Places and spaces - Union Investment Real Estate
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
places
and spaces 01/2021
The Real Estate Magazin of Union Investment
Growth strategy
Interview with CEO
Dr. Michael Bütter
Whither now
All change for retail
and hotels
Sustainability
Buildings as valuable raw
material depots
The new
New symbiotic spaces are emerging
in city centres. What are
cross-over
the opportunities for investors
Contents Editorial
12 6
Collaboration is
key to success
O
nly a few months after it was Modest effort, many benefits
Cover Story founded, the ESG Circle of
Real Estate (ECORE) indus- The content of the scoring model
RE-evolution: Accelerating change in the real estate markets 4 try initiative already has around 40 has been finalised and the pilot
Interview: Dr. Michael Bütter, CEO of Union Investment Real Estate 6 members. Their shared objective is to phase is already under way. More
Supermarkets: Opportunities for institutional portfolios 12 establish a reliable, widely acceptable than 500 properties from members’
28 Hotel holdings: Ready for the next cycle 18 industry standard for measuring the international real estate portfolios
sustainability performance of proper- will be scrutinised in the first year.
Hotel transactions: Anticyclical investment 22 ties and portfolios. The findings from the pilot phase
Mixed use: Curating the perfect combination of spaces 24
Photos: Getty Images, Sebastian Vollmert (2), Christoph Lintl / Rakete GmbH, Union Investment / Adele Marschner
Jan von Mallinckrodt, will be compiled by mid-2021 and
Neue Balan: Campus cool that inspires tenants and investors 28 Ever since the Paris Agreement and Head of Sustainability at the scoring outcomes released to the
the UN’s 2030 Agenda for Sustain- Union Investment Real wider market. Benchmarking across
able Development were adopted Estate GmbH multiple countries and asset classes is
Real People in 2015, the question has not been also planned. Collaboration is key to
Cathrin Schwartz: Head of Asset Management Europe 34 whether the real estate industry will success here, though. For an industry
take action to ensure sustainabil- standard to be useful, a substan-
ity and help fight climate change, consumption and emissions, and tial number of players need to be
Markets
but how exactly to implement such asset check. On a points scale from 0 involved. That’s why more companies
Logistics: A safe investment product in uncertain times 38 action. This is an important political to 100, tenants, owners and inves- will be encouraged to participate
Sentiment survey: Professional investors realign their strategies 40 issue for the EU and the individual tors can instantly see the extent to this year, even though critical mass
Transactions: Dealmaking in challenging conditions 42 countries – and the coronavirus pan- which a property or portfolio meets has already been reached in Germa-
demic has done nothing to change climate targets and ESG criteria. ny. To ensure that as many market
34 Concepts
that. The real estate industry needs In addition, the model provides a players as possible are able to use the
to be prepared for tougher regula- concrete roadmap with milestones new industry standard and it doesn’t
Urban mining: Cities as a source of raw materials 46 tion. for achieving the ESG goals. It also become a burden, some elements
High-rises: Skybridges create connections 48 enables properties and portfolios of the “atmosphere” scoring system
A concrete roadmap for achieving to be compared, including across developed by Union Investment in
Cover picture: Reinhard Schmid / Huber Images
climate protection targets different providers. As such, the scor- 2019 – which forms the basis of the
Wide Angel ing model does not compete with new ECORE industry standard – have
Urban art: Experiential spaces with subway links 54 The new ECORE scoring model green building certificates. While been omitted. Union Investment
provides valuable support in this certificates serve their own particular is something of an exception and
respect. It already takes into account purpose, for example in the planning has been conducting Sustainable
News17
the goals of the Paris Agreement and and construction phase, there are big Investment Checks on properties for
Additions to the Union Investment portfolio55 the definition of sustainable financial differences between them and they ten years now, collecting a substan-
Online & service, contact and publishing information55 investment (taxonomy system) in aren’t comparable with each other. tial amount of information. The
the EU’s Action Plan on Sustainable This causes problems when assess- asset check in the ECORE model is
Finance. The model will also be con- ing the sustainability of a portfolio. not quite as detailed. The important
Cover picture: Redevelopment of the Dorotheen Quartier in
tinuously updated to reflect new EU They also typically fail to illustrate thing is that this model is a step in
downtown Stuttgart has given the area a new identity and vitality instruments. Properties are analysed the environmental progress made by the right direction and everyone
through a mix of offices, small-scale retail and urban living. using three clusters: governance, properties. should be able to use it. •
2 places and spaces 01/2021 places and spaces 01/2021 3
Cover story
CUS ON
FO
E-
N
R
EV IO
OLUT
The next
level
Real estate players are gearing up for the post-coronavirus era.
Our special feature addresses the accelerated rate of change in
real estate markets, transformation processes and new
perspectives for investors.
Dr. Michael Bütter, the new CEO of Union Investment Real
Estate GmbH, sets out the real estate investment manager’s
growth strategy in an exclusive interview. Page 6
Supermarkets offer investment opportunities and exciting
potential for sale-and-leaseback transactions. Page 12
Operators and property holders are getting their hotels
ready for the next cycle. Page 18
From being high-demand assets, hotels are now the focus of
anticyclical investors. Page 22
Photo: Massimo Borchi / Schapowalow
Creative mixed-use concepts are increasingly in favour and
help create vibrant urban neighbourhoods. Page 24
Neue Balan in Munich demonstrates how a campus concept
can work for users and investors alike. Page 28
4 places and spaces 01/2021 places and spaces 01/2021 5
Cover story
CUS ON
FO
E-
N
R
EV IO
OLUT
Leveraging
strong
momentum
Dr. Michael Bütter has been CEO of Union Investment Real Estate
GmbH since 1 October 2020. In an exclusive interview with head of
communications Fabian Hellbusch, he sets out the company’s ambi-
tious growth objectives and growth strategy.
Dr. Bütter, how would you describe cellent overall result, to which we on the
your first 180 days since joining Union real estate side made an important contri-
Investment? bution. The company is incredibly strong
and has weathered the crisis very well to
The past six months have really confirmed date, despite all the challenges involved.
my initial impression. I’ve been surprised Various factors contributed to the positive
on many occasions to find that the image achievements in 2020 – our strong sales
I had of Union Investment before I came team, the trust of our customers and
on board was actually pretty accurate stakeholders, robust tenants and, above
looking at the inside. When I joined the all, the sheer dedication of our people.
