The best way forward is value creation and preservation

The yield compression that has driven returns for the past few years is a thing of the past according to INREV Director of Research and Market Information Irina Pylypchuk.

“Value preservation and value creation through tenant management or enhancement of the asset is the way forward,” she told Real Asset Insight’s Richard Betts.

Following the Covid pandemic the market faces inflation, interest rate rises and now the war in Ukraine and accompanying geopolitical uncertainty. All of them conspire to make investment decision making more difficult.

“There are so many challenges I think the way to think about is that we’re moving into a different economic environment,” she said. “All of it will have an impact on decision making.”

She said that it is about approaching every allocation or decision from an individual asset point of view whether that is on the equity or debt side. “It’s about bottom-up decision-making and assessing the location, the tenure, the geography and the asset individually to really understand what its pathway is.”

ESG inevitably has an increasing bearing on decisions too.

“ESG is no longer about disclosure, it’s all about action. Many investors, particularly institutional investors, already see ESG strategy and the extent it’s embedded – be it the equity side or the debt side — as a deal breaker.”

“It’s no different for non-listed real estate,” she added. “We speak with our members on a proactive basis and they are eager to conform to standard guidelines in terms of reporting and due diligence.”

“As an industry we are working together and I think there is definitely a will from investors and non-traditional lenders in the debt space, to try to do better and comply in as standard a way as possible when it comes to ESG reporting.”

Click on the video above to watch the full interview