Australian group Macquarie Asset Management is betting on ‘new economy’ office spaces through its partnership with sustainable and tech-enabled developer Edge.
For office spaces to be successful and valuable in a post-Covid world, they must not only be well-located. ‘They must also meet occupiers, lenders and investors’ sustainability ambitions, while providing an offering and environment beyond “just work”,’ says Dana Gibson, Macquarie Asset Management’s head of real estate for Europe.
It is with this conviction that the €479 bn Australian asset management giant in early February invested in Edge, an Amsterdam-based green office development firm. The idea is to help this specialist operator expand into new markets and structure a more diverse suite of investment ventures.
‘By partnering with Edge’s management team, we will help expand the business and build its investment management expertise – ultimately providing more opportunities for capital to access Edge’s market-leading developments. And in return, this partnership gives us the opportunity to deliver enhanced value to our investors and to give them greater access to attractive real estate opportunities,’ Gibson comments.
Sector specialists
The acquisition of a ‘significant’ minority stake is part of Macquarie Asset Management’s efforts to connect institutional capital with opportunities to establish and grow specialist platforms.
Last year, the group backed Darryl Flay and Martin Bellinger, co-founders of the UK private build-to-rent developer-operator Goodstone Living, to bring the business to the next level. The platform has just announced its second project in Edinburgh. ‘Within our first 12 months of operation, Goodstone Living has secured two development sites which will deliver over 900 units representing £300 mln in completed value. A further 7,000 units have also been identified,’ Gibson points out.
Like rental housing, Macquarie Asset Management’s Gibson believes future-minded offices are also part of what he calls ‘the real estate of tomorrow’. ‘We are constantly looking beyond the current market cycle to identify and capitalise on opportunities in these sectors which are most influenced by the three key global mega-trends of urbanisation, digitalisation and demographic shifts largely driven by maturing Millennials and an ageing European population.’
What does this mean in the office sector? On the one hand, it means adapting offices to the new hybrid working model, on the other it means focusing more and more on sustainability. ‘Rethinking the use and functionality of the office is requiring more space to be allocated to in-office employees, which ultimately helps to offset the number of employees now working from home,’ Gibson explains.
Offices of the future
Adapting offices to this new way of working – or what Gibson calls ‘new economy’ office space – often results in more technology in the workplace, including more Zoom-friendly meeting rooms, as well as break-out areas to allow for collaboration, networking, and brainstorming sessions.
In addition to the format of ‘new economy’ office spaces, global investors and corporates are shifting strategies to achieve carbon-neutral status, with the proportion of real estate investors taking ESG factors into consideration significantly on the rise. ‘Sustainability is more and more important to tenants too. With the built environment responsible for 39% of global energy-related carbon emissions, it’s clear the real estate sector has a key role to play in the world’s decarbonisation efforts, and there are commercial benefits to be realised as well,’ Gibson explains.
Together with build-to-rent and tech-enabled offices, Macquarie Asset Management also sees growing opportunities in the logistics and data centre sectors, where the global mega-trends of urbanisation, digitalisation and demographic shifts also play a role. Says Gibson: ‘Europe’s supply chains have been in a constant evolutionary state, where the supply and demand dynamics will remain favourable for years to come as Europe’s high obsolescence rates, higher barriers to development than in North America, and increasing e-commerce penetration accelerate demand.’
In the data centre market, the rapidly growing creation, retention, processing and retrieval of data is increasing demand for data centres as data capabilities become mission-critical to the business operations of nearly all enterprises, regardless of industry or sector. ‘While investment into the sector has high barriers to entry - based on capital intensity, required technical expertise, customer and locational requirements - these relatively high barriers can also reward investors with sticky tenant contracts, stable cash-flows and a net initial yield premium over some of real estate’s more traditional sectors,’ Gibson concludes.
