2015 Real Estate Investment Management Survey
Portrait of a healthy industry
The Deloitte 2015 Real Estate (RE) Investment Management Survey portrays a healthy industry that is currently adapting to new business paradigms and patterns–both those imposed by regulations and those requested by investors.
The attractiveness of RE as an asset class has returned to pre-crisis levels. Sovereign wealth funds are increasing their weight in an industry that is still largely dominated by pension funds and insurance companies: traditionally the two biggest investors. Allocations to RE are increasing at both European and global level, intensifying the competition managers have to face in order to deploy their strategies and find the right assets.
Competition in deal selection and execution is the common denominator throughout the survey: managers who have successfully raised capital in the last 18 months must now deploy their investment strategies by finding the right assets to achieve the targeted performance. The arena is crowded and the high pressure experienced by managers means that most of them are changing their traditional business. Some are shifting from core to core plus strategies, others are entering new asset classes to broaden their product offering and others still are opening or closing offices to reshape their footprint. Yet another group is conducting more pan-European, U.S. and Asian investment, or opening offices, investing and marketing in new countries. They are already international but they need global partners to support their business’s global growth.
To support these changes, a large number of mangers are rethinking their IT tools with a view to improve operational efficiency by implementing systems to either monitor fund activities across the whole fund life or to better control RE assets. Regardless of the scope, the RE industry is looking for solutions which can promote–if not reinforce–standardization in the way operations are carried out. In this respect, investor reporting is playing a major role in paving the way for the implementation of IT tools. Indeed, while industry standards such as INREV are becoming increasingly popular and gaining wider recognition as best practice, reports are still largely produced manually, if not on an ad hoc basis.
Managers tend to answer specific questions with specific reports, preparing manual reconciliation and extracting ad hoc information: hence the need for the standardization that dedicated IT tools would offer. Last but not least, the regulatory burden imposed on managers by AIFMD is still on top of their agenda. Questions remain over AIFMD implementation and how to structure corporate governance to reduce duplications and costs (valuation oversight, distribution, relationship Manco-AIFM, etc.). In particular, regulatory compliance is an issue for managers who are not equipped to follow the latest developments.
Overall, the prevailing sentiment is quite positive. Strategic and operational challenges have been identified; most innovative players are already turning them into opportunities that will shape the immediate future of the industry.