The main leaders of the real estate sector have met yesterday morning at the IV Iberian Reit & Listed Conference, where they have highlighted the current signs of strength of the sector, based on the data and on the forecast of approaching pre-pandemic values before the end of 2022. However, it was also discussed that the current instability caused by the war in Ukraine, especially if it continues over time, could have a negative impact on the recovery of the economic activity. Inflation and high energy prices were other adressed concerns.
The opening of the conference was carried out by the director of Iberian Property, Antonio Gil Machado, who valued the importance of meetings of this type to keep the sector at the forefront.
Next, the CEO of EPRA (European Public Real Estate Association), Dominique Moerenhout, highlighted that all sectors have been recovering and we are already at pre-pandemic levels. "The restructuring of the sector's debt has been very positive and has contributed a lot to improving the situation".
The Conference analysed the recovery route after the pandemic and how it has affected real estate companies listed on the Stock Exchange. Ismael Clemente, CEO of Merlin Properties, has stated that "we continue to believe that 2022 will be positive, but if the war in Ukraine continues it will affect us and perhaps the greater growth that we expected will be delayed to 2023 or 2024". In his opinion, “the outlook for the year is good, with high levels of profitability in the retail sector”. In a session moderated by Antonio Gil Machado, director of Iberian Property, Ismael Clemente defended the importance of the Iberian market and assured in one of his answers during the roundtable of discussion that, for the company he presides over, "being in Portugal is like operating in any of the Spanish autonomous communities”.
For his part, Pere Viñolas, CEO of Colonial, who this coming April will be the new president of the European association of real estate investment companies EPRA, also highlighted that “the sector has maintained itself despite the pandemic” and pointed out that “the remote working also opens up many possibilities for real estate companies”. His main concern is "to be attentive to what happens with rents, if inflation growth as high as the current one persists."
Miguel Pereda, Vice President of Lar España, shared the same opinion and assured that “retail sales are now higher than in 2019”. He also stated that "the greatest impact of the pandemic was in shopping centres and our goal now is for people to return to these spaces safely." He also highlighted that "energy is 16 percent of the expenses of a shopping centre and if it doubles, as it is happening, the expenses rise in the same proportion." Despite everything, he considered the impact still limited.
For David Martínez, CEO of Aedas Homes, “covid-19 affected demand at the beginning, but after two months it recovered and has risen again, for example, in high-quality housing”. For the time being, he explained, “we have transferred the increase in prices, but I am concerned if inflation continues or grows”. As additional remarks David Martínez stated that "rental is a great alternative, especially now that the administrations have realized that they must put more land on the market".
The real estate sector, a refuge value
Benjamín López, director of capital markets at BNP Paribas, explained that “the recovery has been very notable in almost all sectors in 2021, and in 2022 it should be better. Spain follows the same trend as Europe and a 30 percent improvement over other markets is expected. Real estate will once again be a refuge value in the face of global energy uncertainty”.
Green and sustainable perspective
The meeting also analysed the real estate sector from a green and sustainable perspective, and for the leaders present at the Iberian Reit & Listed Conference, real estate represents one of the sectors with the greatest potential for reducing carbon emissions. Increasing energy efficiency is an important achievement for caring for the environment in cities. In this sense, experts have highlighted that energy efficiency and adaptation to environmental and sustainable governance (ESG) entail an additional cost increase for companies, but these investments will achieve greater profitability in the future.
The valuation of companies and the value of assets
Alex Moss, professor at Bayes University in London and director of research at EPRA, argued that we are at a historical moment in which the stock market is discounting way too high the real value of the real estate assets in which the Socimis invest. Although this has happened in the past, the reality is that real estate assets have shown great resilience and have defended their value better than what the markets say, making it a good time to invest in this type of company.
