The European residential market currently finds itself headed towards a supply crisis. Meanwhile, demand continues to increase. If governments address this crisis in the right way, with the right solutions, these changing dynamics have the potential to create material investment opportunities for institutional investors.
Over the past few decades, there have been several transformative technology cycles: the proliferation of personal computing, the growth of the internet, the rise of social media, and the mobile revolution. Artificial intelligence (AI) appears to be the next technology with this transformative potential.
One of the biggest themes that came out of CREtech New York, a conference dedicated to real estate innovation and sustainability that was held over 19 to 21 September, was the risk of climate change to not only the built environment, but to real estate investors themselves. Real estate carbon emission levels, along with the risk data and analysis determining them, will increasingly become make-or-break factors in investment decisions. They will also have the potential to throw up major hurdles to refinancing — thereby causing major ramifications to commercial real estate in some of the globe’s biggest markets.
The INREV Management Fees and Terms Study explores the fee and cost structures for European non-listed real estate vehicles. With a primary focus on total global expense ratios (TGERs) and real estate expense ratios (REERs), the study increases transparency and helps to understand the fee and cost structure within the industry. This year’s study includes 83 vehicles that collectively represent a total net asset value (NAV) of €115.0 billion and gross asset value (GAV) of €153.5 billion as of the end of 2022.
In the UK real estate market, a notable shift is taking place, with more attention falling on single-family rental (SFR). According to a report by Savills, more than £1 billion (€1.2 billion) was invested in the subsector during the first nine months of 2023, which was three times the amount allocated to SFR in 2022. In response, house builders are tailoring their business models to cater more to this segment of residential, with a pipeline of nearly 2,000 homes being snapped up by institutional and other large-scale investors.
When business districts hollowed out at the height of the COVID-19 pandemic, and downtowns became ghost towns, a top-flight office building in a gateway city, filled with blue-chip financial clients, lost its lustre. Those assets, once the ideal institutional holding, suddenly became liabilities.
Hybrid working has provided the “biggest opportunity of our generation” to redesign how and where work is carried out within companies. In a recent paper on how to combine real estate and operational strategy to improve business performance, management consultancy Alvarez & Marsal says many organisations with desk-bound employees are blaming hybrid working for a loss of productivity and underused office space. But the consultancy says this analysis is tired and shallow.
There has to be a sea change in property investment mentality as capital allocators can no longer rely on yield compression and cheap debt to drive returns. In its latest Global Real Estate Outlook report, M&G Real Estate says real estate investors will need to rely on generating high yields and growth in an economic environment of increased interest rates and debt costs that now dominate many markets.
Outlets are an exciting form of retailing that can also ensure stable cashflows and high footfall from a landlord or investor perspective. Yet, Germany remains one of Europe’s laggards in terms of outlet density. There are only around 2.6 square metres (28 square feet) of outlet sales space per 1,000 inhabitants in the country. In contrast, this figure is 8.3 square metres (89 square feet) in Austria and 8.6 square metres (93 square feet) in the United Kingdom.
Not everyone who reads this column is responsible for managing people, but at some time in your career, if not now, you may be called upon to do so. Ferdinand Fournies, the author of the book Why Employees Don’t Do What They’re Supposed To Do and What To Do About It, points out that being promoted into a management role for the first time is akin to being knighted.