Bringing GeoSense to Real Estate: The Spatial Finance Lens for Public Markets

The real estate industry is waking up to climate risk as a major headwind, with damage from natural disasters and insurance premiums significantly biting into cash flows and valuations–and reshaping the desirability of entire geographies.??

What comes next is what AlphaGeo was designed for: Using climate as a tailwind to guide offensive and opportunistic investment strategies, highlighting where and why to deploy capital against the backdrop of climate uncertainty. The technical approach known as “spatial finance” guides our inter-disciplinary team of economic, physical and human geographers to identify the next investable opportunities by addressing questions such as:?

• Why do market transformations occur in certain regions and not others??

• What are the physical, economic, technological and political infrastructures that enable or limit opportunities??

• How are upstream and downstream dislocations resulting from disruptive technologies, the energy transition, societal shifts, and human migration impacting location performance??

Our initial client base has been the real estate sector, spanning builders and developers to analysts and investors. But what about other investors who do not directly own or manage real estate exposure? Our R&D has expanded to deliver insights to the broader investment community of institutional and retail investors who focus on companies, commodities and technologies. That is the mission of the GeoSense platform. ?

Starting with the construction of market tracking indices mirroring equity indices such as the Russell 2000, we assembled a series of models that leverage training data including a unique combination of macroeconomic, environmental and socioeconomic factors. Our feature selection process leverages the same raw data and spatial machine learning algorithms as our core insight engine and extends the reasoning to determine where the next boom in financial activity might occur, aided by additional tools such as our “Industrial Renaissance Tracker”. (See our monthly GeoSense market intelligence newsletters for more details.) For example, we have been actively supporting our client Atlas Capital in the construction of a dynamic multi-asset ETF centered on the selection of climate-resilient North America REITs.

To deepen our application to real estate public markets, we’ve begun deploying a similar feature selection process to highlight variables that are important to the public companies and portfolios that carry climate-weighted real estate exposure. We selected two real estate investment vehicles to track: the Prologis REIT ETF (PLD), whose holdings concentrate on high growth logistics real estate, and Equinix (EQIX), a digital infrastructure company whose real estate assets are tied to their data center footprint.??

?As the charts below illustrate, our approach has been successful in capturing the major market inflection points and price appreciation over the last decade–plus notably those associated with the post-COVID rally.?

Please download the AlphaGeo October GeoSense Real Estate Intelligence report here to learn more about how to use our guidance as an outsourced investment advisor with respect to climate driven market activity.

These forward-looking market tracking tools allow investors to develop scenarios based on material variables that guide future asset performance, demonstrating how spatial finance can be very useful in examining location-based investment opportunities in ways not captured through traditional discretionary or quantitative analysis.

To learn more, please visit www.alphageo.ai or contact us at [email protected]?