CEO Outlook 2025: value-add strategies to the fore in Europe
This year more value-add than core capital will be deployed in Europe, experts agreed at Real Asset Media’s Strategies for Success in 2025 panel briefing, part of the CEO Outlook Summit which took place this week in London and was hosted by RSM.
“This is a good year to get back into real estate and the macro picture is supportive,” said Abigail Dean, global head of strategic insights, Nuveen. “Value add is likely to dominate in Europe and all the ingredients are there for money to come in.”
For the first time in many years US and Asia-Pacific investors are under-allocated to real estate, so there is plenty of capital that could be deployed. Political uncertainty in the US and conflict in Europe could lead investors to be cautious and pause, but they also have good incentives to take the plunge.
“It is a good time to go back into the real estate market and we are likely to see more value-add strategies than core capital coming in,” said Simon Wallace, managing director and co-head of global real estate research, head of UK, DWS. “We’re quite positive on the rental growth story and there are real supply shortages in residential and logistics. Beds and sheds might be boring, but they are not wrong.”
Selectivity is the name of the game, Dean said: “You cannot let the market do the work, you have to do a deep search to identify specific locations and opportunities.”
The jury’s out on the office sector. The US is more attached to working from home, but in Europe the trend is to go back to the office and there is a growing divide between grade A assets and secondary offices.
“There’s a rarefied atmosphere for prime offices, demand is going up because people want bigger and better space,” said John Slade, chairman, SLADESco. “The problem is secondary, obsolete offices because very few investors are willing to admit how bad it has got.”
There are not enough grade A buildings to meet demand, so there needs to be a price correction – prices for secondary offices will have to come down.
“The market will adjust to supply and demand forces, as it always does,” said Samuel Duah, director, head of real estate economics, BNP Paribas Real Estate.
According to Wallace, there has been a permanent shift in investors’ preferences and in future “offices are more likely to be 20% of portfolios rather than 40% as used to be the case in the past.”
All sectors will be profoundly affected by the changes that technology, and artificial intelligence in particular, will bring about.
“AI will empower people at the decision-making level to access data quickly and easily, and this will make a real difference in this volatile market,” said Sri Ramachandra, president and CEO, NTrust Infotech.
AI will be an invaluable help for the real estate industry, but people need training in how to ask the right questions in order to get the correct answers. The challenge, said Ramachandra, is “putting tech to really practical use. We must use it but not misuse it.”
