Property – Feature
from ensuring buildings are managed in a responsible way, provides a clear value driver.”
Compared with 10 years ago, investment in property was 2.5% of assets, we are now at 5%. Chetan Ghosh, Centrica Pension Scheme
street and institutional investors showing less interest in retail spaces in the era of internet shopping. Principal Investors has seen a clear preference for logistics and industrial properties and forecasts strong occupy demand in the next 12 months. This is in stark contrast to high street retail. “The traditional centres of high-end stores – Fifth Avenue, Rodeo Drive or Bond Street – have felt a little bit of pressure as retailers have stepped away and as a result we have seen some of the softness in retail rents become quite pronounced,” Indy Karkelar says. There is also strong demand for private residential rental schemes in the UK. These are buildings that house between 50 and 400 apartments, which are professionally managed and rented out on one-year leases. Multi-family residential property, as it is known in the US, is a massive market across the Atlantic and one that remains a strong favourite for investors, with growing demand by investors for this residential investment in the UK and Europe, Karkelar notes. Another trend that counts in property’s favour is the ongoing evolution towards an ESG-conscious investment world. Indeed, The BT Pension Scheme, the UK’s second largest retirement fund, specifically cited the environmental advantages of the asset class in its annual report: “With build- ings accounting for almost a third of the world’s energy con- sumption, greenhouse gas emissions and natural-resource usage, responsible investment is an important factor in prop- erty allocation and in many ways property is the asset class in which its application yields the most tangible benefits,” the scheme said in the report. “Investor and tenant demand for well-managed, sustainable assets, as well as clear cost benefits
It has become a familiar theme for AEW’s Doug Rowlands, who says there has been significant change in the way institu- tional investors have considered environmental issues in the past decade. Any due diligence conducted with an investor includes an examination of ESG implications, he says. Row- lands expects the subject to increase in importance and notes that the Australian bushfires have sparked further conversa- tions with investors on the topic. Principal Investors has observed an upswing in interest in property among traditional defined benefit (DB) pension schemes and defined contribution (DC) schemes, especially in the US, which have added property to their allocations. Historically a lot of pension funds have accessed property through a real estate investment trust (REIT) due to their liquidity and general ease of rebalancing portfolios, but during the past few years there has been heightened interest in more private types of strategies within pension funds that are look- ing to add a level of diversification to their property portfolio. There has been a noticeable shift towards property by DB and DC funds, large and small, according to Karlekar. “It has been more pronounced in larger pension funds because they have more capital to play with. But it has been a global phenome- non,” he says.
And there is no sign of the romance between the two fizzling out. “From a broad allocation perspective, we see 2020 as another pretty decent year of capital flows into the asset class, no ques- tion,” Karlekar adds.
Issue 90 | February 2020 | portfolio institutional | 41
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46
