As each year, EPRA started 2020 with its traditional Insight events in London and Brussels, and concluded this New Year tour back in Paris for the first time in several years. Holding the Insight events in these three countries offered a broad European perspective to the property market outlook as similar trends and phenomena were experienced and debated during each panel discussion.
Millennials are the game-changer for the years to come. Their outlooks on real estate are now driven by an increasing urge for experiences and services, rather than the sole acquisition and consumption of the spaces they live and work in. “We are no longer a provider of square meters but a provider of services and wellbeing,” said Benoît de Blieck in Brussels, CEO of Befimmo, a BE-REIT specialised in offices and coworking spaces.
His assessment was supported by the rest of the panel: Jan de Nys (CEO of Retail Estates), Joost Uwents (CEO of Warehouses De Pauw), Dick van Hal (CEO of Bouwinvest) and Peter van Heukelom (CEO of Care Property Invest). A similar opinion was voiced in Paris by Olivier Wigniolle, CEO of Icade, who highlighted the growing importance of services provided around the office. And by Christophe Kullmann, who emphasised Covivio’s coworking and flex-office offering to meet consumers’ demand.
Just like for the office sector, the ‘experience’ trend applies to retail as well. This new consumer behaviour has led to continued urban population growth and an increase in demand for warehouse and logistics business, in line with the ‘Amazonification’ witnessed over the past decade. “Last-mile delivery continues to grow in importance, with the tailwind of growth in online retailing,” noted David Sleath, CEO of SEGRO.
Urbanisation means, however, that despite technology increase and the ease of communication, people continue to come to the cities to look for human contact and, ultimately, for experiences. As the role of urban centres is evolving, so is the role of shops. The use of the physical shop is changing to accommodate experience. Customers use them more and more as showrooms, for ‘click and collect’ and for product returns.
In addition to the groundswell of change in the behaviour and expectations towards real estate, environmental, social and governance (ESG) issues have become a key topic for a growing number of stakeholders. The definition of ESG is sometimes still a blur to some as it combines three very different topics that should be dealt with distinct scales of assessment. Nevertheless, there is an indisputable rise of interest and push from investors for greater ESG transparency at the investment level but also further up, already during the pre-construction conversation.
Dick van Hal, CEO of Bouwinvest, observed in Brussels: “There is now greater importance for companies to have a long-term view on sustainability and corporate social responsibility. More efforts can still be made, and we have seen that long-term investors are very keen on this topic.”
And the scope of the ESG impact does not stop here. It expands to the whole spectrum of the real estate industry, including customers for the buildings’ energy consumption and investors towards incremental steps for more sustainable finance. Also, employees now give a higher importance to how their potential employer’s brand sits within ESG and will judge them on this basis. And so, companies can no longer step back as the urge for change also comes from within; they must work to keep integrating strategies in a long-term sustainable view.
Overall, it is safe to say that these new trends and changes do not represent a threat to the sector but rather an opportunity. Office and retail are clearly evolving, but the shared view was that they would continue to be the most sought-after sectors by investors.
The continuous diversification of the listed sector has a bright future, with an increasing inflow of capital into the alternatives. Isabelle Scemama, CEO of AXA Investment Managers – Real Assets, argued in Paris: “Out of EUR 7 billion of investment in 2019, 60% were invested in the alternative sectors, such as industrials, healthcare, student housing and data centres.”
Despite refurbishments now being preferred by buyers over the construction of new buildings due to the ESG momentum, there are still continuing requirements for space from a surprisingly wide range of potential and actual customers. “Big tech has been a big part of that, but there are a number of different businesses. In financial services, we continue to see businesses looking to upgrade their spaces. What we see in the equity markets is mirrored by what we experience in the occupation market,” explained the CEO of British Land, Chris Grigg, in London.
Grigg and the four other British panellists – Toby Courtauld (CEO of Great Portland Estates), Matthew Roberts (CEO of into), David Sleath (CEO of SEGRO) and Gillian Tiltman (Portfolio Manager at Neuberger Berman) – were confident about the future of the economy, despite the long-winded uncertainty due to Brexit, and pending any black swan events.