Fotos: Blinde Texte Ovid maiosa aut quundam
company, Germany’s second lockdown This unprecedented situation calls for
was looming and the management team even more management decisions than
was being restructured – those two events during normal times. Important adjust-
naturally created a lot of expectations ments were made around risk manage-
and changes. For a real estate enthusiast ment and staff management in particular
like myself, there’s nothing more exciting – including the smart, carefully considered
than now getting ready to take the next decision to invest in our workforce rather
step forward, backed by an established than battening down the hatches.
team that delivers strong performance at
Photo: Sebastian Vollmer
every level. Is that all about bolstering our
Under Dr. Michael Bütter’s leader-
dependability in response to the crisis?
With Covid-dominated 2020 now ship, Union Investment plans to
behind us, what’s your initial Yes, indeed. We know how difficult it is to double its real estate assets to
assessment of how things went? recruit good staff in the real estate indus- €72 billion over the next six years.
try, and that will be especially true when
I’m hugely impressed with the Group’s ex- the markets pick up again. We aren’t ▶
6 places and spaces 01/2021 places and spaces 01/2021 7
Cover story
fair-weather sailors. That strong commit- formula for dealing with the Covid-19 erty outside the German-speaking coun-
ment to our business and employees gave crisis? tries. We’ve already put down markers in
us extra momentum in an exceptional Amsterdam, and Martin Brühl’s teams are
year. And the storm isn’t over yet. We Our aim is to make Union Investment currently negotiating on exciting deals
need all hands on deck. a key player in Europe and also build in Helsinki and Dublin. We also want to
a strong position globally. We’re look- tap into the highly resilient multi-family
Partially due to the significant growth ing very closely at the medium and segment in the US via our office there. In
you’re aiming for, no doubt. long-term growth potential and asking terms of asset management, the plan is
ourselves where we need to accelerate to work with external property managers
People still believe in the ability of real es- as an organisation, where we ought to to find appropriate solutions in the new
tate to deliver sustained returns. After all, rethink our approach and what things we markets. Optimising our IT interfaces is a
there’s plenty of evidence. Our outstand- perhaps shouldn’t be doing. As stewards key aspect of our existing strategy project
ing portfolio has so far come through this of our investors’ assets, we’re extremely in this context.
huge stress test largely unscathed. That cost conscious. So profitable growth is
justifies the continuing trust shown in our the mantra. That also means striving for
performance and our forward-looking greater efficiency in processes, with digi- “The quality of a property and its ability
management approach at all levels. This tal solutions playing a role there.
trust is vital to maintaining strong mo-
to deliver sustained returns remain our
mentum and leveraging it for the benefit Will the growth targets involve chang- benchmarks in every transaction.“
of our investors. es to investment strategy?
As CEO, what objectives are you Growth isn’t an end in itself; we’re not Does this mean a shift of focus away
specifically focusing on in the Real aiming to hit our growth targets at any from office properties?
Estate segment? price. The quality of a property and its
ability to deliver sustained returns remain There’s been a lot of talk about the
Union Investment has a future-proof our benchmarks in every transaction. I increasing importance of working from
business model with its retail and special therefore don’t see any fundamental home. We firmly believe that demand for
open-ended real estate funds and its shift in our investment strategy. Union high-quality office space in prime loca-
tailored solutions for our institutional Investment has traditionally had a solid tions will remain strong. Such properties
clients. There is enough capital out there focus on core products. We now intend thus remain a pillar of our core-oriented
to drive significant growth. Accordingly, to expand our risk/reward profile in the investment strategy. Home working won’t
we’re confident that we can double our manage to core category in a prudent, be a priority for every company in the
Photo: Sebastian Vollmert
assets under management to around measured fashion. At the same time, we future. There’s more of a trend towards
€72 billion over the next six years. That will further broaden our portfolio. This hybrid workplace ecosystems where the
means growth both of the existing funds is partly designed to leverage additional traditional office serves as anchor space
and in our Service KVG business, and also return potential, but also to mitigate the for brand identity, for attracting talent
through new institutional real estate impact of increased volatility and further and for functions that need a face-to-face
solutions for major international clients. boost the resilience of the portfolio in a presence.
Our plans are realistic, but the conditions hugely dynamic market environment.
Dr. Bütter is aiming to
have to be right. What else is on the agenda for 2021?
recruit 25 new employ- That will include entering new market
You mean the markets returning ees for the Hamburg segments in Europe alongside making We’ll be expanding our use of forward
to normal? and Frankfurt offices in a return to overseas markets. funding – one of our specialisms – across
So there’ll be an increase in head the near future. all property types. The intention is also
Not just that. Our investment teams will count? Absolutely right. In particular, we intend to acquire more multi-use properties,
be handling significantly more transac- to step up investment in residential prop- ensembles and campus properties. ▶
tions, both in Europe and overseas. The Yes. We’re initially looking to recruit 25
aim is to hit around 130 deals a year in new employees in Hamburg and Frank-
the medium term. For that to happen, furt. That will give us a real boost and
cross-border travel obviously needs to allow us to seize market opportunities as
return to some sort of normality. Another they emerge. I’m very pleased that various
important prerequisite is ensuring we trainee positions will also be created to
have enough people, especially in invest- help meet our ambitious growth targets.
ment management and asset manage-
ment, but also in support functions. So counter-cyclical investment is the
8 places and spaces 01/2021 places and spaces 01/2021 9
Cover story
Union Investment was a clear net even in exceptional times without having Are hotels still on fund managers’ What’s your view of retail property?
buyer last year. Will that remain the a fixed local presence. Having said that, a wish lists?
