Reducing energy consumption within buildings is no easy business. What property owners need to meet their decarbonisation targets and what information many tenants are prepared and able to hand over to them remain two quite distinct things.
During the past few months, investors, managers and consultants participated in the editorial advisory board meetings for each of Institutional Real Estate, Inc’s regional publications, to discuss the most pressing issues facing the real estate investment industry. The editorial board of Institutional Real Estate Americas met in Southern California on 12–14 September; the editorial board of Institutional Real Estate Europe met in Portugal on 27–29 September; and the editorial board of Institutional Real Estate Asia Pacific met in Tokyo on 16–18 October.
Life sciences and healthcare real estate have basic characteristics that set them apart from other property types and give them resilience. Their strength, which we can already see in the current market environment, is based on long-term and highly predictable demand based on what could be called the “great demographic opportunity”.
I’ve noticed over the years that people in this industry take a far too casual stance when it comes to sharing (and comparing) performance numbers. First of all, a performance number is only comparable if the inputs that go into the formula for calculating those numbers have been uniformly defined and collected, and if the formulas that are used to calculate are identical.
When assessing the existing ESG rules set out in the EU disclosure and taxonomy regulation for the real estate sector, one particular question springs to mind: Does the current regulatory framework actually work? The answer is complex. Fundamentally, the ESG provisions are an important step in the right direction. That is beyond doubt. Without the ESG regulations, not enough would happen for the real estate sector to help the European Union become carbon neutral by 2050. All parties, however, are clearly aware that the existing provisions on ESG leave room for improvement.
Managers and consultants are delivering conflicting messages over short- and mid-term prospects for the industrial and logistics sector. In its 2024 Global Investment Outlook report — contrast with some of its peers — Hines says occupier demand in industrial and logistics is showing signs of cooling across various economic sectors. At the same time, indications from ecommerce spending levels suggest a potential near-term slowdown from online operators looking for new space.
The ageing of millennials and baby boomers is increasingly having profound effects on the global real estate market. In its 2024 Private Markets Outlook, BlackRock says these two “giant generational cohorts” are moving into new phases of life over the next several years, which will deeply affect real estate trends. Millennials are growing their families, resulting in an increased demand for affordable housing stock and related necessity retail, while baby boomers are creating a “silver wave” of demand for medical office space, destination retail and hospitality properties.
Investors in the German market are increasingly targeting alternative real estate types as they look to diversify their portfolios. In a study on the country’s real estate markets, Colliers says conditions continue to improve for Germany’s property sectors on the whole, but certain segments, such as life sciences, data centres and forest investment are gaining particular attention.
A study of the New York City and London office markets has found strong evidence for a “green premium”. UBS Asset Management, Real Estate & Private Markets has examined 1,453 office building transactions in New York City and London between 2010 and 2022 and found material green premiums of 28 percent and 19 percent, respectively, on a price per square foot basis.
Student housing is returning to the top of many investors’ wishlists — and with good reason. Resilient demand and constrained supply are expected to sustain rental outperformance in key university cities. In a white paper on the sector, DWS says undersupply is still a major feature of many European markets, while student influx into higher education establishments is still very much on an upward curve in southern and eastern Europe. Demographic trends are also a supporting factor for student housing. The manager cites figures from Oxford Economics showing that in the United Kingdom, Sweden, Spain and Poland there will be strong growth in the number of 15- to 24-year-olds seeking a university place over the next decade.
As we all well know, the real estate investment landscape has shifted dramatically in Europe since the reintroduction of higher interest rates and lower loan-to-value (LTV) offers. But for well-run medium-sized real estate companies and local partners that are not distressed, have a clear strategy, and want to expand their market share, this is actually the perfect time. The crisis is eliminating some of the competition, and acquisition prices are lower. The issue is, how can they grow? One possibility for real estate companies is to seek equity rather than debt. One of the best ways to do that is to create a joint venture (JV) with a large investor who will commit growth capital equity, rather than debt.