Magazine Issues » February 2021

Global real estate: Beds, sheds and meds


Truls_NergaardTRULS NERGAARD, HEAD OF NORDIC REAL ESTATE, STOREBRAND ASSET MANAGEMENT

No denying sustainability surge: The momentum around sustainability is undeniable. Climate change, population growth and urbanisation are all issues shifting the landscape and expectations on the industry. The real estate business is maturing quickly as we see increasing pressure from both public and private [investors] to address issues related to sustainability and climate. A sustainable approach in real estate is important for the wellbeing of individuals and healthy communities – but also for increasing the value of the real estate.

Sustainability in general has had a strong focus for many years in the Nordics and both investors and tenants increasingly demand that the offering is sustainable. We see a clear and increased demand for green buildings, both in transactions among investors and on the tenant market as more stakeholders realise that it is not just about safeguarding our future, it also increases the appeal and value of the communities, the real estates, and the investments.

As a consequence, there is more scrutinising on sustainability, due diligence and demand for information on practices and performance. This requires increased collaboration with the tenants to integrate environmental issues and make green practices part of the business plan and in some ways to rethink the business. The EU taxonomy will most probably contribute further to accelerating development on a larger scale.

The challenges and the opportunities are many in the real estate space. Properties in general provide an attractive risk-adjusted return, but the demand is greater than the supply. When you add the sustainability dimension, the range becomes even smaller.


Danny_PhuanDANNY PHUAN, HEAD OF ACQUISITIONS ASIA-PACIFIC, ALLIANZ REAL ESTATE

Asia’s fundamentals are still in place: Asia-Pacific’s long-term macroeconomic fundamentals remain, despite Covid-19. Demographics, high levels of savings and infrastructure investment will see Asia-Pacific GDP outpace US and EU growth over the next five years.

Real estate liquidity has remained high, resulting in competition and increasing capital value across most sectors. With Covid-19, pockets of dislocation are emerging, mostly in the US and Europe. However, Asian property owners remain well capitalised and regional institutional interest remains high, driving mega-trends and negative risk-free rates, which provide real estate yield support.

In Asia-Pacific, we align our investments with secular macro trends including urbanisation, infrastructure and digitisation. Covid-19 has accelerated these mega-trends and validated our investment strategy. In 2020 we expanded our offices to Tokyo and Shanghai to support our growth.

Furthermore, we capitalise individual country and sector cycles to build a diversified, long-term portfolio with income-producing assets, offering investors stable returns.

Our focus remains on Japan, Australia, Singapore, China, India, South Korea and Hong Kong, and we seek attractive risk adjusted investment opportunities across office, logistics, multi-family, student housing and data centres.


Jose_PellicerJOSÉ-LUIS PELLICER, HEAD OF INVESTMENT STRATEGY AND RESEARCH, M&G REAL ESTATE

The UK’s recovery from Brexit: UK real estate pricing has been penalised by Brexit uncertainty since 2016. However, we believe the pricing differential between London and other major European cities will now begin to erode, reinforced by structural strengths such as the London market’s size, deep pools of liquidity and low cyclical supply risk, following the UK’s orderly departure from the European Union.

While the future regulatory framework for financial services is yet to be determined, we believe there remains strong justification for a large share of the industry to retain roots in the UK. Crucially, London reflects a strong source of human capital, with a long history of innovation in financial services. It also represents a powerhouse in business services, technology and biotech, and it is important to consider that the UK is one of the most business-friendly countries in Europe.

Although pricing of UK real estate now appears an outlier when compared to other major European cities, we expect investors to capitalise on this differential as it begins to normalise, reinforced by reduced political and Covid-19-related uncertainty, which may well encourage some investors to increase their risk tolerance.


Raymond_JacobRAYMOND JACOBS, MANAGING DIRECTOR, FRANKLIN REAL ASSET ADVISORS

Governments can’t go it alone: The pandemic has revealed a lot about the world. It drew the curtain back on our ability to deal with a significant global crisis, laying bare systemic weaknesses and exposing structural failures.

One such failure pertains to social infrastructure. The pandemic highlighted that many communities around the world lack the necessary facilities, such as accessible healthcare facilities and affordable housing, to combat threats like Covid-19 effectively.

The lack of necessary real estate infrastructure certainly existed prior to the outbreak of Covid-19, and the pandemic has emphasised the need for increased investment.

While governments have implemented a range of fiscal and quantitative measures to cope with many aspects of the pandemic, social infrastructure funding has not been a priority. Governments alone cannot respond effectively to the crisis on behalf of vulnerable communities; public investments are not sufficient to fill the social infrastructure investment gap. The support of the private sector is needed now more than ever.