Investors and managers pivoting towards space as a service
23 September 2020, Amsterdam – Recent research from INREV, the European association for investors in non-listed real estate vehicles, explores the risk characteristics of the evolving operational real estate investment sectors in Europe and points to an anticipated rise in interest from investors and managers.
The research paper entitled Operational Real Estate – Real Asset or Real Economy? identifies an emerging shift in thinking within the real estate industry. This is being driven largely by two megatrends: the change in investment approach from providing space as a product to embracing space as a service; and the long-term structural trends, stemming from accelerating economic and social megatrends. It highlights the growing need for investors and fund managers to find ways to unlock value from their assets and minimise risks in the face of shortening lease lengths and reducing business lifecycles observed in the traditional sectors. These factors point toward increasing attractiveness for investment in operational real estate.
According to INREV’s Investment Intentions Survey (2020), capital allocations to stand-alone operational real estate sectors in Europe currently stand at 11.8%. Given the strength of underlying demand drivers and increasing investor requirements, operational real estate’s share of the investment universe is expected to increase over the next decade.
The research highlights the implications for the investment approach in terms of objectives, structure, and resource requirements. It identifies the opportunities, risks and practicalities associated with investment in the various models of operational real estate.
The findings reveal that investing in operational real estate has implications for required expertise, knowledge and the overall scale of resource. They identify that the cost and range of this resource requirement vary significantly from segment to segment and intensify with the rate of participation in the operational business across the investment structures. The research also underlines the benefits of operational real estate investment, especially in terms of a large dispersion of risk / return opportunities and as a potential portfolio diversifier.
Iryna Pylypchuk, INREV’s Director of Research and Market Information, said: ‘This research maps out a clear direction of travel for the future of non-listed real estate: a shift in investment mindset from space delivered as a product to embracing space as a service. What is fascinating is the sheer diversity of potential investment options and risk mitigation structures available to investors and managers. For investors with the ‘real estate as a service’ mindset, it is also a choice to move up the value chain and partake in developing segments of the new economy.’
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For further information, please contact:
Johlyn da Prato, johlyn.daprato@inrev.org | +31 (0) 621397456
Justin St Clair-Charles, inrevteam@firstlightpr.com | +44 (0) 7769 644 059
Josie Workman, inrevteam@firstlightpr.com | +44 (0) 7460 325 392
Notes to Editors
About Operational Real Estate – Real Asset or Real Economy?
The Operational Real Estate – Real Asset or Real Economy? report is based on structured, in-depth interviews with a total of 22 investors and investment managers active in the alternative real estate market in Europe, including eight investors, 12 investment managers and two multi-managers. The bespoke interviews were conducted between June and August 2020 and supported by existing literature and data.
About INREV
INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for institutional investors and other participants in the growing non-listed real estate vehicles sector. The association represents and reflects an industry with a total value of €2.8 trillion and INREV members deliver €385 billion of stimulus to the real economy of Europe.
INREV has 461 members which include 86 of the largest institutional investors as well as 40 of the 50 largest real estate fund managers, plus banks and advisors across Europe and elsewhere.
The non-profit association is focused on increasing the transparency and accessibility of non-listed vehicles, promoting professionalism and best practice, and sharing knowledge. It is based in Amsterdam, the Netherlands.