The world’s largest commercial real estate landlord is shuffling a $ 378 billion real estate deck.
Two Blackstone Moves — BNY Mellon’s London office in St. Paul’s Cathedral was sold to Italian insurer Generali Insurance for £ 465m and was sealed this week, according to people familiar with the deal. How landlords are relocating their portfolios as the pandemic accelerates structural trends.
Covid-19 hastened the decline of the two major commercial real estate sectors, retail and office, and urged landlords to build up alternatives that they believe will work better.
The top of their shopping list is: A warehouse supported by the e-commerce boom. Rental apartments and student housing have become attractive due to the shortage of homes and the growing student population throughout Europe. Life science campus supported by huge investment in research and development.
“These are the megatrends that have … Accelerated by the pandemic,” said James Seppara, head of European real estate at Blackstone.
Ten years ago, offices and shops accounted for about 70% of all real estate transactions in Europe, according to Real Capital Analytics. This year, they account for 35%, and the housing and logistics sector is steadily advancing.
Jeffreys analyst Mike Prü said the pandemic accelerated the “transfer of value” from retail stores to “beds, medicines and sheds.”
Life science sets a record
Life sciences are most likely to excite fund managers. This is a niche that is breaking price records as investors are buying or developing high-tech campuses near European education hubs.
In May, Magdalen College of Oxford University acquired a 40% stake in Oxford Science Park. In the marketThe price is around £ 100m, more than five times the amount the university paid to 50% of the park in 2016.
“Demand is skyrocketing, supply is inadequate and rents are rising. Is this without the fastest growing sector bar? Absolutely,” said Simon, head of global capital markets for realtor Savills.・ Hope said.
Properties range from traditional offices to complex labs. An important driving force for value is location. “It’s a’genius trail’. It’s a great school and a talent,” Hope said. The hottest places in Britain and Europe are the so-called “Golden Triangle” between Oxford, Cambridge and London.
“With four of the top ten universities in Oxford, Cambridge, Imperial and University College London, the world’s financial firepower, especially from the United States, is trained in the United Kingdom,” said Hope.
According to consultancy Bidwells, a record £ 2.4 billion was invested in life sciences real estate in the region in 2020, and investors are still looking to more than double that amount.
“We spend a lot of time in the field of life sciences. .. Wide in Europe, especially in the UK. Development is underdeveloped. There are many research institutes in the UK and there are great opportunities,” says Brookfield. Brad Heiler, who manages a $ 38 billion portfolio as head of real estate in Europe, said.
Brookfield owns half of the Harwell Life Sciences campus south of Oxford, and last month a Canadian investment group gave £ 714 million to Arlington, a science and technology real estate group with golden triangular assets. I paid to TPG Real Estate Partners.
But according to Heiler, the real opportunity is to build a lab or campus from scratch. Brookfield is considering development around European cities in “Germany, Switzerland and elsewhere”.
Another new hotspot for real estate investors is logistics, and the growing popularity of online shopping has led to a significant increase in demand for warehouse space.
Through its subsidiary Mileway, Blackstone has built a large network of warehouses close to European cities. Meanwhile, Brookfield has spent more than € 1 billion over the past year building portfolios in France, Spain, Germany and Poland.
During the pandemic, rent from warehouse occupants held up relatively well, and demand for space was a boon to companies in this sector.
Shares of the UK’s largest office landlords, such as British Land and Landsec, fell 20-30% from pre-Covid levels, while shopping center owner Hammerson lost three-quarters, but warehouse development. Segro has increased by 16%.
Investors are also betting on the housing sector, preferring rental properties and dormitories.
“Look at these big European cities. These cities are large employment hubs with significant housing shortages and historically stable economies. It’s a good opportunity,” he said recently. Mark Allnutt, Managing Director of Graystar, a US real estate investor who has raised € 725 million to invest in European residential real estate, said.
“People want to live in Amsterdam and London, but there aren’t enough homes in these cities,” Seppälä added.
Supply shortages are also a hallmark of the student housing market and should help pull the sector out of the turmoil caused by the pandemic, Heiler said. Brookfield, who owns Student Roost, the dormitory operator, plans to increase investment in the continent.
Offices and shops still account for more than half of Europe’s total investable real estate sector, according to Real Capital Analytics. Investors acknowledge the risk of overpayment as money rushes into a particular asset class.
Unlike the 2008 financial crisis, pandemics have not caused a wave of distressed assets that hit the market. But if banks lose patience with the devastated landlords, they may have the opportunity to bet on knockdown deals, a private equity fund that has just closed a $ 2.2 billion fund to invest in Western Europe. Guillaume Kasou, head of KKR’s European real estate team, said. ..
“The important part is to attack and defend at the same time,” he said.