Change of mindset amongst institutional property investors

Across Europe, the trend of “bringing the human back into real estate” is emerging, according to NREPs’ director of investor relations Felicity Beasley.

“Who is the end occupier? Who’s the end user? It’s moving beyond just putting a number on a spreadsheet, but to actually what we trying to deliver for the occupier of that building to have a better quality of life,” she told Real Asset Insight’s Richard Betts.

She added that the trend is historically and culturally strong in the Nordics, where NREP is headquartered, but that the same is being seen Europe-wide.

It is part of the investment sector’s virtually universal adoption of ESG principles which, in roughly five years, have gone from being tick-box items to being “an absolute essential that institutional investors have to get past their own internal IC,” she said.

“Managers that are not thinking about it will start to be in a position where they will not be attracting capital, so it is critical,” Beasley added.

A case in point is the residential sector and its sub-sectors: student accommodation, multi-family housing, senior living and care. Beasley said that these are becoming increasingly important and many, inherently, have substantial social impact too.

This requires more than investment managers placing capital into a market: “It’s a full stakeholder relationship.”

These trends have also required investors’ acceptance of operational real estate. “It is taking a bit of time to get investors’ heads around what that means, so I think something that investors and investment managers are really having to think about is, how they structure their teams to deliver operational real estate,” she said.

 “What I think is very strong with the operational side is that you’ve got to think about an asset beyond even your ownership and that’s where it’s really exciting,” Beasley said.

“Then you bring in the ESG and sustainability element and you’ve just got this much stronger stewardship over assets over a much longer period and that’s a mindset change for institutional real estate.”