Per Erikson, head of real estate at Swiss Life Asset Managers, shares his outlook for market opportunities this year, and the real estate investor's approach to ESG.
What is your outlook for the real estate sector in 2024?
Looking back at 2023, it was a very difficult year with uncertainties and fears of a recession. However, we think a lot these uncertainties have now relaxed and become more clearly defined.
We see first signs that 2024 will be a better year, certainly on the real estate side. For example, we see continued rent growth this year. By the second half of this year, we anticipate a return to a more normal market.
One area of opportunity is residential real estate. There is elevated demand for this real estate sector, and it does not have to be classical residential, but it can be alternatives like micro-living and co-living.
We are also optimistic about the logistics real estate sector, as recently demonstrated by our logistics joint venture with LaSalle Investment Management, as we see growth potential across continental Europe.
The question is not if the market comes back in 2024, but when and how strong.
How diverse is Swiss Life Asset Managers' real estate portfolio?
Currently our assets under management and administration amount to EUR 113.3 bn. We have a well-diversified portfolio with the majority in office and residential assets. We are also involved in logistics and light industrial buildings, as well as healthcare and hospitality to round off the portfolio. Our main markets are Switzerland, Germany and France, and we have recently been building out our presence in the Nordic countries with an acquisition in Sweden.
We have over 2,200 people in Europe in over 20 locations and enjoy a significant presence in virtually every market. That is our key strength, enabling us to support our clients as we have boots on the ground.
How is the focus on ESG and net-zero changing insurers' investment in real estate?
Monitoring, measuring, benchmarking and reporting on ESG has significantly increased. It is crucial that we perform well in this area. Where the impact is much larger is in the net-zero challenge that insurers and financial institutions face.
Net-zero is primarily focused on existing stock, rather than new builds. A total of 40% of greenhouse emissions like carbon dioxide come from real estate stock. Addressing the existing stock and approaches to decarbonisation has a massive impact on how insurers can effectively manage the issue.
Just getting rid of a carbon inefficient building does not solve the problem but moves it to someone else and has no overall impact on the climate. Here we have very strong views at Swiss Life Asset Managers. For example, we have communicated that we want to lower our CO2 footprint by 20% in 2030.
It is about building and reshaping the organisation to deal with net-zero in a holistic way. For example, this requires large investments in collecting accurate data and digitalising and optimising processes to analyse this data and draw tangible conclusions.
What makes Swiss Life Asset Managers stand out as a real estate manager?
As an insurance-owned asset manager we adopt a risk-based asset and liability management approach. Our investors appreciate our efforts to align our investments with theirs.
While we invest in infrastructure outside of Europe, we primarily operate as a European organisation. Our local presence in the market is a significant advantage and helps us attract and retain clients.
We invest a lot in our people, processes and IT and that helps to ensure value preservation, as well as constant and sustainable performance.
Finally, ESG is not a marketing tool for us. It is a fundamental component of our processes. We have invested significant effort into integrating ESG considerations into our DNA, ensuring that we are committed to responsible investing
What is Swiss Life Asset Managers' strategy this year in the real estate space?
With over 125 years of experience in the real estate business, we have the expertise to develop real estate portfolios in every economic cycle.
While we have launched a lot of products in recent years and have a well-stocked product shelf, our focus now is on streamlining and adjusting our product shelf to the new cycle. Rather than launching many new products we believe that this approach will yield better results.
Besides structurally attractive asset classes like Living and Logistics, there will also be opportunities to acquire attractive assets in other classes at very low levels over the next six to nine months. We are open to exploring such opportunities as they arise.
