REflexions offers a wide range of insights into trends and developments in the real estate market across the globe. Read the latest from our four categories: market views, technology, geography focus and markets focus.
Welcome to this tenth edition of REflexions, with its wide range of insights into trends and developments in the Real Estate market across the globe.
We present this edition for the first time in a new format, with items presented in four different categories: market views, technology, geography focus, and markets focus.
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"Market views" presents insights into the RE investment from leading figures in the industry. In this edition, we present two interviews. One is with James Seppala, Blackstone’s Head of Real Estate Europe, in which he explains the company’s proactive approach to RE investment, and the use of real-time data from across its global network in support of decision-making. He also comments on the importance of culture in shaping the company’s success in RE investment, and how challenging opportunities are given to individuals, even at relatively junior levels, to develop the business; on the implications of interest rate changes for investing in growth; and on investment in technology.
Our second interview with Sven Andersen, CFO of FREO Group, explores sustainable development and the role that the real estate industry plays in mitigating the environmental impact of energy consumption. He explains how the trend toward construction of "green" buildings in urban areas to meet changing lifestyle demands of the population is creating value and offering the potential for attractive investment returns. He also identifies problems that exist, such as choosing between different approaches to sustainable building and, not the least, the challenge of adapting the traditional approach to investment appraisal in RE to take account of the value from gains in energy efficiency.
In the "Technology" section in this edition, we present an article on the use of data analytics, a fast-developing feature in the RE industry. As growth and profitability in the commercial RE sector come under pressure, data analytics and AI can assist with identifying investment opportunities, using the increasing volumes and granularity of data from a wider range of sources. Although some concerns remain, data analytics are being used increasingly for predictive analytics and risk analysis to make objective decisions for portfolio management and identify investment opportunities to generate a high alpha. To get started with data analytics, there has to be a development plan for data management, and a shift in the organization’s mindset.
Our article in the "Geography focus" section looks at investing in special-purpose properties in Germany, as an alternative to investing in the "traditional" asset classes of offices, retail, and hotels. Investing in special purpose properties presents opportunities for higher returns; however, a good knowledge of the market is needed to make sound decisions because demand for these types of property are driven more by social and demographic trends than by economic decisions of companies. The article looks in some detail at three segments within the special-purpose property sector. The first is health care properties, where demand is being driven by the growing proportion of Germany’s population aged over 65 and by increasing life expectancy. The second sector is industrial real estate, and particularly properties for warehousing and logistics, where demand for more space is being driven by the growth in e-commerce but may be affected by changing conditions in the German economy. The third sector is micro-apartments, which offer "turnkey" full-facilities accommodation in coveted city center locations and affordable single living accommodation. Demand for this type of accommodation comes mainly from professionals and executives wanting hotel-like facilities with communal spaces, and from students (with smaller budgets).
There are two articles in our "Markets focus" section. One presents a summary of the Deloitte Property Index 2019 review of residential property in countries and cities across Europe. This looks at trends in residential property prices and changes in the availability of housing to meet the high demand. The second article provides a round-up of the findings in Deloitte’s 2019 European Operations and Technology Survey of RE investment managers and their insights into developments in the industry. This covers a range of issues, such as the outsourcing of services, the use of software for day-to-day administration and investment decision-making, the shortage of digital talent in the industry, the pressure on fees, and the impact of regulatory compliance (for example, with the AIFMD) on operations and costs.
The RE industry is continually changing, and we recognize the importance of keeping on top of developments and recognizing what is happening. We hope that the articles we present in REflexions will be both informative and entertaining. Enjoy this edition!