The investment properties of today... and tomorrow
How attractive are offices, retail or (semi-) industrial real estate as an investment? Will objectives shift as a new generation of investors takes over? In short, what are the most interesting investment properties of today and tomorrow? Vincent Gommers and Christophe Ide provide the answers to these and other questions.
Christophe Ide, who left the notarial profession to join Ceusters’ Industrial Agency department three years ago, chairs the company’s Investment & Development team. The team unites the heads of the Retail, Offices, Industrial Agency and Valuation & Advisory departments, together with COO Axel Ceusters and CEO Ingrid Ceusters. “The growing demand for investment and development properties as well as clients/customers’ increasing need for assistance made it clear that a new dynamic and a coordinated structure was needed,” Christophe Ide explains. Vincent Gommers nods in agreement: “I don’t act as a broker myself. As the Head of the Valuation & Advisory department, I am responsible for delivering valuation reports to our clients and providing them with strategic advice in relation to their purchases or sales and the optimisation of their real estate portfolios. I support the Investment & Development department, which is headed by Christophe, with financial/tax advice and market data,” Vincent Gommers explains. “Of course, this isn’t new to the company, but historically investment and development cases were spread over different departments, whereas today they are centralised under the care of Christophe and the experienced team, so we can optimally assist our clients with all their real estate challenges, regardless of the asset class. Together with the extensive market knowledge of our colleagues, this forms a strong basis for providing sellers and investors with advice.”
How do you explain the increased demand for investment properties?
Christophe Ide: “The greater demand for these properties undoubtedly ensues from the current favourable borrowing climate. Although you would think that the COVID crisis might have reduced interest in office or retail portfolios, we’re still seeing a lot of activity in these segments too. The way the market looks right now, high-quality properties can still be found in every asset class. Ceusters manages transactions within the hotel segment, for example, and we’re also active in healthcare real estate, always in line with the requirements of our clients – operators, developers and investors alike – each of whom we support based on their own needs. Moreover, subject to triple net agreements, solid returns can still be achieved in these two segments. With regards to the office market in particular, we’ve been seeing increasing interest in investment properties in and around major cities such as Brussels, Antwerp and Ghent for some time now. Analysts of the brokerage firm Barclays recently published that they consider the Brussels office market to be more resiliant to the impact of teleworking than global cities such as London and Paris. Perceptive investors therefore rightly continue to consider our capital as a stable market, which, by extension, actually also applies to the office market in the other larger cities in our country.”
Vincent Gommers: “COVID is naturally confronting us with (rental) price corrections in various (sub-)markets, as well as shifts in the demands and concerns of our clients, but generally speaking, all commercial property segments still offer great opportunities for anyone looking to develop a high-performance, diversified investment portfolio.”
Christophe Ide: “The pandemic has made things particularly busy on the residential side, which of course puts pressure on yields. This has undeniably led to residential investors also becoming more open to professional real estate – from retail and office to (semi-)industrial opportunities – they previously might have shown less interest in.” Vincent Gommers: “Individual apartments and typical residential investment properties (usually three to six apartments) are always sought after in the market. But as these are under constant pressure from competition from owner-occupiers on the one hand and private investors on the other hand, returns on these properties have become relatively low. That’s why investors today are looking for new opportunities, which makes commercial property an ideal addition to their portfolio.”
With a view to improving returns, is it a good idea to diversify a portfolio these days?
Vincent Gommers: “That’s precisely where our role lies: providing our clients with the best possible advice, tailored to their individual situation. How to get the best return from your property portfolio (and by extension your capital) in the longer term is a common question. The answer will be different for each investor, depending on their profile. It’s perfectly possible, for example, to strategically decide to make a nice profit from the sale of a residential property today, and then reinvest those funds in commercial real estate with a higher return. Stable, high-quality commercial real estate additionally often requires less active management. In these hectic times, not having to deal with much of that hassle is also attracting more property investors.”
Christophe Ide: “We welcome both relatively modest investment portfolios of private individuals and the so-called ‘big gun’ funds. Our aim is to genuinely build a sustainable, long-term relationship with our clients, which is embedded in the Ceusters DNA. Our international networks (Gerald Eve, SIOR, Tirca, Lee & Associates and IRELS) also allow us to assist foreign parties with their entry or expansion into the Belgian market and to assist our Belgian clients with their foreign real estate activities.”
Vincent Gommers: “Regardless of the size of the investment portfolio, every client is offered expert advice from Ceusters. We’re proud of our high level of accessibility, but – just as in the financial world – we naturally also guarantee discretion, a characteristic that’s particularly appreciated by many of our clients, who include company owners, family offices and other wealthy individuals.”
Christophe Ide: Investing in high-quality, rented semi-industrial/logistics real estate has the advantage that it requires limited owner maintenance and can offer certain guarantees with regard to the term of the contract, within a B2B environment… In short, it’s a reasonably ‘hassle-free’ investment.
