ESG: SAVING ENERGY TO BOOST RETURNS

Justin Travlos, Global head of responsible investment, Axa IM Alts

As the real estate industry evolves, I expect data and technology to become more important in supporting asset managers to achieve their ESG goals. For example, there’s always been a rough rule of thumb that if you acquire an asset that has up until that point been managed in a light-touch fashion, you can almost immediately guarantee a 20-30% improvement in energy efficiency simply by actively managing it and focusing on its specific use.

Better again, by utilising the latest technology, you can push these savings further – which is obviously a win-win because it doesn’t require huge amounts of capex but does generate savings, financial returns and lower carbon emissions.

DIGITALISATION: GOOD INVESTOR ONBOARDING

Clive Bellows, Head of global fund services, Emea, at Northern Trust

Across the whole spectrum of alternatives, there is a growing demand to see greater digitisation of the end-to-end process between all the major stakeholders. Real estate is no exception, and one of the primary areas gaining attention is the investor experience, through the onboarding process and reporting.

Delivering information to investors through efficient portals are table-stakes, but investors are looking for more. Transparent reporting of their investments and ESG analytics continue to be a popular theme and will be expected by the next generation as a standard offering.

However, for most investors an effective onboarding experience is a must-have. The investor is currently confronted with multiple experiences, requiring them to complete the exercise repeatedly based on where they invest. Simplifying that process is high on the agenda, but until we evolve towards a more collaborative industry-wide model, leveraging digital portals to source, capture and authenticate the investor’s documentation is a positive step forward.

Real estate continues to be a popular strategy and investment into this area will continue to increase alongside other alternative strategies, so it is key that the industry continues to address the challenges by enhancing the levels of automation, moving towards greater standardisation and presenting investors with a best-in-class digital experience.

Augmented reality and technological advances will enhance the hybrid working model and drive an evolution of offices as a place to connect, brainstorm and collaborate.

INFLATION HEDGE?

Iryna Pylypchuk, Director of research and market information, INREV

The 2022 INREV/ANREV/PREA Investment Intentions Survey once again reiterates the strength of real estate as an in-demand investment asset class. It highlights institutional investors’ substantial appetite to allocate capital to real estate globally – especially non-listed funds – with more than 60% of respondents planning to increase their allocations over the next couple of years.

There’s a clear view among all institutional investors, and European and North American investors in particular, that real estate offers substantial diversification benefits as part of a multi-asset portfolio. But, perhaps surprisingly in the current environment, investors across all regions don’t rank real assets as an inflation hedge as highly, with multi-asset benefits clearly taking an overarching importance in decision-making.

Overall, there is a key theme about greater appetite for risk when it comes to investment preference in terms of capital deployment planned in the next two years. This is reflected in investors’ changing preferences in favour of value-add strategies as opposed to core, and this is quite marked among investors targeting Europe. No doubt, this is in part a response to their search for yield in an environment of stiff competition for suitable products.

FUTURE OUTLOOK: GOING UNDERGROUND

Joanna Tano, Head of research at BMO Real Estate Partners

In the same way that Covid-19 accelerated trends that had been playing out for some time, the key themes that are prevalent today will matter more in the future and become integral to real estate decisions.

The ‘green and clean’ agenda will be mainstream and those that don’t subscribe will fall behind. This will prove pivotal, not just in how and where we build, as we look to preserve the environment, but also in responding to occupier demands.

More construction will happen below ground as we limit urban sprawl, protect green spaces and promote wellbeing. But this comes at a cost and only suits certain types of real estate – for example, industrial and logistics. Multiple storeys require more strength, thus greater investment, and occupiers and investors need to be prepared to accept this for the returns offered.

More intelligent construction will surface, catering for multiple uses of an asset across its life span. And with the green agenda in mind, why not build an office building today that can be repurposed as residential later in its lifecycle? fe

MPIM 2022 takes place in Cannes, France, from Tuesday, March 15 to Friday, March 18.

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