The old real estate mantra ‘location, location, location’ may well morph into ‘location, digitalisation, information and analytics’, predicts Francois Trausch, CEO of Allianz Real Estate.
Which trends and developments do you hope for most for your business?
The global economy is expected to grow by 3.2% in 2018, matching the growth rate in 2017 (vs. 2.5% in 2016). This is the strongest expansion since 2011. Forecasts for eurozone growth have been revised upwards by 50 bps over the last six months, with the eurozone economy now expected to grow by 2.2% this year (~2.4% in 2017). Global occupier conditions are favourable with strong demand and rents above the last peak in many/most markets. And while the US Fed is on a path of slow monetary normalisation, the eurozone and Japan are quite behind (both in terms of interest rate hikes and QE). The global macro environment is very supportive for CRE investments. I hope this momentum continues and our buildings remain full of satisfied tenants.
What do you fear the most in the coming year?
Availability of investment product and pricing are a concern, but not fear. It keeps me sleeping well at night that Allianz Real Estate is well positioned to source good deals and increase our deals volume, even in an increasingly competitive environment.
Will you be expanding or scaling down your business in 2018?
We will continue to expand the business but will do this by investing ‘differently’ - by diversifying the portfolio geographically, notably in Asia and the US, and product-wise, in logistics and alternative asset classes, so as to reduce our historical dependency on offices and Europe.
What is set to have the biggest impact?
Definitely technology/digitalisation, combined with changing demographic trends. It is happening now, it affects the way we live, work, shop and play. This is the biggest disruption the industry has faced so far. Real estate has always been about location, location, location. The future of real estate may well be about location, digitalisation, information and analytics coming together to shape the “experience” provided to the client aka tenant. We follow these trends closely through our thinktank Innovation Forum; using drones from Fairfleet for risk assessments and due diligence (Fairfleet is a company founded by Allianz incubator Allianz X); and investing in ‘smart offices’.
What will trigger the next downturn in real estate?
I believe 2018 will be a good year for all of us. Weaker economic conditions combined with rising interest rates may trigger the next downturn somewhere down the road.
