When most of the industry talks about real estate, they talk about the capital, the values, the billions of dollars of debt.

They might mention structure, the steel, the big bricks, the buildings, the tangible assets. But they don't talk about the heart of the space — the businesses and people who will actually use it every day.

At EQT Exeter, we spend our time understanding the heart and mind of the users of our real estate. We think about what a person wants — whether they’re a student, a senior, or a midlife professional.

The little things, too: say, “Do they need storage?” That applies to business projects, too.

Imagine a global pharmaceutical company. They don’t just need a copy-and-paste corporate office; they need office space, sure, but also warehouses, data centers, and life science labs and research and development space.

We have around 1,200 major corporations as tenants today, and when they come to us with a problem, we think like management consultants to deliver a bespoke solution.

E-commerce is forcing the real estate industry to adjust. The widespread availability of “stuff” seems to be encouraging folk to shop more, and because there are more steps in the process than a simple brick-and-mortar store, that’s expanding the market for warehouses and logistics centers.

That’s just the start of it, though.

E-commerce needs specialist adjustment to reach the next level of efficiency, like “super flat” floors that allow companies to stack boxes higher and higher. In other words, instead of thinking of space in square feet, you need to think in cubic ones. They’re precise — so precise that it takes laser beam technology to make a super flat floor, instead of a regular old surface.

One key thing we at EQT Exeter like to focus on is the end-to-end of e-commerce. You need to think about where the raw materials come from, where products are manufactured and assembled, how it’s all transported, and how the end product ends up in people’s homes.

As far as manufacturing is concerned, we expect the current nearshoring trend, in which we’re seeing manufacturing move to places like Mexico, to stick around.

After all, it takes a lot of time to build these sites. The placement makes sense, too: Mexico has the 12th-highest GDP in the world, and Mexico City is a densely populated area with a ton of infrastructure and opportunity. However, it does have a lower cost of labor.

That explains why U.S. corporations are “nearshoring” manufacturing — that’s when they set up plants close to their warehousing and consumption base.

Real estate is also impacted massively by the wider economy and monetary policies.

Right now, costs are higher, and supply chains are strained under the weight of geopolitical tensions. Add in a number of elections happening this year and the sprawling U.S. debt pile, and the economy could be pushed in several directions.

What’s more, this can all directly and indirectly impact interest rates, which, in turn, can increase or discount real estate values.

That said, commercial real estate is a long-term asset. In the U.S. market, the mortgage market trades off the 30-year Treasury bond, because most people borrow on a 30-year mortgage.

The institutional market generally sticks to the 10-year Treasury bond. Even if short-term rates are reduced, they won’t necessarily affect on those long-term rates.

The “lending borrowing environment” in commercial real estate matters, too. We’ve moved from a very liquid market to a relatively illiquid market in the last two years.

Take the biggest banks in the U.S. as an example. They’d usually have a real estate book of approximately $100 billion. In a normal year, that’d be refinanced or repaid at about 25%, providing $25 billion of lending capacity.

Add to that increased deposits, which can go up at around 4-5% – adding another $1 billion. That means they might have an extra couple of billion dollars to lend each year from deposits alone.

But these days, since the market velocity has slowed, banks haven’t been able to lend money, because they’re not being repaid. That puts a cap on the market’s progression.

In the last 12 months, instead of $26 billion of availability, they might only have had 20% of the standard capital bauble for new lending.

Thinking about the next 12 months and beyond? The EQT Exeter outlook remains positive.

There are always variables in our market. Geopolitical shifts, changing tenant needs, supply chain innovations, and the changeable banking capital costs will always make the future unclear. But focusing, as we do, on maintaining the best relationships with tenants is a surefire way to understand what’s actually happening in the market.