Its core skills that pay the bills
#Week47 was a busy one for those heading off to Cannes on Monday for the annual MAPIC conference – the Innesco team, as the event’s official lead PR agency, look forward to seeing many of you there – but it was news in the investment management space that caught the eye.
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LaSalle Investment Management’s decision to transfer the operational management of its direct UK pension accounts to sister company JLL garnered a handful of headlines, but points to a wider reorganisation in the real estate sector. Under the new arrangements, which will start to be enacted on 1st January 2024, asset management, accounting and finance activities for 11 of LaSalle’s direct mandates will be moved to JLL. Portfolio management – including investment management services and strategy, will still be undertaken by LaSalle.
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On its own terms, this makes a lot of sense. LaSalle gets to concentrate on the areas where it adds the most value, while the portfolios benefit from the expertise of the wider asset and property management capabilities of JLL. And for JLL, which surely has more economies of scale in the operational management space, there is the attraction of reliable fee income at a time when transactional revenue has taken a hit.
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It is also part of a wider trend of companies’ increasing focus on their core competencies. As the property market continues to fracture into ever more specific sub-sectors, those with capital are seeking the advisors and managers that specialise in those niches. In parallel, the advisors themselves are asking if they really need to be offering a full suite of services, or whether they add more value by outsourcing to specialists and managing the process. For a firm like LaSalle, offloading the more prosaic aspects such as property management removes a distraction from their main role of determining their mandates’ big, strategic plays.
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And in this topsy-turvy market, getting rid of any distractions is a definite plus. As Sunday Times business editor and React News columnist Oliver Shah said this week, it is not thematic calls but careful stock-picking that will define the winners and losers in the next cycle. As an example, take a look at offices. A sector that could once have been broadly lumped together – regardless of location, grade or age – is splintering between super-prime assets where demand seems higher than ever, a hinterland of secondary space that is facing significant challenges, and huge swathes of assets that are already effectively obsolete. If your day job is picking the bones out of that on behalf of a pension fund, you’d be very happy to leave the leasing plan and property management to someone specialising in those areas.
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In capital allocation terms, real estate used to be considered (by outsiders at least) as a pretty homogenous asset class. But as sectors have risen and fallen, the assets are becoming increasingly distinct from eachother. LaSalle’s changes reflect this heightened need for granular insight and specialisation, a trend that will continue to reshape how the industry operates.
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Have a great weekend, and please get in touch if you’re going to be at MAPIC.
Happy Thanksgiving!
Wishing all of our clients and friends in the United States of America peace and joy on this special occasion.
Events coming up
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Reason to smile
There's no doubt it's been a turbulent few years for the retail sector. With Covid-19 and the cost of living crisis having a profound impact on the high street, we're pleased to say we're not informing you of another company fading into administration.
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A particularly positive sentiment from this week comes from the return of HMV store to the famous original location on Oxford Street - which was first opened in 1921. Though this store isn't as appreciated by those born after the year 2000, it marks not only a positive story for the recently administered company, but for Oxford Street itself.?
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As Oxford Street recently became plagued with American Candy stores, Doug Putman commented:
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“We think our return shows the positive direction things are going in here,” Putman said. “There is no problem having the odd candy store here but people don’t need tens of them, but also want to see an HMV or a Waterstones."
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We couldn't agree more.?
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