case while going for growth? local presence in volume markets provides Retail is on the brink of a major transfor-
an increasingly important competitive Hotel occupancy rates and revenues will mation. That could provide opportunities
Making acquisitions totalling €4.1 billion edge, particularly around generating remain under pressure over the next two for regeneration of city centres and also
during the pandemic was an impressive off-market opportunities. Based on the to three years. Hospitality has been hit for us as an investor. Repurposing un-
achievement in 2020, as also acknowl- model of our branches in Paris and Singa- very hard financially, mostly through no wanted retail space will enable the crea-
edged by our sales team. Sales activities pore, we will therefore gradually establish fault of its own. On the whole, though, tion of new concepts that combine retail
had to take a bit of a back seat. But that’s local hubs in target markets with critical the hotels in our portfolio have very sus- with short-term accommodation, hotels
just a snapshot. Removing non-strategic mass, initially in London, Amsterdam tainable and efficient business models. or distribution facilities. It’s an exciting
assets from our portfolio is an ongoing and Stockholm. This process will involve They also occupy excellent locations, development that we will be monitoring
task that serves to steadily reduce the new and exciting career prospects for the meaning that the prospects of recovery very closely.
age of the portfolio. Our Manage to whole team, first in investment manage- are good. We believe that things will
Green programme is a central element ment as a spearhead for cultivating new indeed get better and we continue to
of our sales strategy. Where it would be markets, and then also in asset manage- invest selectively in hotels. As such, our Thank you for talking to us,
too expensive to make certain properties ment. strategy here is counter-cyclical. Dr. Bütter. •
climate neutral, we’ll dispose of them in a
timely fashion. To put a figure on that, we Talking of asset management,
aim to realise disinvestments of around what kind of action does the portfolio
three percent of our real estate assets currently require?
each year.
It’s extraordinary what our five asset
Key elements of
We’re currently living with closed management units have had to deal growth strategy
borders, restrictions on entering other with for over a year now, on top of their Strategic decisions
countries and flight bans. Is direct local normal duties. Working closely with our for sustained growth 1 Doubling of real estate assets by 2026
access to markets going to become tenants, new solutions are being found Boosting presence in markets
Clear takeaway from the more important? almost 24/7 to chart a way through and 2 through local hubs
interview: Union Invest- out of the crisis that works for both sides. Diversification and resilience:
ment intends to boost If effective, reliable networks are in place, There have been insolvencies along the 3 e.g. through residential outside DACH
its local market presence cross-border transactions are still possible way, some of which were just down to including multi-family in US, logistics
through new hubs, ini- circumstances. Overall, however, our 4 Expanding institutional real estate
business, particularly services business
tially in London, Amster- users have survived the coronavirus crisis
5 Increasing added value through
dam and Stockholm. well or even very well so far. Agreeing
expansion of manage to core
lease extensions ahead of expiry, like just
6 Accelerating sustainability activities
recently on the Radisson Blu in Berlin’s
Continuous headcount growth –
DomAquarée complex, shows that the 7 starting with 25 posts in 2021
current situation is frequently being used
Solid basis (31 Dec. 2020)
by companies to secure prime locations
ready for the future. We’re happy to assist EUR 47.3 bn
them. Assets under management
of which EUR 7.6 bn
Service KGV mandates
EUR 37.1 bn
Real estate assets
EUR 4.1 bn
Transaction volume (2020) 6 locations
Hamburg, Vienna, Paris,
Madrid, New York, Singapore
Photo: Sebastian Vollmert
444 employees
Source: Union Investment, 31 Dec. 2020
10 places and spaces 01/2021 places and spaces 01/2021 11
Cover story
CUS ON
FO
E-
N
R
EV IO
Supermarket chains are benefitting from higher levels of footfall during the pandemic, but will OLUT
need to strongly focus on protecting store margins as sales growth moderates.
R
enewed investor appetite is a fea- European retail specialist Pradera says. Eu-
ture of the grocery sector following ropean grocery asset transaction volumes,
a strong hike in supermarket sales driven by SLBs and increased investor
volumes during the lockdowns, which interest, jumped by 43 percent to €6.7 bil-
spurred the leading supermarket chains lion in 2020, equal to a 22 percent share
to cash in on this boost to the valuations of the capital flows into retail real estate
of their assets. Sale and leasebacks (SLBs) in the region. This is almost three times
enable them to unlock capital to finance the figure for 2016/17. In comparison,
additional warehouse space for “just- overall retail real estate investment vol-
in-case” buffer stocks to hedge against umes fell 21 percent during the first nine
disrupted supply chains and to accommo- months of last year, according to recent
date a jump in online shopping, as well as research by advisor JLL on the European
opportunities to acquire rival brands. Grocery Real Estate Market conducted
together with Union Investment.
“Supermarkets across Europe have con-
tinued to trade during all the lockdowns The last major peak in sale-and-leaseback
we’ve been through and the performance opportunities was in the aftermath of the
of their online business has also been Global Financial Crisis when a number
fantastic. Really, they have been the win- of retailers sought to recapitalise via this
ners twice over,” Colin Campbell, CEO of route. That trend is emerging again, ▶
Supermarkets on
the shopping list
Sale-and-leaseback deals for supermarkets have soared in
Europe following the outbreak of the Covid-19 pandemic.
Photo: Getty Images
By Judi Seebus
12 places and spaces 01/2021 places and spaces 01/2021 13
Cover story
the JLL report concluded. While private in particular Italy and Spain. There is not the UK. Standard lease lengths vary across
equity players dominated the first wave an endless supply and the market is be- Europe and, in some other countries like
of SLB deals a decade ago, institutional coming more competitive, but this is quite France, are often significantly shorter and
investors are now becoming more active a good moment for sale-and-leaseback therefore less attractive,” Campbell said.
as well, Pradera’s Campbell says. “In recent transactions.”
years we’ve seen the rise of infrastructure The boom in grocery SLB deals in 2020
as an asset class, giving institutional inves- Supermarket assets are an ideal asset was fuelled by solid asset valuations as
tors access to toll bridges and other types for an institutional portfolio social distancing and lockdown meas-
of assets with long-dated inflation-linked ures channelled consumer spending into
income. Supermarket properties are Campbell points to the six hypermarkets, daily staples and away from discretionary
probably the nearest you can get in real with 21-year inflation-linked leases, that retail stores and the hospitality sector.
