Investors should focus on quality of income

Investors should focus on quality of income until the tide turns again, says Pertti Vanhanen, global co-head of real estate, Aberdeen Standard Investments: ‘Our advice is not to bet on high-risk value growth strategies. There is a lot of uncertainty out there now with trade wars, economic slowdown and political turmoil and the end of the cycle. Everyone is being careful.’

Aberdeen Standard Investments’ forecast is that 2019/20 will be ‘down a little’ but then the tide will turn again and growth will pick up. In the meantime, ‘we use our very strong footprint in Europe to be present on the ground, find the right assets and then look after them,’ Vanhanen says. ‘Investors are very keen on residential and logistics, and our Pan-European Residential product and our Pan-European Logistics Trust are investing widely in those sectors and offering opportunities to our clients.’

Vanhanen sees three key global trends that will have an impact on the entire real estate industry going forward: the first is urbanisation, as more and more people move into the cities. This points to investments in residential and PRS, but it will also have a positive influence on industrial and logistics assets.

The second trend is technology. ‘Technology will have a huge impact on retail,’ he says. ‘We have already seen it in the UK. Strong locations and shopping centres will continue to do well in the future but secondary shopping centres and weaker places will suffer a lot’.

The third trend is ESG: ‘This is where we as an industry need to do much more,’ Vanhanen says. ‘The process has started but we must now embed it into our investment management processes.’

The future of Aberdeen Standard Investments is more international and less European. ‘We want to globalise and diversify our business,’ he says. ‘We are very Eurocentric at the moment and we would like to expand our business. Growth and diversification to the US and Asia are the two main keys. Our investors have been very supportive, because they realise that scale and consolidation are necessary in today’s markets.’