There has been a major shift in Europe, as new international investors targeting real estate are willing to look at alternative and even niche sectors in their search for yield, delegates heard at the PropertyEU Real Estate Private Equity event, which was held in London this week.
‘Gone are the days when Chinese investors would only look at prime offices,’ said Jonathan Cantor (pictured), partner at Dentons. ‘Now they are looking at senior living, student housing, logistics and more. Family offices from all countries are paying more attention to Europe and going into different asset classes. This is what we see happening, as our global platform allows us to see the big picture.’
The diversification trend
‘Pension funds always like well-let long-let properties, but now they also have to look at alternative assets and at value-add, despite the hurdles,’ said Paul Jayasingha, global head of real assets at Willis Towers Watson. ‘There has been a real change of view. Even investors who start from scratch no longer feel they need to have a compulsory stake in offices because it is a big part of the index, but they focus on alternative sectors instead.’
As investors become more comfortable with what until recently used to be no-go areas, consultants are now required to advise on a much wider range of investments. ‘Our clients need solutions to problems and real estate is a good solution,’ said Paul Richards, head of European real estate at Mercer. ‘We now need to create a solution across asset classes that fits the needs of the specific client.’
The consolidation trend
After diversification, the other big trends in the real estate sector are consolidation and proptech, panellists said, and these changes are affecting everyone - law firms and consultants as well as investors.
The structure of the investment community is changing fast, said Thomas Wels, head of real estate and private markets at UBS Asset Management: ‘We are seeing consolidation in the UK and in Europe, and we are being confronted with fewer and larger clients.’ These larger clients tend to look for larger deals that can be difficult to find in a competitive market.
‘We are seeing increased consolidation because what is needed is scale,’ said Cantor. ‘Law firms have an expanded role now, they are bringing people together, guiding synergies and joint ventures in the real estate space. They are the facilitator, there from the very outset and no longer just at the end of a deal.’
The other new imperative is that technology, innovation and artificial intelligence must be embraced. ‘Lawyers are not necessarily good at this kind of thing, as they prefer their ink, quill and parchment,’ said Cantor. ‘But we have to learn quickly to move with the times and deliver what our clients want. No one can afford to rest on their laurels.’
