The world of real assets is undergoing a transformation, driven by rising interest rates, technological innovation, and the growing demand for sustainability. In a dynamic panel moderated by Patricia Cressot of Orion MFO, Anna Klaëbe (Inter Gestion Group), Otmane Jai (MJ&Cie), and Doug Rowlands (Invesco Real Estate) shared bold strategies for navigating these changes. From unlocking value in ESG-aligned projects to leveraging AI for smarter investments, their insights reveal how diversification and innovation are shaping the future of real assets investing.
Adapting to market shifts and rising opportunities
Real estate markets have undergone significant transformations over the last decade, with housing prices in the EU rising by an average of 48% between 2010 and 2022. Countries like Estonia and Hungary saw increases of over 150%, while France and Belgium experienced more modest growth. However, rising interest rates and inflation are now reshaping the market.
Despite these challenges, opportunities abound. Otmane explained that MJ&Cie allocates 15–25% of client portfolios to real estate, focusing on value-added investments such as assets with transformation potential. “We target growth assets that can deliver double-digit IRRs through transformation projects,” he shared, emphasizing a mix of core allocations to residential, logistics, and office spaces with an opportunistic approach to seize market dislocations.
Doug echoed the importance of identifying regional opportunities, noting that Invesco has been particularly active in Northern Europe. “Markets like the UK, France, and Germany have repriced quickly, creating compelling acquisition opportunities,” he said. Invesco’s focus on sectors like student housing, logistics, and data centers highlights the value of strategic diversification.
Anna added that Inter Gestion Group balances classic investments with emerging opportunities in segments like operational real estate (student housing, healthcare, and data centers). “We look for diversification across location, tenant types, and asset typologies to ensure portfolio resilience,” she explained.
Navigating interest rates and the role of active management
Rising interest rates have significantly impacted real estate investment, challenging traditional approaches to leverage and returns. Otmane highlighted the need for careful debt management, noting that “GPs are now using less leverage, which means IRRs will likely be lower in the coming years. On the client side, we focus more on leveraging core yielding assets rather than value-added projects.”
Doug offered a different perspective, seeing rising rates as an opportunity for well-positioned investors. “We’re entering a stock-picker’s market where careful asset selection will drive strong returns. For value-added projects, we’re targeting 20–25% IRRs—this is a once-in-a-generation opportunity,” he said.
Anna emphasized that active management is more critical than ever. “Real estate cycles are shorter now, and we must be quicker in choosing countries and assets. Active asset management ensures we adapt to these changes effectively,” she explained, highlighting the importance of expertise in navigating these shifts.
Sectoral focus: resilience and transformation
Certain real estate sectors have proven particularly resilient or attractive in the current market. Residential properties remain robust, driven by urbanization and housing shortages. Logistics, after an initial correction, continues to show strong rental growth, while hotels have rebounded significantly since the pandemic, with RevPAR now exceeding pre-COVID levels.
Doug pointed to the growth of data centers as a key trend, driven by digitalization and the increasing demand for storage. “Data centers are becoming a critical asset class, reflecting the growing reliance on digital infrastructure,” he said.
Otmane highlighted the potential of ESG-focused investments, sharing examples of transforming outdated assets into sustainable, high-value properties. “There’s a clear premium for ESG-compliant buildings. We’ve seen managers upgrade family-owned hotels or office buildings to meet these standards and generate significant returns,” he said.
Anna noted that ESG compliance is now embedded in Inter Gestion Group’s investment process, driven by both regulation and market demand. “We integrate ESG at every stage, using digital tools and specialized managers to ensure compliance and enhance portfolio performance,” she explained.
Blending ESG, AI, and innovation in real estate
ESG considerations and technological advancements are reshaping how real estate investments are structured and managed. Anna highlighted the importance of sustainability, saying, “Regulation and tenant demand are defining high-quality assets. Tenants now prefer net-zero spaces, which drive higher rents.”
Doug agreed, noting that local expertise is critical for navigating regional ESG requirements. “Whether it’s EPC ratings in Europe or climate risk in the US, understanding local regulations and tenant needs is key,” he said. Invesco also incorporates AI tools to streamline processes, interpret vast amounts of data, and enhance decision-making.
Anna elaborated on the convergence of blockchain, tokenization, and AI with real estate. “These technologies bring transparency, reduce costs, and enable better data analysis. They’re driving the creation of new financial products and attracting diverse investors,” she said, emphasizing Inter Gestion’s focus on digital innovation.
Otmane shared how MJ&Cie is using AI to improve internal processes like due diligence and fund selection. “AI makes our work more efficient and helps us analyze sectors and opportunities more effectively,” he noted.
Evolving client expectations in a sophisticated market
As real assets markets grow more intricate, client demands are becoming increasingly nuanced, reflecting the complexities of the broader economic and regulatory environment. Doug observed a growing preference for hybrid solutions that blend public and private real estate investments. “Clients are looking for flexibility and relative value. Our role is to balance risk-return and liquidity spectrums to provide tailored solutions that meet these evolving needs,” he explained.
Anna highlighted how regulation and transparency are reshaping client expectations. “The market has become more sophisticated. Clients now demand innovative, tailored products, and this requires us to not only stay ahead of trends but rethink how we approach the market,” she said. For firms like Inter Gestion, this means aligning investment strategies with an increasingly complex framework of rules and client objectives.
Otmane added that ESG and technological innovation are now central to investment strategies, with clients placing greater emphasis on sustainable assets and tools that enhance efficiency. “Investors want assets that not only deliver returns but align with their values. ESG and technology are becoming essential in shaping portfolios that are both forward-looking and resilient,” he said.
Shaping the future of real assets investment
Real assets are entering a new era defined by rising interest rates, digital transformation, and a growing focus on sustainability. The insights from Anna, Otmane, and Doug emphasize the need for adaptability, innovation, and proactive management.
Success today lies in embracing resilient sectors, leveraging ESG and AI, and meeting evolving client expectations. As the market transitions into its next cycle, those who act decisively and strategically will not only navigate these changes but seize opportunities to redefine the future of real assets investment.