SS&C recently hosted the Intralinks Global Alternatives Virtual Summit, including an expert panel session on Real Estate: New Opportunities and How the Pandemic Reshaped Global Markets. The COVID-19 pandemic has accelerated many trends and themes that we were already seeing pre-COVID. As the panel moderator, we delved into some of the main disrupters and evolving trends and discussed the long-term opportunities in global real estate. We covered many interesting aspects of what is driving the key sectors in real estate today. The full "Real Estate: New Opportunities and How the Pandemic Reshaped Global Markets" conversation is available on demand. Overall, our panel of experts indicated that the next cycle will be driven by structural change rather than short-term economics. For a quick overview of the discussion, here are some key highlights to consider as we start the new year.
In Europe, ESG is top of mind, and all asset classes will be impacted by the path to net-zero. There are not enough net-zero office spaces, so retrofitting the existing stock is a huge opportunity. Sustainability is driving much greater market dispersion. The International Energy Agency recently published a figure that 75% of global building stock that will be standing in 2050 is already standing today. We can’t simply build our way to net-zero; however, the opportunity to retrofit is enormous, as many of the non-compliant buildings today will form part of that next supply cycle. On the retail front, we may be reaching an inflection point.
Demographics will also influence real estate decisions—senior living, as well as the changing needs of the workforce and its age profile, and with that, the associated consumer habit. Transparency will be key in attracting global capital. In offices, lockdown measures have turbocharged “work from home” models across the globe. The virus dynamics are going to continue to dictate the pace of the return to the office: the longer the guidance to “work from home” continues, the more likely we are to see a longer-lasting structural change to the office sector.
In the APAC region, infrastructure will bring a whole range of opportunities for investing in real estate.
The rise of the middle classes in Asia is driving a huge boom in e-commerce, coupled with a focus on popular street retail locations in major cities. The sustained shift from manufacturing to services will underpin demand for office space going forward. Retail and hotel properties, specifically those that cater to an increasingly affluent middle class, may be in greater demand.
In North America, e-commerce continues to surge as consumers continue to rely on the internet for goods. Furthermore, supply chain disruptions have driven demand for inventory storage and for nearshoring. The pandemic has highlighted the vulnerabilities in globalized supply chains. For 2022, we are seeing a trend towards building more resiliency in supply chains, which equates to taking more space to store those inventories. Finding a balance between demand-pull inflation and cost-pull inflation will be paramount.
Secondary cities in the US as well as in Europe are growing as the migration from northern cities to southern and western cities continues to accelerate in part due to the pandemic. Although, secondary cities in the Northeast like Boston have done very well in attracting talent and business. On the office front, work-from-home continues to impact the future of the office—something that continues to be monitored as we face the uncertainty of COVID-19 variant outbreaks.
To hear the full discussion, including why Boston remains a top secondary city in the US, listen to the "Real Estate: New Opportunities and How the Pandemic Reshaped Global Markets" conversation now.
Written by Justin Knott
Director Private Markets