Realcast: War shifts FDI map, hunt for ESG experts, ‘value’ redefined, Iberian strength

In the spotlight this week:

With the anniversary of Russia’s invasion of Ukraine imminent, it has become clear that in addition to the human and geopolitical implications, there have been a major implications for foreign direct investment (FDI).

Investment has been reallocated as multinational companies pulled out of Russia and Russian companies withdrew from investment destinations. Companies’ sensitivity to risk has been heightened and they now have a keen eye on security of supply chains and energy supplies. The equation that determines where investors direct their capital in Europe (and the rest of the world) was already complex. ESG has further added to the complexity.

Furthermore, promotion agencies are becoming choosier when selecting projects to support and will consider whether a project fits with their ESG goals.

Meanwhile, companies are now taking ESG very seriously, but there’s a big gap between the awareness of what needs to be done and the ability to achieve it. Everyone wants to hire ESG experts but there are not many available with sufficient experience. That demand exists is positive, but the context is constantly changing because of rapid technological advance and increased regulation.

Alignment is now key because, in order to move from a linear economy to a circular business model, requires a lot of knowledge, measurement and leadership to be able to transform existing stock into future-proof real estate.

A re-definition of value is required because of the need to know the value of a project as an asset but , given the built environment’s role in generating carbon dioxide, also in terms of its contribution to area development and its impact on climate change.

At the recent Iberian REIT conference there was more positive sentiment about market than had been expected. Asked if a real estate Armageddon is under way, one panel discussion firmly concluded that there was not and while stock market valuations are perhaps low, the fundamentals are still good with occupancy strong and rents increasing. Clearly, this is a different scenario to the Portugal and Spain of the previous crisis.

Click on the video to see the full discussion or listen to the podcast below.