There is just no value in rushing this,” says one senior executive at a European institutional investment firm. Sectors to watch include those that offer the promise of recession-proof stability. The top six in our rankings table are again dominated by niche, operational asset classes that are acknowledged as being underpinned by global megatrends—decarbonisation and energy transition, information technology, demographics and urbanisation. In many ways, this is what investing in real estate without an excellent manager is like. StarPoint Properties, a well-respected real estate investment and development firm.
Between 2018 and the first half of 2023, actively managed US exchange-traded funds (ETFs), collective investment trusts (CITs), and separately managed accounts (SMAs) together garnered positive net flows of $500 billion. These inflows made up for about a third of the $1.6 trillion in mutual fund outflows over that period. A real estate asset manager is different from a property manager, who deals with the day-to-day operations of a property.
What are real estate asset management examples?
Firms that created highly scalable operating platforms with built-in operating leverage generally proved to be more resilient in their ability to remain profitable in a highly volatile year. Similarly, firms with greater organizational agility were able to pivot and reallocate resources toward areas of growth. While the first half of 2023 showed some signs of optimism, with positive net flows across many asset classes, what has emerged so far is a lower-margin recovery. Clients have been reentering the market in lower-fee passive and fixed-income strategies, while higher-fee active equity strategies are again in outflows, and private markets fundraising has pulled back. A strong knowledge of finance is an advantage that can enhance a real estate manager’s relationships with clients and the professionals that turn to them for their expertise. For instance, a property manager might be tasked with marketing a vacant property instead of the asset manager.
Add in ongoing macroeconomic headwinds and a reluctance to write down assets, the cycle of uncertainty and low deal flow perpetuates. Leases and rental agreements need to be structured in a way that attracts tenants, provides flexibility, reduces vacancies, and limits liability exposure. Resources need to be apportioned strategically—badly managed resources negatively impact portfolio value. However, real estate is a more complicated type of investment than your standard security.
- This is different from the revaluation model in IAS 16, under which the asset is depreciated and revaluation increases or decreases are recognized in other comprehensive income.
- A few such firms have collected more capital—and have transformed this newfound scale from a simple outcome of their success into a genuine competitive advantage.
- The owner or owners of investment property may hire property managers to oversee the day-to-day upkeep and rent collection for a piece of real estate or an entire portfolio.
- No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.
The good news is that real estate investors can hire a property manager to manage and oversee the repairs and collection of rent payments for both local and out-of-town investment properties. However, the cost of a property manager will eat into the monthly income received, which would translate into a longer time before the property turns a profit and the investor gets the initial investment back. This book provides insight into the real estate management company and manager’s role in the financial analysis and asset management of a property.
The evolving landscape of real estate investment management
An investment in commercial real estate might involve the ownership of retail stores, office buildings, or storage facilities and warehouses. Investment in commercial real estate is typically more involved and costly than residential investments. Investment real estate is real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence while the others are used to generate rental income and profits through price appreciation. The tax implications for investment real estate are often different than those for residential real estate. Asset managers in the real estate industry tend to specialize in particular types of property, regions, or operations.
An increasing wedge between the industry’s haves and have-nots
Real estate asset managers are responsible for analyzing each property’s best, most lucrative use and implementing an effective strategy to optimize returns. A real estate manager, also known as a sponsor, owns or develops commercial property in which people invest. We estimate that collectively, these four disruptions represent a potential $5 trillion money-in-motion opportunity over the next five years, with the prospect of shifting significant pools of assets into the world of third-party investment management. If asset managers are able to capture these opportunities, they stand to assume a far more expansive role within the capital markets ecosystem. At $3.1 trillion in assets under management (AUM), real estate is one of the largest alternative asset classes (Exhibit 1).
Commercial real estate has quickly emerged as one of the most talked about sub-asset classes in the industry, given the intersection of massive shifts in usage patterns post-COVID-19 and financial tightening on highly leveraged assets. Nowhere is this more evident than in the office segment, where valuations have fallen 24 percent in the year ended in July 2023.3Based on July 2023 trailing 12-month performance of public real estate investment trusts. The situation is further exacerbated by the looming refinancing cliff of more than $1.2 trillion in commercial mortgages scheduled for renewal over the next few years, necessitating refinancing at markedly elevated interest rates. The industry’s accelerating adoption of new vehicles that deliver strategies in more efficient and flexible ways has been another source of the performance differences among asset managers in North America.
Logistics serves the supply chains that keep the modern economies functioning and can help decarbonise the transportation industry. Retail and leisure schemes provide the spaces where we gather and interact in an increasingly digital world. The office sector is the setting for the knowledge economy, central to the success of cities across Europe.
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Investors who seek out asset managers with concentrated expertise in the property type in which they are investing can increase their likelihood for higher returns and minimize their risk. By investing in real estate in a tax-efficient, legal manner, first-time real estate investors can set the stage for longevity in the industry—longevity that can finance the rest of their lives. However, opportunity zone investments can be complicated to navigate for even experienced investors.
Market Perspectives: US real estate: Opportunity amid the volatility Americas_EMEA
The underlying assets of Zhongrong trust are largely property related, which have high default risks, said Xing Zhaopeng, senior China strategist at ANZ. Across Europe, investment real estate finance and asset management Blackstone is working on several other deals outside of the real estate sector. Last week, it bid a mammoth $15 billion for Norwegian classified ads website Adevinta.
Specialist operators are typically investors and developers with committed third-party capital that execute targeted investments within specific niches—often at the intersection of an asset class and region. These firms win when they possess deep operating expertise—often, proprietary site-selection skills, best-in-class asset management, or disciplined capital expenditure. In some cases, it might be necessary for an investor to hire both an asset manager and a property manager, especially if the investor has many rental properties. Asset management in real estate is the strategic planning for a property or group of properties for investment purposes.
IFRS Standards have different accounting and disclosure requirements for real estate depending on whether it is held to be sold to customers, owner-occupied or an investment property. This distinction generally depends on the use of the property rather than the type of company that holds it. This means any company, not just real estate companies or funds, may have land and buildings that are investment property and can be fair valued under IFRS Standards. Here we explain how to identify investment property, how the accounting works, and top differences from US GAAP. In my opinion, all new real estate investors should explore purchasing property in opportunity zones, which were created in 2017. A recent McKinsey survey of about 300 institutional investors showed that half aim to allocate more to private markets asset classes over a three-year horizon, as opposed to the 35 percent who plan to do so over the next 12 months.