Real estate is displaying fair value versus other asset classes, with green shoots beginning to appear, according to Paul Gibson, CIO of EMEA direct real estate strategies at CBRE Investment Management.
‘The cautious optimism we were hoping for earlier in the year is starting to come through,’ he said at Expo Real. ‘It won’t be an instantaneous return to the markets of four years ago. There is always a bit more talk than there is action. But certain parts of the market are displaying significant strength and liquidity.’
He noted: ‘We have a treasury team which keeps a very close eye on our loan book. It’s looking like a much more stable environment for us to be able to underwrite real estate, and have confidence that we can deliver to our clients.’
In a further sign of the market upturn, Gibson said: ‘Those of our clients who have room in their portfolio for real estate are becoming active again. There are reasons to feel pretty optimistic about returns going forward.’
In terms of asset classes, Gibson said that while there were some preferences, CBRE IM’s team were essentially monitoring potential properties on the basis of ‘whether it meets the needs of the occupier’.
He explained: ‘It’s about having a building that has a clear proposition for its end-users.’ He said they had been investing ‘quite heavily in logistics and living’, but added that ‘in these times where liquidity is mixed, you have got to be quite flexible’. Indeed, he noted that the firm had ‘been looking quite closely at retail again’.
On the buoyant logistics sector, he said that ‘levels of demand’ had flattened to ‘normal compared with Covid’, but that rental growth was still evident. ‘We will be much more focused on certain locations and building types going forward,’ he said. ‘On the bright side, we have less than 4% vacancy across our logistics portfolio, which comprises some €12 bn of assets.’
The firm’s living focus, on the other hand, ‘has predominantly been on PRS’, he confirmed. ‘We’re very proactive on that. We have found some good opportunities from developers that need capital and are looking at the pricing relative to build cost.’ Gibson said that student living was also a growing area of interest, particularly in nascent markets such as Milan and Rome.
