Fund manager acting strategically on global real estate

Mike Taylor

Managing Editor/Publisher, Financial Newswire

14 November 2022

As Australian superannuation funds contemplate the Federal Government’s push to have them invest in housing, real estate-focused US fund manager, Heiteman is urging them to take a pragmatic long-term view.

Heiteman has, over the years, surprised many with its strategic calls on property investment, and in an interview with Financial Newswire, the fund’s Global Head of Research, Mary Ludgin reaffirmed that it was remaining alert to the impact of a range of factors, not least climate and geopolitics.

“In the complex morass-like environment we’re in right now my role is to look beyond that – to the dynamics that will drive real estate investment performance over the long run,” Ludgin said.

In doing so, she said that she was conscious of four dynamics which would impact investment with the first being that deglobalization is occurring driven by a range of factors including pandemic-related supply chain issues.

“So, we’re watching the real estate implications of reshoring which will particularly affect manufacturing which will create demand for logistics space and produce demand for rented residential space, medical offices and other services,” she said.

Ludgin said the second theme was with respect to migration patterns including the choices being made by baby boomers entering retirement and Millennials looking for a place to nest.

“We are anticipating cost-sensitivity to locations,” she said. “However, we think it is an investible trend.”

Ludgin said the third theme was the disruptive role of climate change and resultant climate migration – something which was already happening.

“Climate migration is occurring in places where the US goes on vacation and the hurricane in Florida was a wake-up call.,” she said.

Ludgin suggested that there might be great opportunity for Canada, Nordics and places where there are warmer average temperatures rather than extreme heat.

“It has largely been a voluntary matter but now it is being made mandatory,” she said. “Our view is if it isn’t tomorrow it will eventually become best practice – it’s expensive but its important to take it seriously investing in greening your building.”

“Add all those things together we’re seeing rotation from institutional investors out of commercial offices into logistics and alternatives like storage, aged care, medical,” Ludgin said. “And alternatives are a really good place to be with the recession is to come.”