Value-add and active management schemes for real estate investing

Creating value in today’s market involves adaptation. Sustainable, energy efficient improvements are driving up value by increasing building and portfolio performance while lowering costs and meeting ever-changing occupier demands. Meanwhile, investors and managers are leveraging new technology and asset-level strategies with big data and local market insights to drive increased valuations and returns.

As the world adapts to a new normal, private real estate is a sector struggling to adapt to changing tenant demand, as attracting hybrid working employees back to the office is no mean feat.

Modernizing and repurposing assets has become key to encouraging people back to workplaces. Where once location was key, now wellness amenities and spaces for social interaction triumph. Assets without such features in today’s market risk becoming stale, even if newly built.

One overarching message is clear: creating value in today’s market involves a lot of adapting. Whether that is offering multi-purpose space or updating an asset so it stands out in the modern marketplace, it is time to get creative to add value – and that will come at a cost.

With a laser focus on tenant requirements post-pandemic, private real estate professionals are investing with conviction in the megatrends shaping the future of life and work.

This includes significantly lowering a property’s carbon emissions to avoid ESG obsolescence, optimizing spaces and technology for tenant health and well-being, and strategically repositioning asset facilities to meet changing occupier demands. In short, the opportunities for value creation are immense.

The penny has dropped among real estate owners and asset managers that it is no longer enough to be a “provider of space.” The sector must provide a service. And this approach is now widely regarded as the vital cog in value creation wheel.

Tenants demand more from property these days – cutting-edge technology, better lighting and air-quality, social amenities and concierge-like services. They need to be courted; their needs to be met. It is accepted now that this reorientation toward a more service-based model ensures assets are resilient and fit for future purpose; key to reducing void periods, retaining tenants, attracting new ones, potentially commanding higher rents, and enhancing investor returns. As one expert reflects in this report, “You can create value through the quality of the relationship with the tenant and better understanding their drivers.”