estate to such a classic high-yielding Pradera acquired in northern Spain at the The spike in grocery sales volumes from
income play. They’re an ideal asset for an end of 2020 for almost €130 million in SLB stockpiling and the closure of restaurants
institutional portfolio.” Germany and the deals on behalf of German pension fund was a big boost for Europe’s largest retail
UK are the largest markets, but they are Nordrheinische Ärzteversorgung (NAEV), sector in terms of revenue.
also quite expensive, he adds. “There are as an example of this trend. “This is the
better opportunities in southern Europe, long end of the lease spectrum outside Over the last 20 years, the food sector Open during the pan-
has recorded stronger growth in most demic: Edeka Center
European markets than other areas, such Struve in Eidelsted,
as fashion. Nevertheless, supermarket Retail Research EMEA at JLL, says: “This north-west Hamburg
margins still continued to be squeezed. type of investor traditionally knows the
is part of Union Invest-
Many grocery retailers took a hit to their market inside out and usually has the
ment’s portfolio of retail
profits from substantial costs linked to scale to make it work. Because they are
properties.
the need to hire extra staff to keep stores generally committed to these types of
High costs and lengthy delivery times of online food sales stocked and implement safety measures properties for the long term, they are
in response to the virus. also very familiar with the potential for
buffer brick-and-mortar grocers alternative uses such as residential or
The pandemic has also unleashed a mas- last-mile logistics.”
O nline sales in the food retail sec-
tor have jumped since the Cov-
id-19 pandemic but the spike comes
cess of consolidation gathers pace
following the pandemic, but food
retailers are still on a growth path
sive surge in online shopping, fuelling
the further development of distribution
channels, such as click-and-collect service
Increased investment expected in the
coming years
from a very low base and existing and many are seeking to expand points. Supermarkets have so far lagged
Photos: Union Investment / Adele Marschner, Union Investment / Daniel Sumesgutner
barriers to e-commerce penetration their physical presence. Industry other shopping segments in generat- While grocery stores attract 37 percent of
will persist and ultimately shield forecasts point to further long-term ing e-commerce sales and creating an the total retail spend in the EU (27 coun-
brick-and-mortar stores, accord- stable growth for the coming years, omnichannel, or integrated physical store tries), according to data from Eurostat,
ing to Henrike Waldburg, Head of rising to around 1.2 percent annually and online offering, but Covid-19 has also property investment in this segment
Investment Management Retail at between 2022 and 2026 for the EU- accelerated this trend in grocery retail. accounts for only 10 percent of Europe’s
Union Investment (pictured). “Some 27, according to Oxford Economics. overall retail real estate volumes. In other
customers will make more use of Supermarket chains are benefitting words, real estate investors appear to
online shopping in food retail in the Supermarkets are often anchor from higher levels of footfall during the be under-allocated towards supermar-
long term if their experience has tenants in Union Investment’s retail pandemic, but these retailers will need to ket-anchored assets. That will change in
been positive during the pandemic, some €2 trillion in 2019 but has so portfolio thanks to this favourable strongly focus on protecting store mar- coming years, Martinus predicts.
but the costs of online shopping are far lagged other retail segments in growth trajectory and their ability gins as sales growth moderates after the
very high in the perishable goods terms of e-commerce penetration. to generate strong footfall and crisis passes, the JLL / Union Investment “There is a window of opportunity for
sector due to the complexity of sup- Online food sales accounted for high-frequency sales, Waldburg report said. Structural changes prompted foreign investors to access core prod-
ply chains and the need for separate just 1.4 percent in Germany in 2019 adds. “Grocery chains generally have by the ascent of discount retailers and uct and gain scale quickly, for example
cooling zones. Many consumers are compared to 15.8 percent for the good credit ratings, operate on the smaller convenience stores in urban cen- through sale and leasebacks. In some
simply unwilling to pay for higher non-food sector and as much as 33 basis of long-term rental contracts tres are also creating additional pressures European markets, grocery operators
transport costs or may have doubts percent and 30 percent for consumer and generate stable rental levels. to optimise store performance and the prefer leasing space over ownership and
about the freshness and quality of electronics and fashion respectively, How much consumers spend on European grocery market is expected to further merger and acquisition activity
food purchases made online,” she according to recent data from HDE food ultimately depends on their see further consolidation and merger could trigger the sales of the property
argues. Online Monitor. disposable household income, but and acquisition activity in the coming portfolios of newly acquired grocery
the supermarket sector has proven years. Domestic investors have historically businesses. Specialist investors currently
The food sector is the largest retail Retail sectors such as fashion are re- during the Covid-19 pandemic that it accounted for the lion’s share of super- working out value-add portfolios are also
segment in Europe with revenue of porting lower offline sales as the pro- is crisis-proof. • market assets, Tjard Martinus, Head of likely to provide more quality stock to ▶
14 places and spaces 01/2021 places and spaces 01/2021 15
Cover story News
Customers queue to use
the click-and-collect service
at Galeries Lafayette in
Paris during lockdown.
Premium properties remain in demand in tough times
U nion Investment was able to
maintain a high level of occu-
pancy in its real estate portfolio in
of around €271 million. The majority
of lettings last year were renewals,
comprising 82 percent of the total
properties. “These successful letting
figures show that interest in office
space is still strong, despite the
2020, despite the disruption caused or 856,654 square metres. changed conditions brought about
by the coronavirus pandemic. Across by the coronavirus pandemic. Prop-
Photos: Reuters / Charles Platiau, Union Investment / Christian Gahl, Union Investment
all actively managed real estate Of total lettings in 2020, 44 percent erties in well-connected locations
funds, the overall occupancy rate relate to office properties and 43 with modern, flexible and sustain-
based on income was 95.1 percent percent to retail. The rest are split able space remain in demand,” says
at the end of 2020. “Our strong mainly across hotels and logistics Stobbe. •
letting performance shows that pre-
mium properties remain in demand,
even in tough times like these. Our
asset managers are in regular con-
tact with tenants, particularly those
who have been hard hit by the crisis,
the market upon exit. We expect to see estate asset class. Good-quality grocery and are working with them to reach
elevated levels of investment for the next stock provides portfolio diversification mutually satisfactory solutions,”
couple of years, in particular in Germany opportunities, Martinus concludes. “Su- says Jörn Stobbe, the member of
Scan the QR code to
and the UK. Those markets also offer the permarkets are a high volume/low-mar- the management board at Union
order the European best opportunities to gain scale,” he says. gin business, but in times of uncertainty, Investment Real Estate GmbH with
Grocery Real Estate their resilience and defensive characteris- responsibility for asset manage-
Market Study compi- The expedited need for additional tics appeal to investors and the Covid-19 ment.
