Art-Invest Real Estate is a vertically integrated real estate investment and fund manager with about 300 staff and appproximately 135 investments, totalling some €12.5bn AUM. Our investment arm, Art-Invest Real Estate Management, is one of the largest commercial real estate developers and asset managers in Northern Europe and focuses predominately on large, mixed-use developments and sustainable refurbishments, located in prime locations of Germany, the UK, Austria and Scandinavia. In terms of asset classes, our focus is on office, hotel, retail and residential core assets, value investments, and development projects. Our regulated fund management unit has more than 20 actively managed investment vehicles . Our asset management and development teams are regionally organised across 11 local branches.
For our institutional client base, we act as transaction manager, active asset manager, developer, landlord, landlord representative, property manager and regulated fund manager (AIFM).
Investment principles & strategy
Since our incorporation in 2010, we focus on the ‘manage-to-core’ investment principle (some say Art-Invest Real Estate first coined this term), in irreplaceable prime locations. Over the last decade, the principle evolved to what we now call Manage-to-Sustainability™ and is still the core of everything we do: anticipating tomorrow’s needs and delivering best-in-class properties and institutional investment product of sustainable value.
Today, we are one of the largest commercial real estate developers in Northern Europe and an independent real estate investment and fund manager. We continue to focus on prime location for individual assets and well-connected, thriving neighbourhoods for our large masterplan developments. More importantly, however, we receive continued and repeated trust from our institutional investment partners through delivering best-in-class properties, returns, and investment management services.
Since our two inaugural flagship funds Manage-to-Core Fund (Evergreen fund, vintage 2012, three LPs, fully invested) and Hotel Manage-to-Core Fund Germany (Evergreen fund, vintage 2013, six LPs, fully invested), over 20 investment vehicles have been set up, across all sectors and various risk-return profiles. These include separate managed accounts, institutional club deals for large valueadd investments with two to four LPs, and unregulated direct joint ventures. Art-Invest Real Estate regularly co-invests in total returnoriented projects and offers risk adjustments in the capital stack if desired – ie, takes first-loss piece.
Sector forecasts
OFFICE: Despite the market uncertainty resulting from multiple crises, the prime office market remains attractive. Vacancy rates are stabilising and there is hardly any speculative construction. So the fundamentals remain solid, which is also reflected in the still rising top rents for modern ESGcompliant office space in prime locations. As the requirements of office users are shifting, workplace design must change significantly, if employers want to remain attractive and offer an attractive office and meeting space to young, talented employees. Since a good 80% of all offices are only partially in line with the new market, this results in considerable pressure to adapt. This is further increased by ESG requirements for the sustainability of office buildings. Manage-to-sustainability™ is therefore the order of the day.
HOTELS: The hotel industry has recovered quickly from the crises of the past years. In many places, room rates are at record levels and occupancy rates are only marginally behind the figures for 2019. Meanwhile, the restructuring of the European hotel landscape is progressing rapidly. The number of beds per establishment is rising steadily due to the success of the chain hotel industry. The shortage of skilled workers is also spurring the digitalisation of the hotel sector, for example through self-check-in. At the same time, new hotel concepts are being created every day to meet the individual wishes of their users. Budget hotels are likely to continue to develop dynamically in the future. In addition, the European leisure hotel industry is growing steadily and outperforms the overall GDP development in most markets.
DATA CENTRES: The growing demand for European data centres will remain high as a result of advancing digitalisation and EU GDPR requirements. In this respect, the data centre market has entered a new phase in the past two years. The FLAP cities (Frankfurt, London, Amsterdam, Paris) still dominate the leasing and investment landscape. However, since the available energy for data centre operation is becoming increasingly restricted in high-demand locations, many operators are now also moving into secondary markets. In the future, we will therefore also observe a significantly higher demand dynamic and new construction activity beyond the FLAP cities. Above all, sustainability and energy efficiency will play a central role in the development of new locations with regard to sustainability aspects. In particular, locations where sufficient green energy is available are likely to be among the winners in the future.
RESIDENTIAL: In Germany, the federal government’s targets of building 400,000 flats per year are likely to be missed by a wide margin in the coming years. A housing shortage of over 700,000 units has already been built up. In Austria, the UK and Scandinavia, where we are also active in the residential real estate development and investment space, we notice similar market conditions. The sharp increase in interest rates and inflation have shattered the dreams of home ownership of many young households in recent months, not least because of the very high housing prices. This pushes the rental market. Here, rents are likely to face upward pressure, as the number of not started residential developments will become apparent in low completion numbers in the future. Due to strict building regulations as well as high finance and construction costs, we expect the number of newly started residential developments to remain low in the short to medium term. Instead, more energyefficient renovation of existing buildings will take place. However, these will add few additional housing units to the buyer and rental markets.
RETAIL: The dwindling purchasing power of consumers as a result of high inflation leads to a further polarisation of shopping behaviour, which favours discounters on the one hand and the luxury segment on the other and leads to a loss of the middle ground. In Germany, this was observed in the insolvencies and shop closures at Galeria Karstadt Kaufhof, Peek & Cloppenburg, or Görtz. Added to this is the growing pressure from online retailing, which has also become attractive to target groups that previously only shopped in brick-and-mortar stores. The general decrease of high street retail stores will therefore continue. As a result, brick-and-mortar retail will again concentrate much more on the high-frequency locations, while new concepts for subsequent use will have to be developed for the secondary locations. At the same time, the development of neighbourhoods is fundamentally ensuring an increasing diversification of the mix of uses. In the future, we will therefore again see significantly more residential uses in the city centres.
Strategic corporate development
For over a decade, Art-Invest Real Estate has focused on commercial and residential real estate developments, repositioning, and value-add investments.
We believe real estate is a local business and our very active management approach needs people on the ground. With our more than 300 asset and fund managers, developers, technical and commercial investment managers, across 11 local offices in Germany, the UK, Austria and Scandinavia, we take great care of the projects we deliver and the core assets we manage for our clients.
Performance verification
As an institutional investment management firm and property developer, fiduciary responsibility and institutional-grade performance verification are deeply embedded in our activities. The investment performance is reported and benchmarked on a quarterly basis to our clients. The returns are calculated, for example, in accordance with BVI Return Standards, INREV Guidelines, or in accordance with client requirements and custom benchmarks. The investment performance is audited on an annual basis.
COMPLIANCE STATEMENT
Extensive internal and external control and monitoring mechanisms are in place, including compliance, money laundering, risk management, data protection, antitax avoidance, EU regulation, and ESMA remuneration regulations. We adhere to our code of conduct (available upon request). In addition, Art-Invest Real Estate committed itself to the standard for good and responsible handling of capital and the rights and interests of investors rules of conduct of the German Association for Investment and Asset Management (BVI Wohlverhaltensregeln) and the UN Principles of Responsible Investments (PRI).
