This article is sponsored by CBRE Investment Management
What were your firm’s key events in 2023?
One thing that particularly stands out is a large off-market transaction that we completed in Germany with a total value of €920 million. This was a landmark transaction involving 2,500 apartments across Berlin, Frankfurt and Munich, boosting our EMEA residential assets under management to €11 billion. The acquisition, executed in two phases, not only underlined the strength of our platform but also proved our capability to transact at scale.
Beyond this transaction, it was the breadth of our market penetration in Europe that was remarkable. In a market characterized by high levels of uncertainty, we completed residential deals in the UK, Spain, Sweden, Italy and the Netherlands, as well – of course – as in Germany, proving our pan-European transaction capabilities.
On the residential operator side, we have also implemented a new management concept at one of our properties in Amsterdam, to help connect young people and add a cultural dimension to property management. We are rolling out this concept to other investments.
And, while it is less of a singular event and represents more of an ongoing trend, sustainability continued to be a core focus. For the fourth consecutive year, CBRE IM was the largest contributor to GRESB Real Estate Benchmark Assessment.
What has the operating environment been like?
We are experiencing an operating environment with high interest rates and value corrections across all asset classes. We are also seeing tightening environmental regulations and increasingly demanding EMEA investors.
When we look at the residential sector specifically, we see a cost of living crisis that has brought affordability into focus. As a consequence, we see a trend toward tightening rent controls across many residential markets in EMEA.
There is also a change in user preferences; there is no uniform user anymore. The new urban generation expects a culture, community, technology and hospitality layer on top of the basic property management.
What key challenges did you have to overcome?
The discrepancy between the price expectations of buyers and sellers was an issue. At the start of the year, nobody knew the right price and this uncertainty made it difficult to assess assets’ long-term value. Many investors asked if the price would correct itself. In our view, it was more important to ask if it was still possible to find value.
We found the products that could still deliver value were in top cities: modern investments in sustainable assets. Determining the right price to acquire these assets was a challenge. The price needed to reflect our view of long-term value. Based on our research we formed an opinion on value and also looked carefully at two key metrics: in-going yield compared to long-term average and replacement costs.
Who or what’s responsible for your success?
In 2022, when a lot of deals were already very expensive, our disciplined approach ensured we did not invest where it was hard to identify long-term value. This meant we had capital available in 2023 for re-priced transactions.
With our track record in 2023, we gained a lot of market credibility, which places us in a unique position to unlock off-market transactions. We believe our residential proposition is attractive because it goes beyond delivering sound financial returns to generating positive social and environmental impact.
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