Industry and market trends impacting the Real Estate Investment Management Industry
Investors are requiring more control, transparency and alignment
There is a general trend, albeit not universal, away from funds and towards clubs and separate accounts with investors requiring greater levels of control and clear levels of alignment. Investors are rightly challenging managers to justify their fees and placing emphasis on a smaller number of ‘best in class’ trusted managers who are working with high degrees of transparency.
Access to stock, property level skills and risk management are essential
Access to stock, transaction expertise, asset and property management skills, and a thorough risk management framework are becoming ‘must haves’ for all types of investor. Investors and owners are seeking these skills either in one integrated package or as specialist individual service to supplement their own capabilities.
Further rationalisation of the industry expected
Many traditional fund managers are under pressure as closed end funds run off, fees fall and regulatory costs rise at a time when capital raising is taking much longer. We see a period of significant corporate activity ahead in the industry with mergers between strong brands and weak brands and between well financed and poorly financed organisations.
But allocations to property are expected to rise and target markets to broaden
We see real estate continuing to gain a higher market share from asset allocators in response to the continuation of a low yield environment and uncertainty and volatility in other asset classes. The focus of target property markets will also widen in terms of locations and property types as economic recovery gathers pace and the availability of debt improves. High and sustainable income and inflation-linked and ‘fixed uplift’ leases will remain in strong demand, which will see the emergence of many new ‘alternative’ sectors.