Dr. Linsin, the discussions about the new investor behavior in real estate investments are lively. But what trends can actually be empirically identified?
We are actually seeing a focus on more defensive asset classes. Among other things, the residential real estate sector is firmly establishing itself as the second largest submarket on the German transaction markets: With a total volume of EUR 12.5 billion across Germany in the first half of 2020, it is only slightly behind office real estate. In Austria, the residential segment has even overtaken the office segment with a 34 percent share of the total transaction volume in the first half of 2020. But the mix of residential and commercial is also becoming increasingly relevant. This can be seen, among other things, in the significant investment plus for plots of land. With a volume of 3.3 billion euros, the previous year's period in Germany was exceeded by a remarkable 85 percent. Plots that are suitable for mixed-use quarter developments, which are becoming more and more popular with investors, are particularly sought after. This trend is also similar in Austria.
What advantages do investors expect from mixed-use neighborhoods?
The social megatrend of reurbanization means that more and more people will have to live and work together in ever smaller spaces. A well-developed real estate concept with residential, work, cultural and leisure areas that does not close itself off from the outside world, but rather creates urban meeting spaces, can therefore improve the quality of life and living in the entire quarter. This in turn makes the property a long-term sought-after and accordingly weatherproof investment. Such an urban quarter can be created in top locations - but this does not have to be the case. In the same way, an obsolete industrial property, for example, can experience its renaissance as an office loft including coworking and coliving spaces and classic residential units. For some time now, such a concept has no longer only been attracting start-ups. What is important about the location is above all that the quarter is integrated into an intact urban infrastructure - in other words, that it becomes part of an already well-functioning and attractive neighborhood. In turn, a successful quarter contributes to the further development of these qualities and further increases its attractiveness. Or, alternatively, the mixed-use quarter can act as an initial spark for (re)revitalizing urban districts: The predominant deficits of inadequate urban development are compensated for by the targeted mix of uses.
What is the greatest challenge when it comes to quarter investments?
One important challenge is to put together the mix of space in such a way that the respective quarter contributes to an enhancement of the district or even the entire city. Digital technology based on big data can now be used to analyze this: Using anonymized location data, the actual user behavior can be examined in a data-based manner. This results in a knowledge advantage for the respective quarter as well as for future projects - and thus ultimately an advantage for users, investors and also for the public sector.
What will be important for investors in view of the COVID-19 pandemic with regard to urban quarters?
Mixed-use quarters have been a successful model, not only since Corona, and are increasingly establishing themselves as an asset class. According to our definition, it is an area with at least four different types of use, whereby one of these types of use does not necessarily have to be geared towards returns. In view of the current situation, however, this trend is likely to become much stronger again. Two important points that are currently particularly appreciated by investors are the diversified cash flow and the constant frequency that attracts a functioning neighborhood. These are two important security aspects. At the same time, it is not possible at the present time to answer the question as to what long-term consequences will actually arise for the use of space in the individual market segments - for example, how the aspects of flexible working strategies and remote work will affect the demand for office space in the coming years. However, it has been shown that a greater prevalence of flexible working does not lead to users taking up less office space. Rather, office space must meet other requirements. In a quarter, however, there is the advantage that one type of space is strengthened by the others: An office whose surroundings offer many urban qualities will be more attractive in the long term than one whose neighborhood virtually dies out in the evening. With regard to the decision to rent, this can be the decisive criterion for signing a contract. But residential and hotel areas, for example, also benefit from the fact that the workplace is only a stone's throw away. A quarter of short distances will benefit from the increasing trend towards flexible working.
What are the risk factors?
Actually, there are only three possible problem points with quarters: Firstly, the relatively complicated process of obtaining planning permission. Secondly, a real estate concept that is too rigid. Our cities are changing faster than ever before, which is why even mixed-use quarters must be able to change or "grow" with the times. Thirdly, urbanity can quickly be lost if the individual properties within the quarter are managed by a variety of players without a uniform model. It is better if responsibilities and competencies are bundled in a team. It is also important that the idea of "space as a service" finds its way from concept to reality. The quarter manager, community manager - or whatever the exact title may be - should not focus solely on the requirements of the investors. Just as important are the needs of all those who live and work in the quarter.