Unlocking real estate opportunities

Paul Guest, Senior Portfolio Manager, talks to Real Estate International Europe on investing in private markets and real estate.

Higher interest rates are an opportune time to invest in real estate
The recent adjustments in prices due to higher interest rates have created an attractive entry point. Such opportunities arise only once in a cycle, making it a unique chance to capitalize on favorable market conditions. Real estate can serve as a protection against inflation, as rental income typically grows in line with inflation.

Private real estate can be used as a portfolio diversifier
Unlisted real estate sits between bonds and equities in terms of its risk-return characteristics. Historically it has offered higher returns than bonds, but lower risk than equities and listed real estate. Real estate also has a low correlation with bonds, while at the same time delivering higher returns with only slightly higher volatility. As such, it is often used as a portfolio diversifier.

Climate risk analysis is crucial to real estate
As natural disasters increase, so do the physical risks faced by our buildings, which results in growing premiums. That’s why integrating risk analysis is a crucial component to assess the possible financial risks of our assets, and it is an embedded practice into our transaction and monitoring processes.

Green assets generally will have higher value
Green real estate assets generally exhibit higher value because of factors such as shorter vacancy periods, lower obsolescence, decreased depreciation, reduced operating costs, shorter tenant agreements and improved tenant retention.

A less-liquid asset for long-term investment horizons
It is also important to note that real estate is a less liquid asset class compared with the daily traded public markets in equities, and investors need to take this into consideration. In downturns, it may not be possible to sell real estate investments or sell only at a significant discount. As such, real estate investors typically have long-term investment horizons and do not require the high levels of liquidity provided by public markets.