Private real estate investors and their investment managers are facing significant changes in the use of the real estate they buy in every direction they look, PERE’s record crowd heard today at the PERE Asia Summit in Hong Kong.
In the opening panel of the day, Chris Heady, head of real estate Asia at sector behemoth Blackstone, remarked to the 500-strong event that such changes were forefront in the minds of the firm’s real estate investment executives. “In almost every asset class, you have tech disruption, and we’ve tried to orient our properties to cater for those tenants.”
Heady, who was promoted to chairman of Blackstone’s Asia business last year, said logistics real estate was the asset class that has benefited the most, from changes on the back of the rise of e-commerce in retailing. “Malls on the other hand – some are more susceptible than others to be effected.” He said regional mega-malls with strong food and beverage components would fare better than so-called “B-malls,” where the focus was purely on shopping.
“This has been a big change,” he added. “10 years ago it wasn’t front-of-mind. Now it needs to be part of the discussion.”
Graham Mackie, the head of Swiss investment bank UBS’ real estate business in Asia, admitted, however, that investment managers were still in education mode. His firm, for instance, recently discovered how shared office space in Asia was being used by other large financial services operations in addition to smaller, start-up or niche businesses. These operations have engaged the asset class as a way of having flexibility in terms of the additional space to their headquarters they require, better enabling them to ramp up and down their occupational needs to match market opportunities. “It is proving very useful for large financial organizations.”
Stephen Tross, managing director for international investments at Dutch investor Bouwinvest, added that technology was also playing an increasingly important role in helping the firm meet its ESG requirements. “In the Netherlands, we have been experimenting with houses which are energy neutral – so no energy bill. That’s good from an environmental perspective but also from a landlord’s perspective: Money not spent on energy bills can go to higher rents.”
During a later panel, Alison Cooke, managing director at Starr International Investment Advisors, posited that while new occupational needs were currently being catered for in existing properties, what would happen in terms of future use once market and economic cycles passed would be telling. “How will e-tailing survive once we’ve gone through real estate and economic cycles will be interesting.”
By her reckoning, new types of property may need to be created, a topic that Goodwin Gaw, chairman of Hong Kong-based private equity real estate firm, Gaw Capital Partners agreed with. “Today, [disruptors] are not generating new real estate, but they are making a lot of real estate obsolete,” he said.