led by JLL and Union financing has coincided with a renewed pandemic has accelerated that favoura-
Investment. investor regard for supermarkets as a real ble perception.” • Union Investment let or relet a total
of approximately one million square
metres of commercial real estate The Rund Vier office ensemble in Vienna belongs to UniImmo:
space in 2020. From a fund perspec- Deutschland. It is located between Prater park and the conven-
Average annual grocery real estate investment Share grocery sales and share grocery tive, this equates to annual net rent tion centre.
volumes 2014–2020 (EUR bn) investment in percent
UK France
Germany Finland
Finland United Kingdom
Fifth annual PropTech Innovation Award launched
A
France Czech Republic ccelerating the Real Estate Evolution: Under
Spain Portugal this slogan, Union Investment and GERMAN-
Grocery sales
Sweden United Kingdom and Spain of total retail TECH will be recognising outstanding digital
Germany are leaders in sales 2020 solutions for the real estate world of tomorrow.
Netherlands real estate investment EU27
Grocery Proptechs have until 31 March to submit their
volumes in the grocery
Portugal
business.
Sweden investments entries across five categories. The final will take
of total retail place on 23 June as part of the PropTech Innova-
Czech Republic Germany
investments
2014–2020
tion Summit. “The award categories focus on areas
Poland Netherlands
bn EUR in which the real estate industry now needs to
0 200 400 600 800 1,000 1,200 1,400 Poland make important adjustments for the post-corona-
Source (left): JLL, February 2021 0 10 20 30 40 50 60% virus era. This is where we expect to see particu-
Note: Excludes any investment deal less than USD 5 million in value .
larly high innovation potential, which we want
Source (right): JLL, Eurostat, Oxford Economics, February 2021 While grocery stores attract 37% of the total retail
Note: Excludes any investment deal less than USD 5 million in value. The share of grocery spend in the EU (27 countries), according to data
to promote and make reality together with the
store sales in total retail sales is based on the total retail sales in non-specialised stores from Eurostat, property investment in this segment proptechs,” says Christoph Holzmann, a member of
with food, beverage or tobacco predominating (NACE Rev. 2: G4711), as a percentage of
the total retail trade, excluding motor vehicles and motorcycles (NACE Rev. 2: G47) for
accounts for only 10% of Europe’s overall retail real the senior management team at Union Investment For more information visit
estate volumes.
2018 and adjusted by available growth rates for 2019 and 2020. Real Estate GmbH. • www.proptech-innovation.de
16 places and spaces 01/2021 places and spaces 01/2021 17
Cover story
CUS ON
FO
Location secured: The Pullman Berlin Schweizerhof hotel is part
of the Union Investment portfolio. Agreement was reached in
Covid-hit 2020 to convert the existing contract and extend the
E-
N
R
EV IO remaining period from 15 to 30 years ahead of expiry.
OLUT
Ready for the
next cycle
Hotels have been particularly hard hit by the various measures taken to counter
the coronavirus pandemic. Even major property holders are feeling the effects. The
prospects of a quick return to growth are good, however, provided the right steps
are now taken with regard to tenant and property management.
By Christian Hunziker
T
he Radisson Blu hotel in Berlin’s the rooms and public areas. On comple-
DomAquarée complex is a popu- tion of the work, the hotel will join the
lar accommodation option in the exclusive Radisson Collection of excep-
German capital. One guest described it tional hotels in a move that underlines
on travel website Tripadvisor as “A great the hotel’s strong lifestyle appeal. “It’s a
hotel in the best location in Berlin”, while feature of the current crisis that our hotel
another describes the staff as “very friend- partners remain committed to strong
ly and professional”. Despite this praise, locations and high-quality properties and
the hotel has had very few guests recent- are locking in those benefits. All parties
ly. Restrictions on travel, social distancing benefit from this approach,” says Martin
and the cancellation of conferences and Schaller, Head of Asset Management Hos-
other events mean that the fight against pitality at Union Investment.
Covid-19 has affected the entire hospitali-
ty sector, including the four-star Radisson Stable business relationships help pro-
Blu, which is held by Union Investment’s vide answers to the crisis
open-ended real estate fund UniImmo:
Photo: BHotel Pullmann Berlin Schweizerhof
Deutschland. Looking at general hotel performance
in 2020 shows just how significant the
Nevertheless, during 2020 the property contract extension is. According to real
owner succeeded in negotiating a new estate consultancy Savills, at the height of
20-year lease with the Radisson Hotel the pandemic occupancy across Europe
Group that guarantees a fixed minimum plummeted to 15.3 percent. In Germany,
rent. This agreement is being accom- the important RevPar figure (revenue
panied by an extensive refurbishment per available room) collapsed by over 90
programme that will see the fund invest- percent in April and May 2020 compared
ing some €20 million in the fabric of the to the previous year, based on findings by
building, while the operator will spend market research companies Fairmas and
approximately €12 million on updating STR. Against this tough economic back- ▶
18 places and spaces 01/2021 places and spaces 01/2021 19Cover story
1,500 tropical fish
were temporarily
drop, some hotels shut their doors for his 15-strong team were able to induce a moved to the breed-
good or declared insolvency. The slump tenant to recommence rent payments by
ing and nursing area
in overnight stays and room revenue has offering a long-term lease extension. It
also created challenges for owners of can also make sense to change the con- of the neighbouring
hotel properties, not just for operators. tract model, which is what happened at Sea Life Aquarium.
