US Niche Asset Classes No Longer Niche to Investors: MIPIM Panelists
Plus, the New York Economic Development Corporation’s COO touts city’s office-to-housing conversion potential
As trouble continues to stalk the office market — with even giants like Blackstone (BX) having to mitigate distress in their portfolios — and debt becomes harder to come by, America’s “niche” asset classes have moved into the spotlight.
Panelists at MIPIM 2023 told the international stage in Cannes, France, that institutional investors are no longer shying away from assets such as cold storage, data centers, outdoor industrial and properties that generally fall into the “other” category. Instead, they’re specifically looking for them.
“Investors are actually seeking that out more and more,” said Shawn Lese, the chief investment officer and head of funds management for Nuveen in the U.S., during the panel entitled “What’s Next for U.S. Real Estate?” “In the past, they were like, ‘I just don’t understand it, that’s not institutional, I won’t go into it.’ ”
The panel focused on the future of real estate in the U.S. With more and more people comfortable working remotely, that future will focus will be on work that can’t be done at home.
“It’s advance manufacturing, it’s life sciences, it’s research and development,” said Andreas Vlahakis, a senior vice president at Thor Equities. “It’s where you need to go to a real estate asset that’s not your own home.”
Environmental, social and corporate governance (ESG) was also a big topic for the future of real estate as panelists said that tenants are going to demand their real estate be greener in the future. But, on the lending side, the U.S. is still a long way from European investors who are demanding ESG benchmarks (though some Europeans think the U.S. will surpass them soon in that regard.)
“In Europe, it’s an absolute must-have and they take it seriously,” Lese said. “If you want capital from those regions, you’ve got to comply and deliver something that’s going to be very, very high up in consistency with those metrics.
“The capital that comes from the U.S. is completely sporadic,” he added. “You get some states that are saying, ‘Don’t even talk to me about that.’ ”
Panelists do expect that to change. And Vlahakis said that that could shrink the pool of capital available to smaller and family-owned landlords who might not have a team to deliver ESG information to potential investors.
The U.S. panel at MIPIM kicked off with a keynote from Melissa Román Burch, the COO of the New York City Economic Development Corporation, who continued to stress Mayor Eric Adams’ pro-business and pro-real estate stance to the global audience.
“Mayor Adams has been very clear that, as part of his agenda, that real estate and business will be at the center of New York’s economic recovery,” Burch said. “Government cannot enact the changes that need to get addressed in our city alone; we need to be working together in concert with the private market.”
Burch also reiterated Adams’ goal to change legislation to make up to 250 million square feet of office space — or 25 percent of the city’s total square footage — convertible to residential use. Burch said the city doesn’t expect all of that to be turned into housing, but agreed with estimates that 10 to 20 percent could.
She also talked about the close working relationship between Adams and Gov. Kathy Hochul as a far cry from the extremely contentious one between former Mayor Bill de Blasio and ex-Gov. Andrew Cuomo. Burch called the relationship an “unprecedented” opportunity for the city.
“We haven’t really had cooperation between the mayor and the governor in probably about 20 years,” she said. “It’s more than just the same political party. It’s really a shared agenda, [it] is really sort of the window of opportunity that feels very different about this moment than any moment, really, quite frankly, in my professional career over the last 20 years.”
Nicholas Rizzi can be reached at email@example.com.