Investors are diversifying their strategies to spot opportunities in sub-sectors of the real estate market, as a new economic and interest-rate cycle kicks in, delegates heard at the annual conference of the European Public Real Estate Association (EPRA) in Berlin this week.
“In Europe, we have still a strong conviction in logistics,” said Mie Caroline Holstad, CIO of real assets at Norwegian sovereign wealth fund Norges Bank Investment Management (NBIM). “The e-commrece penetration in that sector has yet to see real growth
“We are looking at that sector with huge interest, also with alternative views on that – data centres, for example,”
The office sector in the US is a “good entry point on the private and less so on the listed side”, Holstad said.
She added: “When it comes to the US, senior housing with population ageing, and data centres are interesting. Structural growth in both sectors are very different – [for] data centres [it] is AI and technology. Connections are not there to the extent they should be, and that is obviously something that will drive that sector.”
NBIM, the manager of the Government Pension Fund Global, invests up to 7% of its total assets of US$1.7trn in real estate, including listed and private. Today the real estate portfolio is split 50-50 between listed and private assets and amounts to US$66bn, Holstad said.
Investments in renewables could amount to up to 2% of total assets, but are less than $2bn, she added.
Oxford Properties, the real estate arm of Canadian pension fund OMERS, which invests 15% of total its total assets in real estate, looks at the underlying fundamentals, stock selection, individual assets and locations, said managing director ofr Europe, Abigail Shapiro.
“The purchasing power for the few highest-class office products in the best location will outperform. We are spending a lot of time in London, and we are keeping an eye in Berlin and France,” she said.
Oxford Properties has combined retail and infrastructure investments, recently acquiring the retail concessions at a number of major transport funds for train stations across Italy. Shapiro said: “I am keen to continue to explore (those combinations) across Europe.”
Paul Clark, head of real assets for Europe at AustralianSuper, underlined that UK real estate “has a history of correcting more abruptly” than Europe, and in the first quarters of the year we are close to the bottom for prime UK real estate.
“There is value in retail now. The shopping centres we own from an operation perspective are performing very well. Operationally, we like living, industrial. On the living side in the UK, where is still a relatively emerging asset class, the long-term tension between undersupply and demands continues to offer a prospect of attractive income growth,” he said.
In industrial real estate, “the big returns are over”, but the underlying economic tailwinds behind the sector – digitalisation – make it an “ever attractive sector to invest in”, he added.
Canadian pension fund CPP Investments invest in real estate, infrastructure and energy under a real assets programme worth around $140bn, with listed real estate currently around 17% of the total real assets, said Kim Wright, head of listed real assets.
CPP Investments is closely monitoring the data-centre sector globally, “publicly and privately”, with a solid growth outlook given the strong costumers demand and high compelling development returns, she added.
