INREV Annual Conference 2018 Dublin

Tick tock goes the property cycle clock

INREV celebrated its 15th Anniversary at this year’s Annual Conference in Dublin. Around 450 delegates were welcomed with sparkly lanyards and umbrellas, both to celebrate the good times and prepare our industry for the stormy times ahead.

There is a lot to celebrate – our industry has evolved greatly over the past 15 years and Europe is in a good position 7 years into the recovery of this cycle. But our industry is changing. Technology, big data, globalisation, sustainability, smart buildings and the service economy are just a few of the areas that look set to have a dramatic impact. It’s up to us to drive these disruptions from within before others disrupt our industry from outside.

Michael Bruhn reminded us that ‘the property cycle clock is the only clock that can go backwards,’ and Alice Breheny warned delegates: ‘Deny the impact of technology at your peril’.

If ‘midnight’ is the end of the current economic cycle, most of our speakers and delegates agreed that we are currently sitting at 22:00 in Europe. In the same week as the annual conference, INREV’s Capital Raising Survey revealed that €152.3 billion of new equity was raised for non-listed real estate globally in 2017, with Europe topping the list as the destination of choice.

On the subject of risk, Dr Michael Heise, Chief Economist, Allianz, warned attendees that risk always builds up in good times: expect volatility to return. A panel of investors were unanimous that in these conditions, transparency and rule of law are paramount for those thinking about moving into new markets.

Tim Harford, the ‘Undercover Economist’, urged attendees to be more aware of how wishful thinking and motivated reasoning affect their decision making, in good times and in bad. In the run up to Brexit everyone convinced themselves that it wouldn’t happen, despite 10 consecutive opinion polls that put leave ahead. It’s difficult to avoid, but by understanding your emotional responses, keeping score on previous forecasts, always maintaining a spirit of curiosity, and listening to rational debates, we can make better decisions.

According to Joschka Fischer, Former Minister of Foreign Affairs, Germany, the center of gravity, which had been based in the Atlantic region for the last 200 years, has shifted to East Asia. The two founding members of the trans-Atlantic west, the UK and US, have both within one year of each other said farewell to the west.

He declared the rise of China and America’s reaction to this as the biggest threat to global stability.

This shift is also apparent in the decline of European cities’ global importance – Europe’s share of the world’s top 50 cities is expected to drop from 14 in 2000 to 7 in 2030. Despite this, Alice Breheny, Head of Global Real Estate Research, TH Real Estate, is very positive about European cities. Her team has identified 91 cities for investment – ranked by personality, progressiveness and sustainability – of which 40 are in Europe.

Dr. Heise advised investors to price in political uncertainties and protectionism, though Paul Mouchakkaa, Managing Investment Director of Real Assets at CalPERS later added that ‘geopolitical risk is difficult to ignore, but almost impossible to underwrite’. Michael Bruhn agreed, stating that on a 20-30 year horizon, his team is much less concerned about geopolitical blips than megatrends.

It’s up to us to drive disruptions from within before others disrupt our industry from outside.

While global economics and Brexit were obviously on everyone’s minds, the opportunities presented by megatrends – especially technology, sustainability and health, and alternatives – have clearly moved from niche to mainstream.

Only 6% of attendees indicated that their new building stock has intelligent systems – ‘cognitive’ buildings that tell them if any functional component is not working well or needs replacing, and where it is. According to Claire Penny, Global Industry Leader, Watson IoT for Buildings at IBM, this is just one example of how technology and data can help optimise real estate services. Every phase of our customer journey – design, construction and use – has room for improvement. The 6% of attendees who said that they do have intelligent systems in their new building stock are disrupting from within, while the 48% who said they don’t (and the 46% who said they partly don’t) are leaving a lot of scope for outsiders to disrupt.

John McKinley, Director, Impact Investing, BlackRock and three panelists discussing sustainable investing all agreed that sustainable investing is no longer a niche activity and has become part of the mainstream. ESG management is simply smarter long-term investing. And thanks to new technologies, there are a lot more data and proof points to highlight the correlation between higher ESG and increased economic performance.

A lively interview with the entrepreneur widely credited with starting the student accommodation industry, Nick Porter, Chairman & Founder of Global Student Accommodation Group, gave attendees insights into this emerging alternative sector. Nick has never been more energised about student accommodation than he is now – over the next 10 years there will be 100 million more students in higher education globally.

Marieke van Kamp, INREV Chairman closed the conference with a video summary of the three days in Dublin, and invited everyone to save the date for the Annual Conference 2019, to be held in Venice on Tuesday 3 and Wednesday 4 April 2019.

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