Times that shook the industry to its core

A resilient industry

A lot happens in 20 years and the European non-listed real estate industry has borne its fair share of turmoil. Iryna Pylypchuk, INREV’s Director of Research and Market Information, shared her thoughts on the industry’s resilience with IQ.

When the world woke up to the global financial crisis (GFC) in 2008, the shock waves immediately hit the real estate industry. INREV reacted swiftly galvanising its committees and developing initiatives that would help the industry take stock of the situation and move forward constructively. A major undertaking by the association at the time was to review and update the INREV Guidelines, which would help prepare the industry for future shocks. As Iryna points out, ‘this meant that INREV wasn’t actually shaken, quite the opposite, it played a pivotal role, servicing the industry to withstand the negative impact and align’. 

In many ways, the GFC offered an opportunity for the industry to learn and strengthen. It prompted the need for greater transparency, broader understanding and more in-depth knowledge. It was the catalyst for the drive toward more granular data and better analysis. For example, the INREV Funds Index grew significantly from 2008 onwards, providing members with a clearer picture of the shape and scale of the non-listed real estate investment universe.

In response to the growing volume of regulation in the wake of the GFC, INREV established a Public Affairs team and opened a dedicated office in Brussels. This enabled the association to better manage key pieces of legislation, such as Solvency II, unpicking its significance for members and helping them to accommodate changes within their businesses. Add to that improved reporting standards and greater consistency of definitions – driven principally by the INREV Guidelines and INREV NAV – and a more aligned industry began to emerge. 

This meant that INREV wasn’t actually shaken, quite the opposite, it played a pivotal role, servicing the industry to withstand the negative impact and align. 

So, when the Covid-19 pandemic hit in 2019, the industry was better prepared to weather the storm. But the pandemic was also the impetus for further evolution. As Iryna says: ‘From Covid we have the Sentiment Survey which provides members with a very powerful set of quarterly Market Insights that further enhance transparency and link backward looking performance data with frequent assessment of sentiment to enhance the decision-making process.’ This has now evolved into the Consensus Survey and led to the creation of the soon-to-be-launched Consensus Indicator, which will further enrich the quality of information available to members. Similarly, the latest downturn is already providing ‘new lessons learned’ as sharp increases in interest rates revealed misalignment in mark-to-market debt methodologies that are used as part of INREV NAV reporting.

So far, both INREV and the industry as a whole have demonstrated considerable resilience in the face of major challenges. There will inevitably be more in the future, but the historical evidence suggests that when the next ’big thing’ occurs, the industry will be well equipped to deal with it. In Iryna’s words, ‘it’ll be less of a shock and more of a bumpy refinement’.