Pricing Reset: A Market Ripe for Value-add Property?
Fast-rising interest rates triggered an ongoing market correction in the European real estate market. In spite of that, this market reset has created a very attractive set of high-octane return opportunities.
Capital values have started adjusting in earnest, but with continued bearish signals from the listed market and further credit tightening expected even as inflation abates, additional negative valuation movements are likely to occur. This is creating a wider set of value-added opportunities than were previously available in Europe. But the dynamic will naturally play out differently depending on geographies and property types.
Market Reset & Repricing: Are We Done?
It is already apparent that there will be an overcorrection in some markets and property types because of the rapid emergence of a dual funding gap: one linked to the very rapid rise of the cost of debt and tighter credit conditions and another linked to the increased costs of ESG and decarbonisation.
However, despite the market pricing reset, operational fundamentals remain strong across many sectors and geographies particularly those that can benefit from solid demographic, digitalisation, ESG and urbanisation mega-trends.
Three areas in particular – logistics and industrial, grade A CBD offices, and specialised alternative assets – stand out, particularly in major urban areas with strong demand fundamentals and a relative lack of quality supply.
In partnership with PATRIZIA, we will examine the macro environment and implications for real estate investors.
- What are the megatrends shaping strategies as we enter a new real estate cycle?
- How are the different European markets adjusting pricing in comparison to other global markets?
- How are we judging fair value in today’s market?
- With the fall in liquidity and repricing starting in H2 2022, should investors commit to higher risk strategies now, instead of waiting 12-18 months for the market to stabilise?
The Future of Offices vs Other Property Types
When it comes to the office sector, most European stock is somewhat dated at this point in time, especially compared to the North American market. Concurrently, what most corporates want from their offices has been changing for some time, a trend only accelerated by the Covid-19 pandemic.
- What are some of the trends in terms of office as an asset class?
- How might these play out in a value-add strategy in 2023 and beyond?
- What is the expected impact of rising rates on a non-core office asset?
- Will green capex be a defining theme of the 2020s? How will this affect the different RE sectors?
- How is the real estate stock being affected by green regulations? Are all sectors affected the same?
Investing in Living & Alternatives
Alternatives like data centres and life science remain strong future performers given secular trends in data and biotech demand.
Residential demand is resilient, and logistic assets have quickly repriced and are liquid again, while retail assets are benefiting from rebased rents and higher yields. In the medium term, the living sectors look positive too.
- Are there surprising evolutions in the capital markets today? What opportunities does this open-up?
- What are the best entry points for opportunistic investing in Europe?
- What signs should investors be watching for?
Mahdi Mokrane joined PATRIZIA in January 2020 as Head of Investment Strategy and Research, overseeing PATRIZIA’s investment strategies, research and performance analytics. He works closely with the CIO in crafting PATRIZIA’s House View and serves on PATRIZIA’s Investment and Executive Committees.
Previously, Mahdi worked at LaSalle as Board Member where he led the European strategy and research team and served on LaSalle’s Debt & Special Situations and private equity real estate investment committees. Mahdi held leading roles at AEW, MSCI IPD, ESSEC Business School, and Caisse des Dépôts. He is also a regular keynote speaker.
Mahdi holds a Ph.D. in Economics and Finance from EHESS (France), a Masters in Financial Economics of Dauphine University, and is an active member MSCI IPD, INREV, EPRA and the RICS.Enquire about this event