PATRIZIA, a prominent partner in global real assets, has unveiled the insights from its 3rd annual Client Survey, based on feedback from over 120 respondents from its international institutional investor base.

The results indicate a clear shift towards generating value through active asset management, with an emphasis on decarbonisation initiatives, environmental, social, and governance (ESG) data collection, and a transition to value-add strategies in the coming years.

Generating Value through Sustainable Practices

The survey showcases a growing interest in brown-to-green development, with 85% of investors anticipating an increase in this area within the next 12 months. Notably, two-thirds of investors expect to enhance capital expenditure and refurbishment programmes, reflecting a heightened focus on value creation through hands-on asset management.

Changing Strategies and Risk Appetite

The survey highlights changing investor strategies and risk appetite, with debt, value-add, and opportunistic approaches emerging as the top three strategies for increased allocations over the next five years. This trend aligns with the modernisation of European real estate stock, where a significant portion of office buildings was built before 2000.

Caution in a Market Environment

Given current market uncertainty, investors appear more cautious about expanding their real estate portfolios. While 55% intend to maintain their allocations, around a fifth plan to increase allocations, and 28% intend to decrease them over the next five years. Last year, a higher percentage of investors expressed intentions to increase their real estate portfolios.

ESG Integration Becomes Industry Standard

The survey emphasises the growing importance of ESG considerations in investment decision-making. Nearly 90% of respondents now collect and utilise ESG data from their real estate investments, with 70% considering ESG criteria an integral part of their investment process. Investors increasingly evaluate 'impact' alongside risk and return in their investment decisions.

Climate Impact Measurement

Tracking the environmental impact remains a key focus for investors, with 82% planning to monitor energy consumption and significant percentages monitoring direct and indirect CO2 emissions over the next five years.

Commitment to Sustainability

PATRIZIA's Head of Sustainability & Impact Investing, Mathieu Elshout, highlights the survey's findings, underlining clients' dedication to sustainability and decarbonisation. He emphasises the role of ESG considerations in preserving income and long-term investment value and the importance of broadening product portfolios to include ESG-led strategies.

Conclusion

The PATRIZIA Client Survey 2023 reveals a strong commitment to sustainable practices, decarbonisation, and ESG integration within the real estate investment landscape. Investors are leveraging active asset management strategies to generate value while navigating the uncertainties of the market environment. As the industry evolves, a heightened focus on environmental impact measurement is expected to shape future investment decisions.

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Source: PATRIZIA