“We had to learn to take one step at a the Pullman Berlin Schweizerhof hotel.
time and model a wider range of scenari-
os,” comments Martin Schaller. According During the crisis, Union Investment suc-
to Schaller, landlords waiving part of ceeded in extending the remaining term
the rent is not really a solution. “Simply of the contract ahead of expiry from 15 to
waiving the rent without the operator 30 years, while at the same time convert- An exciting video
delivering something in return is gener- ing the management contract with Accor
provides an insight
ally not the best way forward,” he says. Hotels into a franchise agreement, with
Such a waiver does, however, make sense the HR Group becoming the new tenant. into the refurbish-
if it can be made to serve the long-term In Schaller’s view, there’s no need to in- Union Investment hotel property in Berlin: After 15 years in service, the world’s ment project. Simply
interests of the fund and its investors. The corporate clauses about future pandem- largest cylindrical aquarium underwent a full refurbishment. The project at the scan the QR code.
objective should be to offset rent conces- ics into agreements: “A contract cannot DomAquarée complex took nine months to complete. Work on this scale had never
“Theoretically, it’s sions by tweaking hotel agreements that cover every eventuality.” In any case, that previously been carried out on a free-standing aquarium of this size. With the job
needed changing anyway, irrespective of type of clause would not have solved the done, the piscine population of the AquaDom is now back home again.
possible to reopen
the crisis. practical issues associated with suddenly
a hotel within two closing a hotel, as became necessary in
days. For safety Switching brands is one of many many locations due to the lockdown in
reasons, however, options March 2020.
additional checks
As hackneyed as it may sound, tackled Operators are actually well prepared for additional checks on water quality were navigating the crisis, though. According
on water quality correctly, a crisis can be an opportunity. such a scenario, says Rolf Hübner, manag- performed so that it took just under a to Schaller, the long experience of the
are performed so “The current situation provides a major ing director of UBM Hotels. This Austrian week to reopen. Hübner explains that Union Investment Hotel Asset Manage-
that it takes just window of opportunity; the action we company leases ten hotels owned by the necessary hygiene requirements were ment team is another key factor that
take now will shape our hotel portfolio Union Investment across three countries drawn up while the hotels were closed by underpins tenant trust. The quality of the
under a week to
over the longer term,” says Schaller. Never and signs its own contracts with the law, allowing fast implementation when portfolio is also of critical importance.
reopen.” before has Union Investment agreed so hotel managers. The first thing to clarify preparing to welcome guests back. “Recent months have demonstrated that
many changes with its tenants in such a was whether it was even commercially our hotel portfolio, with its creditworthy
Rolf Hübner, short time as in 2020. “Almost all agree- viable to remain open under lockdown Experience and strong partnerships tenants and excellent micro-locations, is
managing director, ments have been renegotiated or are conditions, explains Hübner. In his words, help in a crisis already largely crisis-proof,” says Martin
UBM Hotels in the process of being renegotiated,” hotels that decided to close went into Schaller. “The pandemic is a temporary
explains Schaller. “Our aim here is that “standby mode”. The heating, ventilation Something that became apparent is challenge facing hotels as an asset class,
every solution should add long-term and water supply remained in operation, that hotels which shut down during the not a structural one.” Having said that, it’s
value for our funds.” Requiring both but on a reduced scale. Water manage- first wave had a tougher time in terms possible that Union Investment will add
parties to invest in the property is just one ment was a particularly important issue: of being accepted by guests again than strong holiday hotels and resorts to its
option here. Another is to bring forward to prevent a build-up of legionella bac- hotels that remained open throughout. portfolio, which currently consists solely
Photos: UBM, Union Investment
a planned rebrand. teria, it was necessary to turn on the hot While the majority of the 73 hotels in the of city hotels. He firmly believes there
water in every room every two to three Union Investment portfolio stayed closed are better times ahead, including for
Union Investment is currently preparing days. A closed hotel was therefore never during the first wave of the pandemic, city hotels that attract large numbers of
for a hotel outside Germany to switch to fully deserted – according to Hübner, that figure was around a third during the tourists in addition to business travellers:
another brand, for example. The change there were always at least two employ- second wave in late 2020. Throughout, “People will start travelling again as soon
had been scheduled to take place at a ees on duty. Theoretically, it’s possible to it is essential “to work in partnership as it’s safe to do so. There is a basic human
later date, but the crisis created new reopen a hotel within two days, adds the with tenants”, says Martin Schaller. That’s need for individual experiences and social
priorities. In another case, Schaller and hotel expert. For safety reasons, however, not the sole prerequisite for successfully contact in a global world.” •
20 places and spaces 01/2021 places and spaces 01/2021 21Cover story
CUS ON
FO
E-
N
R
EV IO
OLUT
Checking in...
or checking out?
Although the pandemic has scared off many investors from hotel real estate, with
globally, most notably representing pri- William Duffey, JLL’s EMEA Head of Hotels
underwriting hospitality assets proving challenging in an uncertain world, some market vate equity and pension funds as well as & Hospitality Capital Markets.
participants see this as the perfect moment for an anticyclical play in the sector. institutional investors, means that a wall
of money is awaiting the recovery of the And while CEE proved an extremely sub-
By Isobel Lee hotel markets. That isn’t leaving a lot of dued market in the first half of the year
room for meaningful and sustained price – there were no hotel deals in Poland, for
discounts,” says Andreas Löcher, Head of example – Ott Ventures, the fund ma-
I
t’s been a tough 12 months for the the real estate world, hotels are conside- Investment Management Hospitality at nagement platform of MaMaison Hotels
European hotel and hospitality indus- red to have no structural weaknesses but Union Investment Real Estate. & Residences’ founder Ott Properties, is
try. With occupancy figures slumping a continuing, long-term potential, which now betting on this region’s recovery with
in double digit percentages throughout is driving investor demand. This, com- Clear evidence that some investors are its first hotel fund. The vehicle is targeting
2020, the year’s final months saw the ef- bined with €250 billion of dry powder taking an anticyclical approach “The MICE seg- some €500 million in assets under ma-
fects of a second lockdown paralyse over- ment within nagement and will invest across Europe
night stays once again after the summer ECE Real Estate Partners is one such hotels has come with a focus on the main CEE markets of
respite, slashing year-on-year occupancy player which is poised to pounce. Ascan Poland, Czech Republic and Hungary plus
under significant
rates by figures of 50–80 percent right Kókai was appointed in October 2020 Germany and Austria.
