The economic outlook hasn’t been this good in a long time. According to the latest RICS Commercial Property Monitor the eurozone is enjoying its best period since the financial crisis, which is giving a boost to real estate markets. The mood in euro area real estate markets is generally positive, say the experts at RICS. The Occupier Sentiment Index also returns a positive reading for 28 of 34 countries. In particular, German real estate – the cover story of this issue of places & spaces – is scoring points thanks to the country’s stable socioeconomic framework and counts among the most sought-after investment regions world-wide.
That’s generally good news. But even if the situation in the real estate sector has improved slightly on previous years, the challenge of investing client capital in properties that will ensure sufficiently high returns in the long term is still considerable in 2018. After all, the European Central Bank is continuing to operate in crisis mode, leaving the base rates of interest unchanged in January and confirming that the low interest period will endure for some time to come. So, as in the recent past, we can expect capital to carry on flowing into real estate markets for lack of alternative investment options – even in locations where the cycle is very advanced or has already past its peak. It will be a while yet before we get the “all-clear”.
Nevertheless, even if financial markets continue to normalise, we might wonder if it will ever be possible to return to the kind of “business as usual” approach of decades past on the real estate markets. After all, achieving success on international property markets is now about much more than just understanding the real estate cycle or living by the successful property manager’s favourite maxim of “location, location, location”. Proactive risk management, which has fortunately gained in standing over the past few years, is still an obligation for the time being – not least because in the globalised world of the 21st century, changes in trends, the economy, technology and society are occurring at an ever-faster rate. Digital technology, the development of artificial intelligence and new environmental protection goals and regulations are giving rise to changes in demand, whether this is for real estate locations and segments or the design and quality of properties. These are some of the topics we explore in this issue, and it’s highly recommended reading!
In addition to the “traditional virtues” called for in fiduciary management of investment funds – and by no means only in the asset class of real estate – managers and employees need one skill in particular: the ability to identify transformation processes early on and to assess their relevance for their own work. They need to be able to adapt to these processes but also to shape them and use the opportunities they afford. To give one example: IT expertise is seen as increasingly important at all major asset managers. But more essential than IT know-how is an approach to your work that allows you to try out new solutions and implement them early on. We are talking about a new kind of mentality; one that asks how innovation in teams can be initiated, encouraged and established – ultimately, it’s about creating a culture of transformation.