Changes in the investment landscape

One key discussion focused on a possible shift in asset categories, featuring insights from industry leaders Christiane Eckert PBU - Pædagogernes Pension, Martin Lemke (AM ALPHA), Max Beekmann (Bayerische Versorgungskammer), and Dr. Nicole Arnold (Commerz Real AG).

They explored the connections between real estate and other investment options, identifying which types of buildings, locations, and uses offer the best chances for strong returns. As the investment landscape evolves, their insights provide valuable guidance for the future.

Martin Lemke pointed out that there is a significant difference in the global real estate market between developed countries and growth countries. “Countries with high GDP growth and rapid urbanization are witnessing substantial real estate development and attracting many real estate investors, while in developed markets, the share of investments in real estate relative to other asset categories remains more or less stable.” One such growth country is Poland. Since Poland joined the European Union, its GDP has doubled to €750 billion, making it the sixth-largest economy in Europe. The costs of buying and maintaining real estate in Poland are relatively low compared to other European countries, and due to robust economic growth, there is high demand for office space, ensuring stable rental income.

Max Beekmann noted that real estate will always remain a valuable instrument for institutional investors, as it is generally inversely correlated with assets like stocks and bonds. “However, this has also led to the appreciation lagging behind the substantial value increases of technology stocks from companies operating in the artificial intelligence space.” This has caused some institutional investors to rearrange their portfolios and invest their distributions from real estate funds into other assets. “It remains true,” added Max Beekmann, “that real estate provides protection against inflation, especially when investors also make efforts to enhance the resilience of their properties, such as through renovations for higher energy efficiency. Therefore, real estate should never be absent from a balanced investment portfolio.”

While some types of real estate assets, such as office spaces, have faced challenges recently, others, like hospitality and logistics, continue to attract significant interest from investors. Furthermore, conversations at Expo Real and during various conferences indicated that the opinion expressed during the pandemic—that no one would return to the office for work—can now be disregarded. Not only because people are inherently social beings who need contact with colleagues, but also due to cultural differences that have often been overlooked. For instance, in a country like Japan, working from home has never truly been an option post-pandemic.

The main takeaways from the panel discussion were that offices remain in demand, and hospitality and retail properties continue to offer ample opportunities for investors. However, it is crucial to focus on innovation and renewal in these areas. Tenants still want offices in prime locations, but these spaces need to be designed in a more homely manner. There is also a clear growing interest in so-called “SWELCH” total concepts. This acronym stands for neighborhoods with a vibrant mix of Shopping, Working, Entertainment, Learning, Culture, and Hospitality. This innovative formula is gaining traction in the realms of retail, urban policy, and city development. Properties in green shopping promenades are looking forward to a bright future. These trends are already evident in places like the Green Light District in Amsterdam or Coaldrops Yard in London. Greening is indeed a key term. As ecological expectations become more prominent, the gap between prime and ESG-compliant assets and others is expected to widen. Therefore, we see some investors exploring alternative uses for their properties, such as converting well-located office spaces into housing, student accommodations, and data centers.