AEW Favor Core-plus and Value-added Strategies

AEW achieved 4 billion euros worth of transactions in 2018 and increased its assets under management in Europe to 30.6 billion euros. Twenty-nineteen also promises to be dynamic.

© AEW

AEW achieved 4 billion euros worth of transactions in 2018 and increased its assets under management in Europe to 30.6 billion euros. Twenty-nineteen also promises to be dynamic.


Leaders League. What’s your view on the 2019 real estate market in Europe?
 

Rob Wilkinson (CEO). I am cautious but more optimistic than at the end of last year. In the last semester, a number of investors began to show concern at real estate prices and the prospect of interest rates rising. But the general economic slowdown seen since the beginning of the year has led central banks to review their approach to monetary policy. An environment of lower for longer would be positive for the European real estate investment Market even if the macroeconomic fundamentals are weaker. 

 

In your view, what will be the key real estate markets and those that will be neglected by investors in 2019? 

 

We have identified three categories of countries in Europe. Firstly, the developed markets which are liquid and transparent, namely France, Germany and to a lesser extent the Nordic countries. They are likely to remain investors’ preferred choice. Their occupational dynamics will also be positive with an increase of rental values due to the low vacancy rates. The second markets are those that are in turnaround such as Spain and the Netherlands, these markets suffered particularly during the economic crisis and have taken some time to recover. Today they are experiencing sustained growth that will generate significant increases in rents. Finally, we have markets where investors will remain relatively wary. These include those countries in central Europe where the geopolitical risks are increased and the United Kingdom, where the uncertainty generated by Brexit will see investors staying on the sidelines at least up to end of March 2019.

 

What will be the main investment strategies of AEW in these markets frame? 

 

We favour core plus and value-added strategies due to the current discounted pricing for non-core assets and the significant potential for value creation. With respect to asset types we are seeing a major re-balancing of investors’ portfolios. Historically, office assets would represent half of their portfolio, retail 30%, logistics 10 to 15% and residential the rest. We are now heading towards a balance between these four major asset classes, with a particular focus on logistics due to the positive impact of e-commerce and residential with its socio-demographic drivers. Finally, we will continue to focus on the debt market. We launched our debt platform a few years ago and are targeting to increase this to more than €2bn in AUM within the next three years.

 

François Perrigault

Read the full Special Report: MIPIM 2019 - Cannes

When is the cycle going to end? While the question has been discussed at length by real estate professionals in recent months, the general consensus seems to be ‘no time soon’. Several of the leaders interviewed for this special report have committed their companies to targeting core office properties to hedge against a possible market downturn. That is just one of many strategies being deployed by investors in Europe in 2019. Leaders League gives you a 360-degree perspective on the state of play in the industry today, in the company of its main players.
Summary MIPIM 2019 Round-Up Allianz Real Estate is Working on Its Asset Pool to Create Value AXA IM-Real Assets Expects to Remain Active Across the Entire Risk Spectrum Paref’s Strategy Rests on Three Principal Pillars La Française Aims to Redirect its Focus to Interconnected Urban Centers We Invest in Products That are Core/core+ With a Long-term Approach Primonial is in Lockstep With Developments in the Market Diversification of Our Asset Allocation is Our Watchword for 2019 Covivio Will Use Three Pillars to Further Improve Results

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