Identifying those sectors and assets that will benefit from key mega-trends is not enough to guarantee success. The value of good asset management will prove more critical than ever now that the cycle appears to be turning. This means increased engagement with all stakeholders, from residents and users to regulators and even the planet.
In real estate, for example, the role of the asset manager has shifted away from rent collection. “The focus is now very much on the tenant side, including building management and relationship management,” says Laurie Lagarde, head of the EMEA logistics operator division at CBRE Investment Management. “It is about ensuring the quality of the customer journey, rather than just collecting income.”
“Investors aren’t our only clients,” adds Rik Eertink, president of the EMEA real estate division for CBRE Investment Management. “Our occupiers are also extremely important, and those occupiers are becoming increasingly discerning. They require more flexibility and higher-quality service levels. The combination of listening not only to our investor clients, but also to our occupier clients, is what will generate superior investment performance.”
Listening to occupier clients in the residential sector may mean changing the use of common areas, or adapting units to meet shifting demands. In retail and office, meanwhile, real estate is an increasingly important part of many companies’ brands. “These businesses have high aspirations for their buildings and high aspirations for the services provided by their landlords,” says Paul Gibson, chief investment officer of EMEA direct real estate strategies at CBRE IM. “Those that know their customers best will thrive.”
Staying on top of trends
In logistics, asset managers can help their clients understand the big trends that will impact their strategy, staying ahead of their future real estate needs. That might mean identifying the best locations from a labour supply standpoint, or helping employers attract talent with gyms or cafes or the inclusion of electric vehicle charging.
“The focus is now very much on the tenant side, including building management and relationship management”
Indeed, ESG is an increasingly important speciality within asset management. “There is a far greater emphasis on ESG, particularly in the European market where I operate,” says Lagarde. “In Europe, it is now mandatory to be mindful of ESG issues, whether we are talking to investors or customers. That is an important trend that is shaping the future of real estate asset management.”
Asset management is also an increasingly important driver of returns in infrastructure. “If you want to successfully differentiate in this market, I believe an active, value-add strategy will deliver good risk-adjusted returns,” says Esther Peiner, co-head of private infrastructure, Europe, at manager Partners Group. “The impact of rates and inflation on long-term valuations is likely to hurt more passive managers.”
It is clear that the prospect of a new macroeconomic environment is placing renewed emphasis on asset management. “Things look easy today, because yields are going down and value is going up. But one day that may change,” says Lagarde. “When that day comes, an asset management function will be judged on its capacity to answer tenants’ changing needs and to address ESG objectives. It is no longer just about collecting the rent.”