Vincent Gommers: “That’s right. We note that many business parks and multi-tenant SME-sites sell out quickly. These sites serve as lively hubs for local companies, but often also house the regional offices of larger service providers and multinationals. This makes them very popular with both owner-users and investors. Thanks to the different purposes they serve (storage/workshop, warehouse with offices or just offices), there’s usually also ‘something for everyone,’ with different options depending on the client’s budget and wishes. These developments therefore appeal to private investors and large funds alike. In order to further unburden our clients, Ceusters can also take on the management of these assets, for owners and in co-ownership. This allows an investor to create and diversify a portfolio with our support, carefree.”
Christophe Ide: “In the context of the healthy diversification of investment portfolios, we’re also noticing continued interest in the other segments of the market. There are four important initial parameters for identifying a potential investment in rented retail, office and (semi-) industrial real estate: location, lease, tenant and the property’s state of maintenance. However, these aspects are often interconnected. For example, a prominent location could mean that a less favourable state of maintenance is less relevant. Alternatively, a perfectly equipped building can sometimes compensate for a (slightly) less favourable location. A solid tenant can also make a property particularly interesting, as can a long-term lease, even if the location is not perceived as ‘prime’ (within the market). Our services allow us to match a rapidly increasing number of investors with properties that are right for them, in line with their profile and expectations.”
Today, with great appetite for residential property, price levels may drive more people to the rental market. Will this have an effect on investments in this segment?
Vincent Gommers: “Traditionally, Belgium has been a nation of buyers. However, precisely because residential property prices are rising so sharply, we can say with some caution that there are indeed (initial) signs of a shift towards the rental market. After all, the affordability of quality housing has come under increasing pressure. We therefore note that various parties are currently raising capital and setting up funds that focus on the residential rental market. They are already responding to this shift with the aim of providing a high-quality solution to this (future) growing demand. Their initial focus is on larger cities, where demand already exists today.”
Christophe Ide: “In this way, these funds are also responding to an emotional shift. Younger generations clearly feel less attached to having ‘their own home’ than past generations did. People tend to move around, de- pending on their relationship or work status. Travel will also become more frequent again, which means young people may want to be less bound to bricks and mortar and all the concerns ownership can entail – a trend that will be very clear once the pandemic is over. In short, there is greater flexibility in the living arena, which funds are responding nicely to.”
Vincent Gommers: “In neighbouring countries such as Germany, the UK and the Netherlands, this has already been the case for quite a long time.
In our country, however, it’s a more recent development and the market is less mature. Our role therefore also lies in matching project developers with these funds.”
“In real estate ION is active as a developer and end investor. With their market knowledge and extensive network, Ceusters manages to identify the right investment opportunities and bridging the gap between seller and buyer. Their Investment & Development team brings an important added value to the table in the preparation, structuring and commercial implementation of transactions.”
Sam Bordon - Investment Director at ION
In addition to investments, you also handle development cases. Are the same segments –residential, retail, office and industrial – also represented there?
Christophe Ide: “We guide land owners towards optimal results . We look at sites’ potential and try to valorise it. That can indeed result in retail, offices, semi-industrial or residential developments, or increasingly a variety of these uses. Moreover, Ceusters also has the necessary expertise in the hotel, healthcare and leisure segments.”
Vincent Gommers: “Demand for residential (re-)developments is particularly high these days, in line with the interest in this market which we mentioned earlier. The repurposing of run-down, inner-city office buildings that no longer meet current standards and the requirements of office users is a classic example of this. These are often converted into apartments with ground floor shops, offices or services . But large-scale former industrial sites too, for example, are increasingly being redeveloped due to the scarcity of available land.
These days, it’s impossible for anyone who pursues long-term investing goals to ignore the topic of sustainability.
Christophe Ide: “Today, people tend to refer more to ESG criteria, which stands for Environmental, Social & Governance. In concrete terms, this means that various factors are taken into account when developing a portfolio, of which energy consumption, the impact of raw materials, health and safety are only a few. It’s all about making a positive social contribution, not just a profit. These investment choices are affecting the rest of the market too. The Flemish government has also drawn up some very clear guidelines on how energy should be approached. These will be audited for both residential and non-residential real estate. In this case, the question is how investors will handle these sustainable investments when calculating returns...”
Vincent Gommers: “Property that is geared to withstand the test of time in an ever changing environment. That’s what it’s all about when you’re talking about long-term investments. Which is precisely why ESG is rightly gaining importance in investment decisions. It’s also increasingly given more attention on the financing side. Ceusters’ range of services therefore also include extensive technical analyses, for example, to allow us to serve our clients in this area too – both today and in the future.”
“It’s all about making a positive social contribution, not just a profit.” CI
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