As delegates push through the turnstiles for the first day of Expo Real, many will be looking to gauge the industry mood in an environment of rising interest rates, soaring energy prices and slowing transaction activity.
Many familiar firms are exhibiting and attending Expo this year with sizeable teams, even though the event – and the investment climate – are radically different since the last ‘full-sized’ iteration of the show in 2019.
From pandemic-era protocols to the effects of war in Ukraine, both the way that conferences are held and the headwinds faced by investors place the event in a new era. Even this weekend’s tremors around the European banking sector’s potential stress scenarios have changed the mood. Yet arguably, that is also why exhibitions like this remain so essential for the real estate community, according to delegates on the ground.
Christophe de Taurines, senior advisor at Long Harbour told PropertyEU: ‘I expect participants will be eager to re-establish fruitful contacts and that there will be a buoyant mood despite the macro-economic challenges. Resilience will be the key theme of the event, and for Long Harbour that plays to our strengths and growing activity in residential real estate and commercial ground leases in the UK and in Continental Europe, which we anticipate will be well positioned in the current economic climate.’
Added Alexandre Gruca, head of asset management at Round Hill Capital: ‘Expo Real marks the important return to in-person events in our industry. The event provides people with the opportunity to connect with real estate disruptors who are turning the tide in technology, sustainability and social value. We look forward to speaking to people about the latest trends and successful new technologies.’
Several attendees said they would be looking to take the market’s temperature, given the current sluggish transactions environment.
Heading into Expo, Justin Curlow, global head of research & strategy at AXA IM Alts, said: ‘Given the macro shocks that characterised the first half of this year, I am most looking forward to gauging the mood of participants at the conference, and hearing from investors and market participants to better understand their current investment appetite following the capital markets movements year to date, as the denominator effect continues to impact allocations.’
The often-cited denominator effect - which occurs when the value of one portion of a portfolio decreases drastically and pulls down the overall value of the portfolio – has indeed become a tangible worry for investors. Its consequences – that segments of a portfolio which have not decreased in value subsequently represent a large percent of the overall pie – significantly skew allocations.
Added Maurice Grassau, founder and CEO of proptech Architrave: ‘We think this year’s Expo Real will be fascinating, against a backdrop of rising interest rates and slowing transactions. Cost pressures will only increase, and frankly, the party is over for the sector.
‘However, this does mean that the real work to transform the industry into one with greater efficiency can now begin. At Architrave, we are interested to see how the industry adapts to this new environment, and we are confident that our team is well placed to navigate this next period of uncertainty.’
Noted Justin Meissel, chief investment officer and managing director Europe at Henley Investment Management: ‘We are all aware of the changes that have been affecting real estate capital markets and the broader economy over the last year, especially exacerbated in the last six months. At Henley we are focused on finding value in both themes and one-off opportunities, with a creative, entrepreneurial approach. Given the clouds on the economic horizon, creativity and flexibility will be especially important to preserve and then grow value.’
Yet other attendees described different priorities. Said ULI Europe CEO Lisette van Doorn: ‘A key question for me is how the industry balances the current challenging market environment with the need to invest in ESG measures, like climate adaptation and mitigation as well as social elements like social and affordable housing.’ She added: ‘These are not nice-to-haves. Now is the time to act and I will be looking to see how real estate’s leaders are responding.’
Pavlos Gennimatas, managing director – European Living at Hines, noted: ‘Living remains a key sector for Hines across Europe and we expect to see high quality assets prevailing over the long term. Moving forward, the three fundamental pillars of success in the living sector will be location, ESG initiatives and providing a first-class experience through amenity provision and human-centric operations.
‘Together these will provide resilience for both occupiers and investors alike, and we expect to hear more about this at Expo Real. At Hines, we also believe investing in highly sustainable real estate is a form of “futureproofing” assets which is especially key given the backdrop of rising energy prices and inflationary downward pressures.’