Real estate investment’s role in the recovery
As we reported in the last IQ, the COVID-19 crisis has prompted an unprecedented number of regulatory and policy consultations. Faced with the new challenges brought by the pendemic, including the stresses to the financial sector, policy makers have been closely monitoring how current regulations achieve their goals. They’re keen to understand whether the wave of regulations ushered in following the GFC are fit for purpose and how well they can support a vigorous and safe economic recovery from the current crisis.
The COVID-19 crisis has prompted an unprecedented number of regulatory and policy consultations
At the same time, the real estate investment industry, along with other financial sectors, are engaged in far-ranging discussions with policy makers about how existing regulations haven’t worked as well as intended or, more often, how they could achieve policy goals at lower cost with fewer inefficiencies and unnecessary burdens.
INREV has been playing a leading role in these discussions and has been intensively engaged with policy makers across a range of issues. A critically important part of this engagement is educating policy makers how institutional real estate investment is a long-term investment for pension funds and life insurers and how it contributes to economic growth, job creation and the re-invigoration of spaces where people live, work and spend their leisure time. At the same time real estate investment significantly contributes to achieving sustainability goals and other impactful social benefits.
The pandemic has not resulted in a widespread real estate crisis, as some regulators may have feared, but instead has left the real estate investment industry well positioned to contribute strongly to the recovery and a sustainable future
As the economy and society in Europe have had to demonstrate resilience and reinvent themselves to survive and emerge from the COVID-19 crisis stronger and more fit for purpose, so too is the non-listed real estate sector demonstrating reinvention and resilience. This is an important message we’re bringing to policy makers across Europe, pointing out that the pandemic has not resulted in a widespread real estate crisis, as some regulators may have feared, but instead has left the real estate investment industry well positioned to contribute strongly to the recovery and a sustainable future.
[ad:content]
The combination of economic transformation, new regulatory standards and changes in the real estate investment sector’s structure and operation will develop hand-in-hand in the months and years ahead. Upcoming changes to Solvency II, AIFMD, ELTIF, SFDR and Sustainable Finance Taxonomy, available fund structures and the tax treatment of real estate investment will all have a significant impact on our industry’s ability to make the best possible contribution within this dynamic.
The latest annual data show available that commercial real estate investment contributed €452 billion to the European economy and that our industry directly employs more than 4.2 million people, more than in the banking sector and more than in the automotive and telecommunications sectors combined. We want policy makers to know that the ability to lease rather than own premises offers flexibility to businesses, including SMEs, and that approximately 40% of total office space is let to businesses, freeing up capital and enabling them to lease new space as they grow. In addition, the huge energy saving potential achievable through investment in real estate assets of around €60 billion per year is a major source of economic activity. We stand ready to play our part in building Europe back better.