1. More runway: There is an obvious reason EXPO Real recorded a record attendance of 44,536 participants this year, 6 percent up on 2017: markets are showing few signs of slowing. At the turn of the year, JLL predicted global investment volumes to dip by 5-10 percent in 2018. The reality has been different. With two months to go, rival broker Cushman & Wakefield announced at the trade show it saw a record $1.8 trillion of investment, up 18 percent year-on-year.
  1. Still no black swan: Cushmans’ global research chief Carlo Barel di Sant’Albano acknowledged geopolitical concerns, but saw further runway on this cycle too. “Volumes could exceed current levels by up to 2 percent next year,” he said. His European research head David Hutchings added macro environment risks were being offset by global growth and lower than feared inflation, giving investors reason to plow on, even in the face of record low yields.
  1. Then what gives? In short, returns. PERE moderated EXPO’s opening panel and was told investors are accepting a lower return for the same strategies than going for the same return by permitting greater engagement with riskier assets. Blackrock managing director Thomas Mueller was one of the panelists. He said investors would accept 12-14 percent from value-add property these days, down 100-200 basis points from a couple of years ago, for example.
  1. Money for the heftiest: Sant’Albano saw capital continuing to flow into the asset class. But it is the sector’s largest operators which are benefiting most. PERE’s panel comprised an aggregate $270 billion of AUM. Participants included BlackRock, Hines, AXA Investment Managers – Real Assets and M&G Real Estate. They discussed how they are becoming everything to everyone, offering products that span return profiles and asset classes. Hines, for example, was known as an office development-focused fund manager before the crisis. How it has diversified since: last month, it entered the UK logistics market via a 50:50 joint venture with developer Chancerygate, for instance. And investors are onboard: weeks later, it raised €720 million for its first value-add fund, 40 percent more than originally targeted.
  1. Mirror, mirror in the fall: This indulging of the private real estate market’s biggest managers over backing its minnows is reflected in PERE’s Q3 fundraising numbers, to be published shortly: In the three quarters, 114 closed-end funds collected $87.94 billion, 4 percent more equity year-on-year. But the number of funds to have final closings is a staggering 53 percent down, a margin not anticipated to narrow much come year end.
  1. Not all chase the herd: Besides raising third-party capital for the first time to help it capture market share in the senior lending space, Germany’s Allianz Real Estate is one investor defying the institutional playbook by ramping up its manager count. Just before the conference, chief executive Francois Trausch told PERE it had increased its manager relationships from 20 in December 2015 to 36 in June 2018.
  1. The Japanese are coming, seriously this time: Long awaited, Japanese institutions are ready to deploy. At PERE’s conference in Tokyo last month, we heard from broker CBRE how $14 billion could be deployed in the next three years alone. Its own manager, CBRE Global Investment Partners already bagged the first mandate of the country’s whale, the Government Pension Investment Fund. But causing as much of a stir at the conference was gatekeeper Tokio Marine, which, having started overseas investing in 2012, is now ready to push on: it plans to double its European manager count by the end of 2019, for instance.
  1. Liquidity is not just a property concern: It comes also at the fund level. Peakside Capital, one European manager, believes one answer lies in cryptocurrencies. The Bank of America Merrill Lynch spin-out used the conference to announce a tokenized fund with blockchain platform Brickblock. The Zug-based manager stressed the ability to buy and sell units in no-negotiation circumstances in just minutes would draw investors to the vehicle, which it will launch in Q2 next year.
  1. Happier to swim alongside: Club and joint venture investing has been a particularly attractive route for private real estate’s biggest, deepest-benched investors, but a prohibitive route for others. Fund co-investment is increasingly expected to be one work-around to the issue. Managers at EXPO remained skeptical about proportions of investors which ultimately take up these rights, but acknowledged an uptick in requests. Whether co-investment is considered a concession or promotion continues to split opinions.
  1. The sector’s dark horse: On PERE’s panel, participants were asked to select markets as rising stars, dark horses and falling knives. For the former, the consensus was accommodation, specifically private rented housing; the verdict for the latter was equally unsurprising: secondary retail malls. Interestingly, the dark horse top pick was offices in Europe’s biggest market, London. A bold call on the city’s business prospects less than half a year from a Brexit deal?
PERE’s panel: Blackrock’s Mueller explains investors’ lower returns acceptance

To contact the author, email jonathan.b@peimedia.com