4 July 2019, Germany | Corporate Finance, Investment Management | News
A few weeks ago, we once again asked the German multi-asset managers about their attitude and perspective when it comes to real estate. Especially since the signs have changed: Looking back, the real estate year 2019 will go down in history as the era in which value-added investment strategies structurally replaced traditional core-investment-styles. Structurally, because there are no signs of a significant change in the interest rate landscape. In addition, there are changes at the macroeconomic level: it is becoming more and more obvious that classical property selection, applied to selected markets using a top-down approach, is becoming more and more ambitious. In the current transaction market, it is clear that the majority of investments are primarily made on a deal-by-deal basis.
Further results:
Asset allocation:
- Office: While an average of approx. 30 % is currently being invested in this segment, participants plan to invest around 4 % less in office real estate in two years' time. Residential real estate ranks second in the popularity scale. Approx. 27 % are currently being invested in this class. A small decline of 2.5 % is expected in 2 to 5 years.
- The industrial class shows a small fluctuation, which is expected to peak in 2 years. It is also striking that the retail segment will continue to decline according to this evaluation and will decline by approx. 3 % in 5 years. By contrast, investments in hotel properties are expected to pick up by around 3 % in the long-term.
Markets:
- The geographical investment prospects for next year are seen most positively among the selected markets in Germany. This market is rated as "very good" by 15.63 % of those questioned, "good" by 53.13 %, "average" by 28.13 % and "below average" by only 3.13 %.
Extra question ESG:
- Most of the respondents indicated that the importance will increase in the coming years (59.38%). 31.25 % even said that they were convinced that the issue would become increasingly important in the future. 9.38% rated the importance of the sustainability issue as "neutral". It is noteworthy, however, that none of the respondents selected the categories "decreasing" or "significantly decreasing".
In summary, the answers also indicate the tactical direction for the coming quarters:
- Investors are leaning toward more selective investments.
- Overall, fewer transactions are expected in the coming quarters, albeit in a higher lot-size.
- Alternative strategies are aimed primarily at the value-add segment as long as the risks are considered manageable.
- A deal-by-deal process is becoming more popular with investors, bottom-up research, on the other hand, is experiencing a renaissance.
Please take these insights with you into the more relaxed time of the year.