Bisnow: If the real estate sector in 2023 was a song, film or TV programme, what would it be?
Browne: If 2023 was a film, I’d go for Rocky III. The country has taken a few blows and we’re up against the ropes — but against the odds, we will get through this.
Supply chain blockages, thanks to Covid, and extended by the EU embargo against Russian energy exports, combined with most workers looking on helplessly as their paychecks fail to keep up with price increases, along with the rise in the cost of debt, is creating a cocktail of misery that could be greater than we all experienced in the 2008 financial crisis, although we hope this isn’t the case.
However, for those who take a courageous approach to 2023 and have agile business models, a recession and the associated opportunities it comes with could help smarter businesses achieve their goals far sooner.
Bisnow: Who will be the property hero of 2023?
Browne: Planning policy and legislation dictates the real estate market, and as the Levelling Up and Regeneration Bill evolves further in the coming months Michael Gove will either be a hero or villain in 2023.
His current intention to penalise developers on build-out rates and dilute the industry’s ability to deliver housing is counterintuitive, especially if we want housing delivery to be a catalyst for the economic recovery.
Gove must listen to economists, decision-makers and communities across the country on what will work best for the industry and local people in the long term, and shape legislation that truly does create a meaningful platform for economic growth and positive change.
Priority No. 1 must be to deliver a streamlined planning service and release additional funding for local planning authorities in order to retain and attract high-calibre planners and decision-makers that are critical to delivering complex and strategic large-scale mixed-use developments. With inadequate resources in local government, the ‘growth, growth, growth’ agenda will never be realised.
Bisnow: What achievable tweak would you make to the property sector in 2023 to make it a better place?
Browne: I’m currently on a mission to encourage the industry to widely adopt a ‘Community Investment Programme’, an initiative I coined several years ago. This provides a framework for developers, by way of a legal agreement, to partner with and really listen to 10-15 local community groups, social enterprises, charities and SMEs on each project that could benefit from free use of our buildings.
Instead of predetermining what we think groups and people need, we need to genuinely ask them: What would make the biggest difference to their community and services? This would go some way to enhancing social value across the country.
Bisnow: What is your top ESG tip for building owners or property companies?
Browne: Two million fewer people donated to charity than usual in February 2022, according to the Charities Aid Foundation. And last year, the Charity Commission said that 60% of charities saw a loss of income, while a third experienced a shortage of volunteers.
Sadly, those who are most reliant on frontline services in the UK are disproportionately impacted by the ongoing economic crisis, and real estate has the finances, resources and reach to play a part in trying to mitigate such impacts.
So let’s give the ‘S’ a little more importance in 2023, and focus on qualitative impacts, and not solely the quantitative results.
While achieving most of your company’s ESG targets is commendable, no Excel spreadsheet or graph will be able to convey the real difference that can be made on the ground to an individual. Whether that be providing a hot meal to a hungry child though working with local food banks [or] community cafés, or ‘saving a life’ by supporting and offering free accommodation to domestic violence victims.
Bisnow: Right, the market stuff: What listed company would you take private and why?
Browne: There are quite a few listed companies that could benefit from being taken private, in particular some of the UK’s traditional build-for-sale housebuilders, and I would say now is the time for this to happen.
This will enable them to regain greater control, provide easier access to capital for diversification while reducing red tape and helping them to become more nimble and proactive, if that is the only way to evolve their core business functions without joint ventures.
With the value of apartments stagnating in London for the last five years, recent hikes in interest rates, rising build costs, the imminent end of Help to Buy and a real pinch in the cost of living across the UK, it is difficult to fathom how large-scale build-for-sale projects will be delivered at scale in 2023.
Bisnow: What is the deal/building everyone will be talking about next year?
Browne: I’m currently travelling across Southeast Asia and staying in co-living communities to better understand the region’s approach to alternative living products and innovations, while also experiencing its unique cultures. The significant regional investment in co-living and hybrid hospitality that I’ve seen so far on my trip is really inspiring.
Blurring the lines between residential and hotels is on the increase globally, as people demand greater flexibility and a higher quality of amenities and experiences. With this in mind, I’ll be excited to see the completion of Merdeka 118, a 118-storey mega-tall skyscraper in Kuala Lumpur, Malaysia, that will become the world’s second-tallest structure after the Burj Khalifa when it opens next year. The stunning structure will become the ultimate mixed-use building, with a retail destination, business district, hotel and residential all coexisting in one place. It’s great to see innovative large-scale mixed-use approaches coming from all corners of the world.
Bisnow: Which sector will provide the best returns in 2023 and why? And the worst?
Browne: I am probably somewhat biased, but I firmly believe that the three alternative living sectors — co-living, hybrid hospitality and purpose-built student accommodation — that my company re:shape specialises in are probably on track to deliver the best returns in 2023 and beyond.
[That's] due to the fact there are now a handful of developers and operators in our sector that are able to reposition underperforming hotels and offices into turnkey, branded living experiences within a year.
This minimises development risk and cost, and expedites the creation of new income-generating assets for investors.
People will continue to prioritise more connected and flexible living experiences alongside all-inclusive options, which insulate consumers from spiralling utility costs. PBSA undersupply will only intensify if we see a ‘flight to university’, as employment opportunities become sparse in a contracted economy.
Outside of my sector, I would probably rather be in the ‘dark kitchen’ sector, which is proving to be resilient and has room for further growth as advances in technology make it easier than ever before to order food online. Premium build-for-sale residential is probably in line for the most difficult year ahead.
