Real estate, the value-add way

?In November, inflation reached another high of 10.7% in the euro zone, where alarm bells have been ringing for some time. The European Central Bank is busy tightening monetary conditions, but will it succeed in bringing inflation back down to its 2% target within a reasonable time? Since the 1970's, whenever inflation has exceeded 8% it has taken years to return to acceptable levels.

In this environment, the traditional asset classes – equities and bonds – are face challenges. What are the alternatives that could help people protect themselves against currency depreciation? Not gold, the price of which has dropped noticeably in recent months and which has the major drawback of not generating a regular return. Nor commodities, there is a high risk that prices will fall. That leaves real assets – particularly real estate, since revenues from this source are mostly indexed to the general increase in prices.

It is, therefore, a good moment to draw on our real estate team’s long experience in investing in direct real estate by launching our second value-add strategy - Elevation II ?- for long-term investors. This vehicle has a diversified range of assets, including luxury residential buildings, logistics (last mile, data centres, etc.) and “special situations”, such as properties that are being discounted because they require a change of use and/or complete renovation. It's also diversified geographically: acquisitions are planned in western Europe’s key gateway cities with an ESG focus by renovating the buildings with the objective of significantly reducing their carbon emissions.

We believe that current challenges – the demand for flexibility, the shortage of new housing, and sustainability issues with real estate accounting for 35% of global energy consumption and 37% of energy-related carbon dioxide emissions – are of vital importance.

Since transactions are arranged by mutual agreement, real estate is an area in which experience and an effective presence on the ground make all the difference. This is true of our teams, which include 14 nationalities in six countries led by our colleague Zsolt Kohalmi, who has overseen transactions worth over 20 billion euros during his 30 years in the real estate business.

https://am.pictet/en/globalwebsite/global-articles/2022/expertise/alternatives/value-add-real-estate