International Real Estate Investment Hope is Not a

International Real Estate Investment Hope is Not a Strategy Author: Dr K A Sieracki KASPAR Associates 1

International RE Investment • Globally across the main international RE markets returns have converged • Seen positive RE returns for the past 7 -8 years • Most returns have peaked and now in mature stage of the RE cycle • Construction costs are high which cannot support rent or capital pricing • Business margins are being squeezed for occupiers • Most companies require cheaper space • So what do you do for investment?

International RE Investment • Today, the critical issue is the impact of technology on the use of property as well as the RE fund management business • The RE business side is behind on technology • New niche sectors are emerging based on the relative demand for property • Technological transformation creates uncertainty on the future of property use • People are doing the same thing but it is technology that changes the process • Happening all around the world, no one is immune • Is more important than geographic location

International RE Investment Retail • Impact of online, omni channel effect • Customers want it all, every which way • Retailers need to make investment in technology as well as the right product • Good becoming commodities and sold on the internet • Goods available to rent, not just to buy • Experiential retail the new buzz word • Make the place the destination – F&B, cinemas • Less retail floor space needed • US has 24. 5 sq ft person compared with Europe average of 4. 5 sq ft, UK at 2. 4 sq ft person

International RE Investment Industrial • The new retail due to ecommerce • The last mile is important – look out for drones, driverless vehicles for deliveries • Need big sheds and little ones • Been the big beneficiary of technological change on retail • Seen the best performance of the main sectors • Most elastic sector in terms of supply and occupier demand

International RE Investment Office • • Next sector to be hit like retail Artificial intelligence to get rid of office jobs, up to 45% could go Less bums on seats and the need for office space Already seeing business processes being automated eg law firms, financial services, insurance, accounting and call centres Millennials now more of the workforce than baby boomers and like open space and break out places Gen Z work differently – do not like collaborative space and might want a door, back to cellular offices? ? Big divide between knowledge workers and those with little education Shortage of data scientists, need talent from universities

International RE Investment Niche Sectors • Demographics important • Some service jobs higher education not relevant • Impact of driverless vehicles and reduction in transport costs for some – lessen the need for self storage, billboards, motor vehicle showrooms, low quality retail, some transit oriented assets, car parks • Impact on local authority and landlord revenue streams • Kerbside could be very valuable • Look at autonomous urbanism • Suburbs could rejuvenate, get new priority and higher value • Climate change impact – don’t fool with mother nature • Data centres, senior housing, student accommodation

International RE Investment So what do you do? ? Repurpose Rehabilitate Redefine