Briefing: resilient sectors the best bet in a volatile market

In today’s volatile market it makes sense to choose sectors which are resilient to shocks, delegates heard at the Debt Finance Outlook briefing, organised by Real Asset Media and Sociëteit Vastgoed and hosted by CMS at their offices in Amsterdam.

“We opt for sector which are resilient whatever happens”, said Richard Craddock, Head of Real Estate Debt, Redevco. “We do not know where technology is going, so we stay clear of data centres. We are very active in the logistics space, because physical goods will continue to be needed across Europe, and in residential because everyone needs a place to live, even if regulation can be an issue.”

Green logistics is a particularly in-demand sector, as large companies like Amazon want sustainable schemes and on-site renewable energy. Leases tend to be longer as well because of the high-tech investments made in robotics and automation.

Redevco has just closed a deal on a Grade A logistics scheme at the Medel logistics estate in Tiel in the Netherlands which is interesting from a sustainability perspective, as it is connected to the Medel Energy Island, a shared local energy hub that helps overcome electricity grid congestion challenges experienced by many logistics schemes across the country. The site is expected to generate approximately 75% of its energy requirements from on-site solar PV panels and excess energy will be stored via the on-site battery with any surplus feeding back to the energy island.

“The light industrial sector is seeing a lot of activity as value-add strategies are being implemented”, said Etiënne Courbois, Advocaat / Partner, CMS. “But we also see activity in niche areas that keep us very busy like science parks and hotels, which include developments. I think this positive momentum will continue in the next few months, so I am very positive on the market going forward.”

Transactions are likely to be slow for as long as current geopolitical uncertainty persists, but there are positive signs in the market. Even the traditional office sector, which had seen a slump during and after the Covid pandemic, is showing signs of life.

“We believe in offices, they are still attractive from a lender’s perspective”, said Dennis de Laat, Head of Real Estate Finance Benelux, Berlin Hyp. “If they are high-quality and easy to reach we are more than willing to finance them. Liquid assets will always find financing, but there are many secondary offices that will not survive.”

The office sector is perhaps the most impacted by the polarisation in the market between a minority of top-quality assets which are in great demand and the majority of second-grade buildings which are likely to struggle.

“We believe offices are an attractive asset class”, said Enrico van Erkelens, CEO and Founder, Equity Estate. “Our tenants push us towards quality, which means assets that are Paris-proof and close to transport hubs, and the increase in rents you get makes it possible to invest in upgrading buildings.”

In today’s market lenders and investors need to be more sector-agnostic and look at the details of every single deal. “There are opportunities everywhere, but they are bottom-up, very deal-specific”, said Iryna Pylypchuk, Director of Research and Market Information, INREV. “This is an important difference from the last cycle, which was very sector-specific.”