As the 21st-century global commercial real estate market continues to evolve, London’s commercial property marketplace is enjoying steady growth. Gradual recovery from the COVID-19 pandemic business shutdowns, combined with changing business priorities and infrastructure, are driving this expansion
Nick Millican, Chief Executive Officer (or CEO) of London-based Greycoat Real Estate, maintains a finger on the pulse of this highly competitive commercial real estate sector.
Three Business Sectors Drive the Growing London Commercial Property Market
In October 2023, Breaking Travel News profiled three distinct London business sectors benefiting from changing external economic conditions. Together, these commercial hubs create a thriving commercial real estate marketplace.
Increased Use of Coworking Spaces
Coworking spaces are common on the London outskirts, but the COVID-19 pandemic propelled these flexible workspaces to the forefront. Today, Central London offers an increasing number of coworking arrangements that promote innovationand networking.
Flexible lease agreements enable businesses of different sizes to adapt to evolving needs. This flexibility appeals to both cash-crunched startups and thrifty enterprises switching to a hybrid work infrastructure. If a company’s operational situation changes, the firm may also be able to revise its leasing agreement structure.
Thriving Logistics and Industrial Operations
The UK’s logistics and industrial real estate markets have been significantly affected by four major trends. Continued eCommerce growth, industry technology advancements, focus on reliable supply chains, and decarbonization have together spurred a revamping of this complex market.
With a desirable location served by ports and multimodal transportation, Central London’s logistics and industrial sectors are well positioned for growth. Use of the latest technologies, and heavier demand from low-carbon energy and agrifood industries, have led to major corporations’ investments in London logistics and industrial businesses.
Sustainable Real Estate Initiatives
The London business sector continues to embrace sustainability and decreased carbon footprints in commercial propertyarchitecture. Energy-efficient building designs, sustainable construction materials, and green certifications combine to reinforce this commitment.
As might be expected, building tenants and investors are flocking to these sustainably constructed buildings. From a big-picture perspective, sustainable commercial space demand continues to grow. Although initial capital expenditures are higher, sustainable buildings show longer-term reduced operating expenses and less resource consumption. Therefore, companies are better positioned to realize a profit.
CEO Nick Millican Continues to Minimize Risks and Maximize Opportunities
During CEO Nick Millican’s commercial real estate career, he has successfully navigated market challenges and over time, has become known for his asset management and commercial real estate expertise.
Nick Millican’s Commercial Real Estate Evolution
Young professionals often enter their profession via a circuitous route. While studying chemistry at Oxford University, Nick Millican applied for investment banking internships to earn some extra income. He completed a short stint at Schroder Solomon Smith Barney, a Citigroup investment banking subsidiary.
Following that assignment, Nick Millican joined the firm’s real estate team to obtain much-needed market training. He was somewhat familiar with the real estate industry, as his father had previously worked in property development.
After earning a MChem degree from Oxford, Nick Millican joined Citigroup in 2004. He worked with a private equity-backed investment banking team for a year before rejoining the Citigroup real estate group.
Together, these experiences provided Nick Millican with a solid investment banking and real estate foundation. During this time, he also gained an ability to identify struggling businesses that might represent opportunities. These insights served as the basis for his subsequent commercial real estate achievements.
In 2006, Nick Millican joined Rockpoint Group LLC, a respected real estate private equity firm.
The Global Financial Crisis Spurs a Financial Market Shakeup
From mid-2007 to early 2009, the Global Financial Crisis led to worldwide financial market stress. A United States housing market downturn sparked unrest in world financial markets. Numerous banks realized large losses and required government support to head off bankruptcy.
Still at Rockpoint, Nick Millican described the major shift in real estate investment operations. “Virtually everyone working in real estate was affected. The focus shifted from…buying…new stuff to focussing on stabilizing and maximizing the value of existing investments.”
Nick Millican Joins His Current Firm
In 2011, however, Nick Millican realized that Rockpoint was winding down its international investments and accepted an offer from his current firm in 2012, to join as CEO with a management earn out structure for the then partners in the business.
Since then, Nick Millican has remained in his CEO role, although the company has significantly changed its focus and structure. Specifically, the firm moved from a consultancy framework to an operating partner focus. Nick Millican further enhanced this notable paradigm shift. Today, he seeks joint venture partnerships that often deliver better investment returns.
“In the U.S., you’d be called an operating partner where you invest money in a project, [and] you typically find the project. So you…[bring in] a joint venture partner to fund… say 95% of the capital. That model is in some ways more difficult, but brings better alignment… You [also] look to receive a share of the profits if things go well,” Nick Millican explained.
Two Factors Complicate Commercial Real Estate Investments
In late 2023, Nick Millican acknowledged that rising interest rates, along with higher construction costs, have led to reduced capital investment and commercial development. He summarizes two key issues that continue to keep many investors on the sidelines.
“One has been…an industry-wide change where…interest rates are higher and therefore…people want to have a higher cap [or capitalization] rate to buy real estate…It …varies depending on the market and the quality [of] the asset.
“The second is a more office-specific issue, which is the…legacy of working from home and…that impacting head-on with increasing regulatory pressure to ensure that buildings consume less energy. It’s pretty expensive to retrofit or to construct new buildings actually on that basis,” Nick Millican remarked.
That said, Nick Millican remains optimistic about London commercial real estate investment prospects. “In London, for example…rents are going up quite fast and the vacancy rate for the top 10% of specification buildings is actually very low.
“So you can actually make a reasonably good case that now would be a good time to be taking a bit of risk to deliver new space for occupiers over the next few years,” Nick Millican concluded.
Stronger Interest in European Investors
Finally, Nick Millican noted that because United States investors are currently reluctant to invest in overseas commercial projects, his firm is more aggressively pursuing European investors. “It’s become quite tricky to get U.S.-based investor[s] to invest in office[s] in London due to the difficulties of their domestic office market.”
“So we slightly pivoted more towards European investors over the last 12 months. It feels like it’s getting cheap enough to go back in to buy stuff again,” Nick Millican summarized.