Patrizia sees the world's smart cities as a critical focus area to bring the next level of smart and sustainable construction solutions to today's urban communities. The stand at MIPIM reflects the new brand campaign 'NextNow' which has to do with smart cities. A team of around 30 PATRIZIAns was at Cannes this year, including Amal Del Monaco, Head of European Asset Management & Countries, who explained t strategy and Iberia’s importance within Patrizia’s portfolio.
What is the importance of Iberia in your European portfolio?
Globally, Patrizia manages some 52 billion euro including infrastructure. In the European real estate market, we must have about 40 billion euro, and in Spain 2 billion euro. We are very interested in the Iberian market, an interest which has been materialized in recent years through yearly investments between 400 and 500 million euro. And there is still a lot of interest in growing within the Iberian Peninsula, particularly in Spain.
Do you have a prospect, in terms of figures, for the next three years?
We are going to update the strategic plan for Spain next year, and I cannot say what we will be doing exactly, but doubling the figure in Spain in three years seems plausible to me.
Why are you interested in Spain and Portugal?
In terms of housing, for example, there is more demand than supply and the demand for the rental segment is growing. Before, in Spain, if you did not buy your own house you did not feel completely fulfilled, and although this has not disappeared, now there is a greater willingness to move, to be able to work in Barcelona, in Madrid, or go abroad. People rent more, and we're not the only ones who see that opportunity.
In terms of logistics, Spain is part of the European logistics corridor and that has been confirmed by the many investments we have made in the country.
In terms of the office segment, we are in the midst of a transformation which will lead us to be more selective in terms of location and real estate product, but we will always have offices in the portfolio. And everything related to food and supermarkets will continue to work very well inside the shopping centres. Of course, because of the war in Ukraine, I think investors will take a little more time analysing investments and return to the mall, but the shopping centre will not disappear from the portfolio of institutional investors either.
Is housing your first choice?
Yes. And logistics, mainly last mile.
In terms of housing, what kind of locations are you interested in?
Our strategy for housing has always been to focus on cities. We have the ability to combine the vision of our local teams, who know the dynamics of their markets well, with a super research team that uses data intelligence to feed the top-down vision and focus on different cities, not so much on countries.
In Spain, right now, we are focused on Madrid and Barcelona, but we plan to study other provincial capitals, with good services and infrastructures.
In second-tier cities, which are the 'top' ones?
Malaga is one of the cities that often sneaks into our conversations, both in terms of housing and student residences and I think it also makes a lot of sense for senior living. I don't think it's in the Spanish top ten, but there has been a positive dynamic there for the last couple of years which interests us.
Many municipalities, Madrid included, have affordable housing plans that will go out to tender. Are you interested in this sector?
Yes, affordable housing is a sector that interests us a lot and for many reasons. If I look only at the economic side, it is the most resilient of the sectors, and it does not have as much volatility. In fact, affordable housing is the focus of our main housing fund focused on Europe, which is called Living Cities.
Has the COVID pandemic changed your investment profile?
Not so much. For more than two years now, we have recommended that our investors focus on housing and logistics, and these two years have only confirmed those recommendations.
However, ESG criteria has meant a drastic change, I would say, in these last two years, and that is impacting the way we evaluate the future, the sustainability of an investment in our portfolio, and affects offices more than other sectors.
We are in an unthinkable situation of war in Europe. Are investors waiting to see how the situation evolves, or is it business as usual in terms of their investment activity?
In the office market, perhaps tenants will take more time to decide whether to stay or leave, if they rent more square meters. In that sense, the leasing activity will be much slower than we expected a couple of weeks ago; but in terms of investment, it doesn't fundamentally change what we had planned.
As for the projects under development, the costs have been growing significantly for nine months and with the inflation that is anticipated they will continue to be under pressure, but we have a chain of partners with whom we have been working for a couple of years that allows us to ensure that most of the cost is contained, so as not to be exposed to inflation and price growth in a significant way.
A few words about the prospect of investment in Portugal.
In Portugal, the focus will be on living (housing, students and senior) and, perhaps, logistics. Opportunities will have to be found for the other sectors. It should be remembered that Patrizia has an ongoing development in Lisbon, which consists on the acquisition and pre-rental of a conversion and remodelling of an office into an hotel in a rapidly improving location, which should be completed in 2024.
