer services online that commit to closing purchases of residential properties in as little as seven days.

When you consider how long it can take to sell residential assets the traditional route, it’s easy to see why this has been proving an attractive proposition recently, and it provides a good model for the sort of freedoms Shaw might find attractive for commercial investors, even if the final sale price may be slightly lower than on the open market.

Shaw says that Abrdn’s new hybrid fund model will enable it to buy and sell shares in real estate companies with more agility, ensuring improved access to sectors and trends of specific focus. The hybrid model also enables Abrdn to direct exposure to retail properties, all of which can be improved via continued management and redevelopment.

Shaw revealed that Abrdn hasn’t been as bullish on property exposure for retail investors for a long time. He also points to the “muted” pipeline of development for new commercial units, so demand is likely to continue to outstrip supply, at least in the short-to-medium-term.

Areas of specific focus for real estate investment includes data centres, student accommodation and healthcare environments - all of which are tough for retail investors to get exposure to without going via a managed fund.