Investing for resiliency key to weathering volatility in the real estate market.
All eyes are on the U.S. real estate market for late-cycle signals that reveal fresh opportunities to generate value. As I meet with institutional investors from around the world, I am frequently asked: “How should I invest in today’s market?” Our dedicated research, transactions, and asset management teams explore the answers to this question by examining counter-cyclical demand drivers and the valuable data-driven insights they produce. Our analysis and experience tell us that a little perspective goes a long way.
At Bentall Kennedy, we look beyond market fundamentals and job growth figures, focusing additionally on idiosyncratic demand drivers. Demographic trends, population shifts, and the emergence of new innovation hubs can create cycle-resilient, demand-driven investment opportunities. Investing with resiliency in mind, however, requires an approach that takes a longer-term outlook in a world that often seeks instant results.
Mature markets like New York, Chicago, and L.A. have enduring value, but they often come at a high cost. Our team dives deep into those local markets to identify the sub-markets and adjacent micro-locations that are attracting young talent, offer relative affordability, and are likely to become more in-demand in the coming years. Lower-cost markets with residential options at different price points attract younger, price-conscious residents looking for modern civic infrastructure and rich cultural amenities with future options to advance their standard of living as their careers advance, as well.
The quest for top talent is also triggering economic migration within the U.S. towards cities and regions that have access to pools of highly educated labor. The impact of this migration extends to real estate where demand for places to live, work, and shop follows in lock-step. So-called “knowledge cities,” that grow or attract and ultimately retain business in the industries of the future, pave a path for attractive investment opportunities. Take Pittsburgh as an example — the growth of artificial intelligence and robotics centered around Carnegie Mellon University is poised to have a meaningful impact on the city over the next decade.
Deeply embedded within our leadership ethos is the value we attribute to sustainability and the role this plays in delivering value for our investors. Making sustainability a part of the value equation has been a perspective of ours for many years, and our industry is slowly awakening to the social and environmental consciousness that is shaping tenant behavior, and in turn, driving property values. On balance, properties with exceptional environmental footprints and investments in sustainability demonstrate lower vacancy, lower risk of obsolescence and lower operating costs, thus offering greater investment value over the long-term compared to assets lacking in these aspects.
I work with my team to balance our analysis of key economic metrics with often atypical, counter-cyclical sets of indicators that challenge conventional wisdom but also reveal hidden value propositions that offer stable, long-term resiliency. This informed and attentive perspective driven by local presence is how we are leading the way for our clients in a late-cycle market where value in the real estate market might just be found in places where others fail to look. — Amy Price
Amy Price is President and Chief Investment Officer of Bentall Kennedy in the U.S. Based in San Francisco, Amy has overall responsibility for the operating and financial performance of Bentall Kennedy's U.S.-based businesses and has direct day-to-day responsibility for all asset management, financing and transactions activities in the U.S. She has more than 20 years of experience in investment strategy and transaction execution, combined with significant experience in asset management and finance.
Download our Perspectives report at bentallkennedy.com/investment to learn how Bentall Kennedy is investing for the future.