Look Ahead 2024: Bouwinvest to move from selling to buying

In 2022, Bouwinvest Real Estate Investors hit a five-year divestment high and has continued to focus on rebalancing the portfolio this past year. But 2024 will mark a change in investment approach at the organization, which currently has €15.1 billion in assets. The expectation is that market conditions are set to be more favorable for investment, and Bouwinvest is gearing up to take advantage of the shift that it expects to come in the middle of the year.

“We are not expecting to invest only at the absolute bottom of the market,” Stephen Tross, the Amsterdam-based firm’s chief investment officer of international investments, told PERE. “We will see some further value declines in various markets and sectors, maybe in the first two quarters of 2024, but then we expect the bottoming out – and you want to be ready and invested when that is the case and things are picking up.”

In the US, ongoing shortages because of construction starts being halted mean the residential sector – specifically workforce housing, manufactured, affordable and student homes – is an attractive asset, Tross believes. Similarly, he expects logistics and warehousing to be a good place to play, driven by high demand, financing difficulties and an increased push towards onshoring. Niche areas like urban infill, cold storage, data centers and the growing industrial outdoor storage are all asset types that Bouwinvest is coveting.

In 2022, Bouwinvest was divesting “ahead of the crowd” but is now in the process of withdrawing some redemptions that have not yet been fulfilled, Tross said. Funds were slow to act on those redemptions in some cases, with properties not moving in an environment with large bid-ask spreads. Not wanting to be a seller, but rather a buyer, at the bottom of the market, the investor is getting its ducks in a row to snap up opportunities, he said.

“The markets in general have not turned yet, and some further declines are still expected… There is no bell ringing that we have reached the lowest point in the market,” Tross said. “There are always a lot of people who need to be convinced with marked evidence that we have reached the bottom. But in our view, then you are typically too late. We want to be ahead of the curve.”

Bouwinvest is predicting rate cuts in 2024 and, off the back of the US Federal Reserve’s comments at its most recent meeting, is forecasting rates dropping even earlier than expected.

Many in the market are overexposed to real estate right now, he said, and don’t have capital to deploy. Others are focused on working out loans in their current portfolio, but Bouwinvest said its North America portfolio is leveraged at a comfortable 30-35 percent.

Its exposure to office is between 10-15 percent, including life sciences, with no plan to change that ratio. “We are happy with our current low US office markets exposure, as these are still more challenged than some other office markets in the world,” Tross said. “We don’t feel this is the time yet to increase our US office exposure.”

Worries about the US election loom, particularly in light of climate risk. The company wants to be a sustainable investor and is thinking carefully how a catastrophic event would impact the value of property when it comes time to exit in five to 10 years, according to Tross.

Access and cost of issuance are largely considered to be at a crisis level, with some 23 separate billion-dollar weather events hitting the US by September this year alone, according to the National Oceanic and Atmospheric Administration. With a general election in November, Tross finds the political uncertainty – especially when it comes to ESG policies – to be an issue.

“The US market is getting more polarized which we find a concern,” he said. “We want to make sustainable investments and ESG is very important for us. If there are states where you can’t speak about ESG, for example, then those states might not offer the products which are suitable for us. So it might really have an impact on how our money is invested in the US.”