The year ahead will not be easy. A combination of late cycle blues, geopolitical tensions and trade wars are creating an uncertain context that will test investors’ ability to pick the right asset.
At times like these experience and a deep knowledge of the markets are needed, says Mike Sales, CEO of newly-rebranded Nuveen, formerly known as TH Real Estate: ‘Investing in tomorrow’s cities is at the heart of our investment process. Location, location, location is being replaced by people, people, people. The urbanisation trend is key. You must be where people want to be. Places like Berlin and Paris are very robust.’
London also looks attractive, despite the question marks over its post-Brexit future. ‘People are quick to say that London will suffer, but it hasn’t suffered so far,’ says Sales. ‘There hasn’t been a lot of supply, there is not a lot of development coming online, demand is robust and there is no leverage in the system. There may be some occupational softness, as you would expect at the top of a ten-year cycle, but on a relative yield basis London looks attractive going forward.’
Alongside the city strategy, Nuveen believes that one of the sectors that are offering better growth potential is logistics, which has had a good run but is still robust. According to Sales, retail, which is often written off now, can also offer opportunities: ‘It can work if you adapt to changing consumer demands. The fact is, every sector offers an opportunity, it is a question of timing, of knowing when to enter and exit those markets and of always being aware of the risks.’
2019 will be challenging, the cycle is at an end and the markets where people want to be tend to be expensive. The world is far more correlated than it used to be’, says Sales. ‘There are no cheap core markets out there. We are at a very late stage of the real estate cycle and you always have to have that at the back of your mind, but at the same time our investors’ allocations to real estate are below where our clients want them to be. That is our challenge: they want us to continue to invest wisely and selectively and to continue to generate long-term returns.’
Nuveen is the new brand of TH Real Estate. ‘The rebranding makes it easier to understand that we are the real estate arm of the asset manager and that we benefit from economies of scale,’ Sales explains. ‘We are able to leverage the operating platform that you would associate with a trillion-dollar manager’.
Sales is keen to emphasise that nothing else has changed. ‘The brand is new but our vision, our mission and our strategy are the same,’ he says. ‘We offer clients performance, a global company with boots on the ground in 26 countries, office locations and sector expertise.’