Real estate under management grows 5% globally

Investors will be able to count on a less chaotic picture, according to Breglia, regarding prices and a downward direction of monetary policy. Moreover, real estate market fundamentals remain solid with supply and demand stable, if not growing in most asset classes. The big international players think that 2024 will be a "year of action", after a 2023 pause.
"There is a need to refinance, renew products and balance portfolios. A decisive recovery is expected in 2025, but the signs are also positive for the current year, where we expect an increase in real estate asset management globally of no less than five per cent," Breglia emphasised.

The report by Scenari Immobiliari analyses the entire Reits system and the situation of other types of real estate funds in the main European countries: France, Germany, Great Britain, Luxembourg, the Netherlands, Spain, Switzerland and Italy, which represent the European real estate fund industry.

In summary, Germany continues to dominate the European ranking by size, followed by Luxembourg, France and Italy, which has assets of EUR 114 billion. The average performance is 2.2 per cent in Europe, with Italy at 1.9 per cent.

The total European assets of real estate funds and Reits in 2023 is EUR 1.6 trillion, of which 64 per cent are in unlisted real estate funds, 33.5 per cent in Reits and 2.5 per cent in listed funds.

"In a year in which the protracted war in Ukraine was compounded by a new crisis in the Middle East, the global economy grew by 3.2 per cent, slightly less than in 2022, and investments were inevitably affected by the restrictive monetary policy," the Report states. The uncertain macroeconomic scenario is compounded by changes in ways of living and working, new needs require innovative solutions, where different uses merge to generate hybrid functions. In 2023 the turnover realised by the five main European countries (including the UK even though it is no longer part of the EU) was EUR 910 billion, a drop of almost two percentage points compared to the previous 12 months.

Germany continues to account for more than one third of the total volumes with EUR 307 billion, although down by more than five percentage points. France is confirmed in second place with EUR 209 billion. Italy shows the highest growth (plus 2.2%) followed by Spain (1.9%), their turnovers amounting to 142.5 and 110 billion euro respectively. Estimates for 2024 are for widespread growth (2% two on average) with peaks of 3.9% for England and 3.4% for Italy.

The average asset size of European real estate funds in 12 months fell from EUR 499 million to EUR 478 million, a decline of about four percentage points over 2022. The average figure is unrepresentative of the differences in the sector because it is conditioned on the downside by the limited value of Italian and Spanish funds and on the upside by the peaks of German open-ended funds, Dutch instruments and British 'puts', which fluctuate in a range from around EUR 1,200 million to around EUR 2,850 million.

According to the Report by Scenari Immobiliari and Studio Casadei, the Italian real estate fund sector, with a weight on the rest of the European vehicles of over 12%, continues to register a strong growth trend. Its Nav at the end of 2023 reached €114 billion, an increase of 8.6% over the previous year. Real estate assets held directly by 60 SGRs and 640 active funds reached EUR 131 billion, an increase of 6.5% over 2022.

Forecasts for 2024 are for an increase in Nav of 5.3% and in assets of 4.6%, the number of vehicles could reach 660. "2024 will be an ideal year for value-add investments _ pointed out Francesca Zirnstein, managing director of Scenari Immobiliari _.The path towards more sustainable real estate finds support from investors, who are willing to take on more risk in exchange for higher returns. The fall in inflation is bringing attention back to the more modern office sector, and 'living' is the asset class where the greatest attention of international operators is focused".

In summary, all real estate is expected to grow in 2024. Fund assets continue to be divided between core investments, the world of pragmatic portfolios, with good occupancy, decent yields, and market rents, and the world of value-added investments, which are prime, high-quality properties with excellent locations and high prospective rents. Both can enjoy solid cash flows and the support of long-term contracts.

"In Italy, we can observe how the asset allocation of managed assets has seen the weight of the various sub-funds vary, with a growth in residential and logistics," continued Francesca Zirnstein. "The outlook for 2024, based on the indications gathered among the asset management companies that participated in the realisation of our Report, is one of cautious optimism, with an increase in assets under management and diversification of portfolios compared to their current composition.

The indebtedness of the fund system in Italy at EUR 58 billion is slightly down, close to 45 per cent of assets. Performance (Roe), while representing the average of highly diversified realities, has fallen below two per cent. The asset allocation of Italy's managed assets has seen the weight of the various sub-funds vary, with residential and logistics growing.

"The estimated total turnover of domestic asset management companies amounts to EUR 380 million in 2023, with approximately 1,200 employees. The value of the average assets for management companies is about 2.2 billion euro, compared to the previous 12 months the figure has been revised upwards (over 15%) due to the consolidation of new companies and vehicles in the assets under management; but if we consider the top twenty-five Sgr, which hold almost all the funds, the average assets of Sgr are worth 2.4 times (over 5.2 billion euro)," the Report reads.

Purchases during the year amounted to EUR 2.4 billion (down 40% year-on-year) against EUR 1.5 billion in disposals (down more than 58 percentage points year-on-year). In the area of acquisitions, interest in residential was on the rise, while retail and offices recorded a contraction; divestments mainly involved residential and offices (altogether over 70% of exchanges).