Positive signs emerging for the listed real estate sector: EPRA
The dominant real estate theme of the last year has been climate change and the measures being taken to address it, according to EPRA CEO Dominique Moerenhout. Talking recently to Real Asset Media’s Richard Betts, he said he is happy to see the progress the sector is making in this regard.
Meanwhile, on the business side, the recovery in 2023 compared to 2022 was also noticeable but was experienced differently in the public and private real estate markets.
Also he said: “We are starting to see more investors coming into the listed space, even traditional private equity firms who were 100% concentrating their capital on the direct part of the of the market. We are starting to see more and more those people coming in.”
Changes in the UK regulatory environment mean that some funds might be tempted to allocate a greater portion of their equity to global listed real estate in the very short term, Moerenhouts said. “I hope this will become a reality very soon – in the next two to three months – which is a positive signal for the listed real estate sector going forward.”
On the sourcing side of the equation, Moerenhout said that there has been a wave of consolidation in the industry which he expects will continue.
Although consolidation can be unhelpful to an organisation like EPRA as it implies the loss of a member, on the other hand, it creates larger companies, “which are much more investable for investors, so this wave we will probably see in the future again.”
And, while some public companies may become private, some private equity firms have significant portfolios for which the listed sector might provide an exit strategy in the next 24 months.
While EPRA is focused on the listed sector, Moerenhout said that he realises that investors need an allocation to both listed and unlisted real estate.
“A lot of investors in reality are often underallocated to the listed space compared to the private real estate space,” he said, adding that lack of liquidity has been on eof the main obstacles to private real estate.
“That’s why some of them are also shifting to allocate a portion of the equity to real liquid investments to provide a certain level of liquidity for their shareholders,” he said.
While the listed side is accused of being more volatile, Moerenhout argues that it is a long-term investment, “and in the long run, listed real estate has always outperformed private real estate”.