across the block, according to data from as Principal – Head of Hotels to imple- pressure from the
benchmarking firm STR. Unsurprisingly, ment the firm’s debut hospitality fund Covid-19 impact, The hotel fund’s manager, Nicolas Horky,
these effects have hampered hotel deals. strategy. Meanwhile, Henrie W. Koetter, with conference says it plans to leverage the team’s collec-
Data from Cushman & Wakefield shows CEO of ECE Work & Live, says that his firm tive experience in hotel investment and
spaces and ball-
that European hotel investment volu- is picking up some hotel development management to improve the operational
mes fell 55 percent year-on-year in the projects which stalled due to financing rooms ripe for profile of the properties it buys.
first half of 2020, even though some 79 problems during the pandemic. But the conversion to
percent of the total deal flow had been focus is also on how to run them more co-working, or Waiting for a return to normality and
agreed before Covid struck. leanly in the future, “to break even with strong occupancy
other services
occupancy under 45 percent. A lot of it is
Yet there were still notable transactions about taking out everything the customer which capture And although the outlook for 2021 still
agreed after the outbreak, suggesting doesn’t appreciate. Business hotels don’t greater spending includes plenty of unknowns, “most ope-
that several investors remain confident need a three-metre cupboard, a land line from guests.“ rators have found new ways to sell rooms
about the long-term prospects of the phone or an ironing board in every room,” since the first wave,” Horky notes.
hotel sector. The sale of the Ritz in the Koetter notes. “While data suggests we won’t be back
William Duffey,
UK for £800m to a Qatari tycoon, two to normal until 2023, news of the vaccine
Photos: Gregor Hofbauer / Ruby Hotels, JLL
EMEA Head of
major resort transactions in Greece, plus “The MICE segment within hotels has could shorten the recovery time.” Duffey
Hotels & Hospitality
sizeable deals in Germany and Spain kept come under significant pressure from the agrees. “Once restrictions are eased, we
Capital Markets
the market ticking along – largely thanks Covid-19 impact, with conference spa- can expect a lot of room stock to come
at JLL
to the liquidity of institutional investors, ces and ballrooms ripe for conversion to online within a short period of time. But
who were responsible for 48 percent of co-working, or other services which cap- realistically, it will be 2023–24 before rates
H1 deal volume.
Just drop off your room key: No
ture greater spending from guests,” notes are back to pre-Covid levels.” •
“With progress in vaccination and the in- check-out is needed at the Ruby
tent of guests to travel again, investment Coco Hotel & Bar in Düsseldorf.
markets will gradually come back during Guests receive their bill by e-mail.
the course of this year and next. Within
22 places and spaces 01/2021 places and spaces 01/2021 23Cover story
CUS ON
FO
E-
N
R
EV IO
OLUT
The new face on
The mixologists
the block: with its
mix of housing,
Photos: Union Investment / Adele Marschner, Multi Corporation (simulation), UNStudio / Groß & Partner (simulation), Team V / visualisation by Zwartlicht (simulation)
workspace, shops
and restaurants,
Forum Rotterdam is
Creating successful modern mixed-use schemes requires
a vibrant addition to
a deeper understanding than ever of urban trends, although some key mixology skills the city centre (top).
are already in landlords’ toolkits. By Isobel Lee
The Four project in
Frankfurt is a lively,
diverse skyscraper
W
ensemble featuring
hile single-use assets still have generating synergies between the differ-
apartments, offices,
a place in the commercial real ent types of use to create a 24/7 destina-
a lifestyle hotel,
estate landscape, they are tion.” Union Investment purchased Mer-
increasingly challenged by competition cury Helsinki towards the end of 2019, a a nursery and a
from mixed-use destinations which argu- mixed-use scheme which fuses offices and sophisticated mix
ably fulfil a broader range of needs for retail uses on a prominent corner location of shops, amenities
their customers, often creating inspiring in the centre of the Finnish capital. The and eateries
synergies in urban areas. However, mak- anchor tenant is fast fashion giant Zara, (centre).
ing successful mixed-use assets isn’t just while the biggest office tenants include
about balancing usage percentages – it’s strong covenants in the shape of eQ and Construction work
about forging property ecosystems which the OP financial group. Similarly, the on the Y-Towers
reflect new ideas about working, living firm’s exciting FOUR Frankfurt project is a development in
and playing in the same place. “There’s no 100 square metres office tower which will
Amsterdam began
“A good mixed-use point in putting together users in a build- offer compelling retail at ground level, to
in January. Union In-
concept is more ing with no connection,” suggests Thierry create a whole which is greater than the
than the sum of vestment is creating
Cahierre, Redevco’s Head of Global Asset sum of its parts.
its parts. It´s about & Development Management. “Today, a a mixed-use urban
generating syner- tenant doesn’t just ask which floor they Mixed-use concepts attractive for cities complex comprising
gies between the are on, they want to know what the and investors alike a hotel, apartments,
different types of building is about, who else is in it, and offices and food
use to create a 24/7 what else they can do there. The days of Yet while retail is often the “glue” in outlets (bottom).
destination.“ pure office, pure retail, or pure residential urban schemes, backed by ICSC research
schemes are over.” which suggests it has the most synergies
Martin Schellein, with other asset classes, the new science
Head of Invest- Henrie W. Koetter, CEO of ECE’s new of mixology is also giving rise to schemes
ment Management mixed-assets division, ECE Work & Live, which discover unexpected combinations.
