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Keep close: Are we at the start of an asset management cycle?
Over the past couple of years, European real estate returns have been largely driven by investment in distressed opportunities. Value investments were plentiful, both in the core and core-plus styles. Yet, with a more competitive market, such opportunities are now increasingly scarce. Indeed, the next investment cycle is likely to be characterised by lower nominal returns unless investors are willing to “get their hands dirty”. We believe that we are at the start of an asset management–led investment cycle. The kind of expertise required for this type of cycle differs from previous ones. This is a cycle where local knowledge, acquaintance of local occupiers and local business practices and preferences is key.
Conditions for an asset management cycle
“Asset management” includes filling up vacancy, re-gearing leases, improving the tenant mix, taking on short leases, refurbishing