Markets are clearly unpredictable and the real estate sector in Europe is certainly no exception. But after several strong years, there is growing consensus that the sector will at least see a slowdown in growth in 2019. Given the potential headwinds, does technology offer any benefits that investors could leverage to enhance returns?
There are several reasons for the growth slowdown, but obvious ones include uncertainty over trade conflicts, geopolitical shifts including Brexit, and rising interest rates.
These will likely slow transaction activity. However, there are still many investment opportunities in Europe. The attractive, steady yields currently offered by the continent’s real estate sector are in demand from investors at a time when risk appears to be rising generally in financial markets.
Certain sectors are particularly promising. For example, the logistics sector saw significant expansion in 2018, particularly in Germany, The Netherlands, Poland, Spain and the UK. It will likely continue to be a key focus for investors for some time, driven by further urbanisation and growing e-commerce, which together will require increased provision of first-rate city distribution centres.
Well-situated offices in certain areas also remain attractive. There were, for example, significant rent increases in several central business district office markets in 2018, including Madrid, Stockholm, and various German cities.
To take full advantage of the opportunities, however, investors must be able to respond quickly to them, which is where technology is a major help.
Quick reactions in rapidly changing markets are essential to avoid the risk of missing favourable sales opportunities. Modern day due diligence requires all transaction-relevant data and documents to be at hand if unnecessary asset price reductions or even the loss of sales are to be avoided. Just one missing document can sometimes block an entire deal.
A solution lies in virtual data rooms (VDRs), such as Drooms NXG. These give authorised personnel controlled, online access to confidential data and documents, all of which are stored remotely. Business processes such as commercial real estate sales, mergers and acquisitions, non-performing loan transactions and board communications can be conducted securely, transparently and efficiently.
By expediting these processes from purchase through to sale, VDRs allow transaction-relevant documents to be available at all times during an asset’s entire lifecycle and they provide a way of ensuring documents are always current. Having a database in which documents can be updated consistently gives vendors full control and enables them to react to the latest market conditions and bring assets to market quickly.
One of the biggest challenges real estate market players now face is how to deal with the rise of big data. The issue is of strategic importance because it can enhance decision-making across supply chains and failure to adopt the right technology can lead to severe loss of competitiveness.
Despite the inevitable slowdown, demand from investors for the right deals and investment strategies in European real estate will continue due to the attractive yields available compared with the low interest rates prevailing elsewhere. Industry practitioners just need to remember that the inevitable slowdown will just make the right technology more useful than ever. jh
Jan Hoffmeister is co-founder and chairman at Drooms