Managing risks – acting with foresight

In a late-cycle environment, it is even more important for real estate investment managers to have a forward-looking risk management strategy in place. Rising property prices and declining yields for established property types require risk-adjusted strategies to ensure that satisfactory returns can continue to be achieved for investors. New approaches can help.

Real Estate Investment Risk Forum

With more than 120,000 members worldwide, the Royal Institution of Chartered Surveyors (RICS) is the leading professional body for the international real estate industry. RICS’ Real Estate Investment Risk Forum (IRF) comprises over 40 of the world’s most influential real estate investors. Collectively, they represent over USD 1 trillion in real estate assets.
Martin J. Brühl
“It’s often said that the real estate industry has a ten-year cycle and a three-year memory. We want to change that.”

Martin J. Brühl, CIO and member of the management board of Union Investment Real Estate GmbH

New solutions for recurring challenges

Ten years on from the global financial crisis, the financial markets are once again in a late stage of the cycle. Investors’ risk-return profiles are under pressure due to high demand for real estate and rising prices.

57%

of real estate investors have adapted their investment strategy to the late market cycle, according to a RICS survey.

The industry has already made many improvements in order to avoid a new crisis. At its recent meeting, the IRF also identified three further solutions to improve risk management.

  1. A better mechanism is needed for cross-border sharing of quality-assured, comparable real estate market data between investors.
  2. The real estate industry’s risk management systems should draw on lessons from other asset classes, such as listed securities, to make processes more efficient.
  3. The real estate industry needs to improve knowledge sharing to ensure new generations are able to learn from the experience of previous property market cycles.
The full IRF report is available here

Risk management benefits from digitisation

Ongoing digitisation is helping the real estate industry to further improve risk management. Key advantages include greater data transparency and new analysis and risk modelling options.

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Digitalisierung

In the spotlight: digitisation

Digital technologies offer exciting potential for developing more efficient processes and new business models. Union Investment is working at multiple levels along the entire value chain to seize the opportunities around digital technologies.

Market trends

In the spotlight: market trends

Real estate investment managers inherently take a long-term view. At the same time, the property world is in a constant state of flux. Anticipating changes wherever possible is therefore key.