Europe at Union agrees with this philosophy. “There’s not Lisbon-headquartered Sonae Sierra has
Investment a one-size-fits-all approach, you need to had success incorporating multiple hos-
dive into each unique situation and ana- pitals and health clinics into its malls, the
lyse what the neighbourhood is lacking,” latter surfing the wellness wave.
he notes. Adds Martin Schellein, Head of But it’s residential that often puts the
Investment Management Europe at Union heart in mixed-use schemes, driving the
Investment: “A good mixed-use concept is revitalisation of neighbourhoods and re-
more than the sum of its parts. It’s about sponding to planning directives seeking ▶
24 places and spaces 01/2021 places and spaces 01/2021 25Cover story
Meyer Bergman, has been scaling its working – and these trends have been
urban mixed-use strategy across multiple accelerated.” It is no wonder that the
downtown conversion projects in Germa- mixed-use wave is attracting new market
ny, the Netherlands and France. Accord- entrants. Atrium European Real Estate, a
ing to CEO Markus Meijer, CEO of Mark, former specialist in CEE shopping centres,
“we see this specialised platform ap- with a focus on Warsaw and Prague, is
proach as being the future of institutional currently exploring how it can transform
investment into real estate, with investors some of its shopping centres into mixed-
wanting a clear and focused narrative use schemes. “The days of pure
around the opportunities that have been
created by structural shifts in the way we CEO Liad Barzilai says: “There is a lot of
office, pure retail,
live, work and shop.” interest in creating better places in city or pure residential
centres and city authorities are happy schemes are over.“
It is also evident that the global pandem- to work hand-in-hand with developers.”
ic has further moulded what users now He adds: “Mixed-use is a story. You’re Thierry Cahierre,
want from buildings. “One of the most selling a dream – not just to your tenants Redevco’s Head of
important lessons of 2020 is that digital – you’re selling a location, a destiny – to Global Asset &
technology has radically changed the lives their clients as well. The right combina-
LoureShopping in Development
of millions of consumers. We are contin- tion is vital.” However, Barzilai cautions
Portugal is an example Management
uously on the lookout for new solutions against property people seeing this as
of seamless integration to keep our locations attractive, safe and a wholly new trend. “Even in single-use
of retail and healthcare smart, often vertical solutions for housing which has been created mixed-use assets desirable, so people will continue to visit assets, like shopping centres, getting the
services (left). shortages. Union Investment’s spectacular for over 40 years, recently concluded work our assets,” notes Multi’s López. “The mix right was always crucial. So achieving
Y-Towers development in Amsterdam will on Forum Rotterdam, a major inner city trends were already suggesting a new the right synergy is already a part of our
Werk12 in the Munich comprise a 101-metre-high residential redevelopment project in the heart of the way of working – flexible hours and home toolkit,” he concludes. •
district of Werksvier- tower with 174 apartments, flanked by port city which successfully fuses 64,000
tel-Mitte is a popular a high-rise Maritim-branded conference square metres of shops, food & beverage
destination due to its hotel with 579 rooms. outlets, fitness, offices and residential
rich array of fitness units. Similarly, in Lille, Redevco is current-
While responding to what end-users ly transforming a single-use retail asset
and wellness services,
restaurants, leisure facil-
wants clearly requires a bespoke ap-
proach to each site, there are also some
into a mixed-use scheme, Le 31, which
will include 2,400 square metres of retail,
Symbiotic retail spaces
ities and business space
E
powerful, broader trends at play. More 1,700 square metres of food and drink stablished neighbourhoods fea- ya Merritt of Union Investment at here. The transformation process
(right). and more people are moving into urban outlets, 5,200 square metres of leisure ac-
ture a variety of uses. But does a joint event with Bulwiengesa. we are now seeing could prove a
areas than ever before, with the United tivities, plus 8,000 square metres of office
the business case for transforming In the US, buildings are currently major opportunity for revitalising
Photos: Sonae Sierra, Ossip van Duivenbode / MVRDV, Rotterdam, Redevco
Nations suggesting that there will be and Unofi-branded co-working space.
buildings into multi-use properties most frequently being repurposed inner cities, with conference hotels
at least 662 cities with at least a million There will also be a 120-room Okko hotel
stack up for retail properties? Faced as hospitality venues, offices and already being part of the trend.
inhabitants worldwide by 2030, as com- and 600 parking spaces. Says Cahierre:
pared to 467 in 2015. These trends create “The F&B and leisure parts help tie the with the pressure of impending multi-family apartments, as well as Housing that has disappeared from
all kinds of pressures on housing and scheme together, providing amenities for vacancies, landlords and city author- logistics and distribution centres. city centres could make a comeback
transport, with the latter already inspiring all the tenants.” ities are increasingly being forced to Increasing competition for space in the form of apartments and shel-
new mobility solutions. As car-ownership consider repurposing retail space, in urban areas is driving growing tered accommodation – reprising
declines, accessible, urban locations with Housing, offices, retail and other especially in inner city locations. interest in multi-use opportunities. the role of the city as a place where
good public transport connections are in amenities create exciting synergy Former retail properties lend them- people meet and spend time, rather
high demand with busy citizens seeking There are many different conver- selves well to utilisation as light than just visiting shops.
to fulfil a variety of tasks from single The financial argument for these kinds of sion options, as demonstrated by industrial space, i.e. micro-hubs
journeys, or those wanting to live in loca- schemes is also compelling. “For investors, or micro-fulfilment centres, said The general view at the event was
successful examples in the US such
tions with a potent range of services right mixed-use can reduce risk by sharing
as the redevelopment of the Macy’s Francisco Bähr, managing partner that going forward, cities will have
on the doorstep. “Mixed-use allows for financial commitment across different
building in Seattle into offices for of Four Parx. He adds that scope for to embrace mixed-use develop-
commercial spaces to hold a higher social asset types, and create different rental
Amazon. “Potential solutions vary heavy logistics is restricted due to ments in order to remain efficient,
value when they are blending working income streams,” notes López. Apart from
and living functions. This helps create a the built-in diversification hedge, mixed- widely and depend on location limited load-bearing capacity, low sustainable and viable for the
stronger community feeling,” suggests use assets tend to exploit land-plots in (peripheral or central), the physical ceiling heights and poor delivery future. The more flexible the space,
Antonio López, Senior Architect TTDesign increasingly vertical and ingenious ways. space (particularly natural light) and access. The impact of noise on the the better, because demand contin-
/ Multi Corporation. Multi Corporation, Mark, the company formally known as financial considerations,” said Kseni- surrounding area is also a factor ues to evolve at lightning speed. •
26 places and spaces 01/2021 places and spaces 01/2021 27You can also read
