Andy Poppink, CEO EMEA markets at JLL, pursued a career in basketball before moving to the world of real estate. As the property industry warms up for what looks like a challenging year, Poppink thinks it will still be worth investors shooting their shot.
‘My view is that there will be both opportunities and challenges ahead,' he says. 'For well-capitalised investors that have seen cycles before there will be tremendous opportunities; for those that have put themselves under more pressure in the near term, it may be a bit more challenging. Real estate is ultimately based around tenant demand which fills the space and creates returns. We had a surprisingly resilient year in the leasing markets in 2022 – that story has got lost in all the talk around rising interest rates and the impact on the capital markets.
‘Looking at the investor side, the debt and yields situation creates pricing disparity, and we are starting to see price discovery and a more solid footing emerging in key markets. I expect uncertainty to continue through the first half of the year, but in the second half, people should start to feel like they have enough terra firma to make investment decisions.’
One of the fallouts of the shifting macroeconomic landscape has seen sector-agnostic investors hit pause on real estate in favour of other financial instruments. Yet Poppink sees a way for property to stay in favour. ‘I think it’s still part of a well-balanced, diverse portfolio and should be a key component of people’s investment strategies. In this environment, which has had a broad impact across asset classes, it is often difficult for investors to find the lighthouse that guides them to the safe harbour. But if we look at interest rates, real estate is a bit of a hedge against inflation; and to be honest, there are few stand-out, compelling alternatives.’
Diverse approach
Drilling down into asset class opportunities, Poppink acknowledges that the ‘clear safe haven assets such as residential and logistics’ that emerged in the first year of the pandemic have also been affected by 2022’s economic downturn. Once again, he counsels a ‘diverse’ approach to portfolio building.
‘The fluctuations we have seen in the past tend to be cyclical. So industrial and logistics appeared to be out of favour, until e-commerce made them the darling of the industry. Retail was facing distress, but we have recently seen significant activity, particularly on high street locations. Offices fell out of favour during the pandemic, but our research shows that 74% of businesses still see the office as core to their strategy. Then there are the niches like life sciences and data centres which have performed very strongly, also thanks to tailwinds from the pandemic, but continue to look compelling.’
Finally, a word about proptech, in the light of tech investment taking the brunt of investors withdrawing risky capital. ‘Although we have made tremendous strides in the proptech journey, we’re still in the early stages of what it can do for the industry. We have billions of data points we still need to process and the long-term opportunity remains massive in terms of delivering outcomes.’
‘The main takeaway is that the property sector is amazingly resilient,’ Poppink notes. ‘I think that surprises people sometimes looking from outside the industry. The key is using the assets that we have and encouraging their evolution, while taking heart from property’s global status, its importance to our societies.’
