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By Chenjing Wang, EMBA ’23
The first panel of the 14th annual Columbia Business School Real Estate Symposium was led by Jeff Giller, Head of StepStone Real Estate, and joined by Joanne McNamara, EVP of Oxford Properties, Christina Gaw, Managing Principal of Gaw Capital Partners, and Alfonso Munk, CIO Americas of Hines. The four prominent investment professionals with expertise across Asia, Europe, and the Americas had a live discussion and debate about investment opportunities and challenges in the current global market.
Christina shared that China is a major market in Asia and the regulatory risks sometimes are not easy to navigate, especially during the COVID-19 pandemic when investors cannot travel freely for site visits and in-person meetings. Having multiple local offices in the country has provided her team with quick accesses to information on the ground. Japan, on the other hand, has lower regulatory risk. Portfolios in general have been performing well in decades with low interest rates and constant market demand. Joanne echoed that Asia is a great market to invest in. Liquidity remains high and capital from all sources has been chasing alternatives for growth. She mentioned that it is important to attract talents and identify growth opportunities in key areas such as industrial and multifamily. Besides China and Japan, Joanne thinks India is a promising market with its large population, a growing talent pool, and the investment industry becoming more institutionalized. Jeff added that investing in Asia could be challenging with issues related to transparency, regulation, and currencies.
As for Europe and Americas, Jeff shared that the U.S. market is more mature, maintaining a relatively stable performance during the pandemic. The European market continues to have low interest rates. Joanne added the different vaccination ratios and local mandates could impact the investment environment on the continent, making some countries more favorable to investors than others. Alfonso shared his long-term experience in Americas. Although there are various regulatory, interest and currency risks in both the emerging and the developed markets, he believes that the world is converging, creating more value-added opportunities for investors.
The panelists then talked about their favorite property types and locations. Alfonso is cautious about the future cap rate changes and is focused on finding good fundamentals. He suggested that there are plenty of old assets to be fixed and altered. Office, student housing and retail are attractive in the long term considering the demographic shift. Investors could work with operators to continue meeting the needs of their tenants. Joanne shared her interest in life science and single/multifamily rental in the U.S. and Europe. She also introduced the potential in smaller markets such as Australia, as well as the increasing popularity of logistics real estate as impacted by the global supply chains. Using her decades of experience in Asia, Christina brought us her recommendations of data center, medical, industrial and logistics in China, office in Hong Kong, and multifamily, office and hotel in Japan. The COVID-19 pandemic has substantially accelerated the transition to online shopping and increased the demand for healthcare, communication, and better living. China has a well-established 5G network, and the development of data centers there would continue to generate fascinating yields for investors despite the difficulties of establishing government relationships and navigating local regulations. Tourism in Japan is expected to bounce back and the demand for housing is still high. Western investors may find good acquisition targets with lower prices in Hong Kong as there is less competition led by the recent restrictions from the Chinese government on private capital outflows. Demand for office buildings remain strong in Hong Kong because the majority of the population live in small apartments instead of houses and would prefer working in the office to working at home. Additionally, Christina mentioned that there are pockets of high-return opportunities in Vietnam, especially in existing manufacturing buildings, benefiting from the recent trade wars between the U.S. and China.
When discussing the market cycle and underwriting guidelines, Joanne recommended real estate as an ideal investment alternative in a high inflation environment. The overall investment return is expected to decrease. It is critical to underwrite opportunities with in-depth research and sufficient mitigants to operational and market risks. Christina agreed with Joanne on the importance of risk adjustments. With People's Bank of China reducing the reserve requirement ratio for banks, the market dynamics may start to shift, and yields for investors could change in a short period. Christina is applying both opportunistic and value-add strategies in the Asian market. Alfonso emphasized the long-term value of real estate investment from both cash flow income and capital appreciation. Even though cap rates may stabilize, and interest rates may increase in the near future, investors could prepare their buildings for future use adaptation and ensure underlying assets are aligned with ESG.
Chenjing Wang '23 is a first-year Executive MBA student at Columbia Business School. She currently works on the credit team at Morgan Stanley, covering real estate and middle market companies. Prior to Morgan Stanley, she worked for over 3 years at Santander Bank, gaining experience in project finance and impact investing. Chenjing graduated from the University of Southern California with a master degree in Public Policy and a graduate certificate in Real Estate Development. Originally from China, she is interested in real estate investment in the global market.