AXA Investment Managers – Real Assets is part of AXA IM Alts, one of the global leaders in alternative investments with €154bn of assets under management1, across real estate, infrastructure, private debt, structured finance and hedge funds. AXA IM – Real Assets has €110bn in assets under management, including €78bn in direct property & infrastructure and €28bn in real asset finance1. It offers a 360° approach to investing in real assets, which comprises opportunities in equity or debt, across different geographies and sectors, as well as via private or listed instruments. Its teams have been managing funds and mandates for over 30 years and comprise over 600 people in 14 offices that operate in over 20 countries around the world, providing us with in-depth knowledge of countries, cities and sectors.

1 Source: AXA IM – Real Assets data (unaudited) as at Q2 2021.

Sector forecasts

Industrial: The pandemic has accelerated the shift to online retail channels and showed the need to improve the resilience of many supply chains. As a result, logistics take-up reached a record high in 2020 and through the first half of 2021 with demand expected to continue to increase. Below average vacancy rates across Europe, in combination with rising land and construction costs, should see this heightened demand trigger further rental growth and more yield compression allowing logistics to outperform the other key commercial sectors. There are opportunities to develop as well as invest in standing assets.

Office: COVID -19 has forced an acceleration in the adoption of remote working practices which is likely to result in long-term headwinds for future net absorption. Although the first signs of a recovery in demand are emerging, no single post-COVID workplace strategy has become clear yet with recent evidence suggesting a tilt towards a hybrid working model. Overall office demand is expected to be focused on modern office buildings that can offer more flexible layouts, shared communal spaces and amenities, which is expected to increase obsolescence risk for older stock but support prime headline rents and Grade A assets.

Residential: In an environment characterised by the pandemic, multi- family continued to demonstrate resilient performance and rental growth is expected to pick up as cities re-open and international travel returns. Market conditions for rental housing, the supply-demand imbalance in many markets, a strong rise in prices for all types of housing, as well as single-person household formation, remained positive and are expected to underpin the sector going forward. Increased regulatory pressure is a likely risk over the coming years but this is not expected to impact the resilience of income returns.

Retail: The health crisis acted as an accelerator for the existing disruptive retail trends. The closures of shopping centres and city lockdowns have exacerbated retailers’ profitability pressures. Plus, the pandemic eased the last resistance to e-commerce, encouraging retailers to cut their future retail footprint. The crisis dramatically increased the magnitude of the correction in rents and yields that was already underway. The increase of redundant retail space across Europe is making conversions into other uses a more viable option for the least performant schemes. The sector is expected to take the longest to recover, selectivity will remain key.

OTHER: Student accommodation: Flight to institution and product quality to emerge as pent-up demand from university deferrals coupled with easing of restrictions and the return of face-to-face learning provide a strong boost to international applications. Low provision rates across Europe combined with delayed supply will likely keep pricing competitive while providing development opportunities.

Hotels: Easing travel restrictions and loosening quarantine requirements are expected as the vaccine rollout progresses. A full recovery in RevPAR is widely expected by 2024. Domestically oriented hotel market performances are likely to bounce back first. Gaps in pricing expectations should narrow as investors take a more aggressive position based on greater clarity of recovery. Distress in hotel investment markets remains limited.

Data centres: The secular demand story is intact. Demand for data centers facilities sharply increased throughout 2020 and into 2021. Public cloud adoption is the key demand driver. Strong leasing activity has helped relieve supply concerns across major markets. However, smaller co-location tenants continue migrating to the cloud giving large cloud companies more leverage when signing data centre leases. Re-leasing spreads remain below expectations. Guidance on both RevPAF and NOI growth remains cautious. Developing/ leasing data centre space to large cloud providers remains profitable. However, development yields continue to compress.

Investment principles & strategy

AXA IM – Real Assets’ core business is real asset portfolio development and asset management. It aims to provide expert global real estate and infrastructure investment solutions throughout market cycles, supporting every client’s unique strategy. AXA IM – Real Assets launches and actively manages or advises real asset portfolios, seeking wide-ranging opportunities through a variety of investment strategies along the risk spectrum: from core to opportunistic, country-specific to geographically diversified, sector-specific to multi-sector. Its 360°, multidisciplinary real asset approach allows it to combine different management styles and expertise, to provide clients with individual investment solutions and deliver targeted returns commensurate with specific investor risk profiles and objectives.

Strategic corporate development

AXA IM – Real Assets’ strategic objective is to become a global player, answering clients’ needs through a 360° view on real asset investing. In a rapidly evolving environment, the company continues to pursue both its medium and long-term development plans and sees active long-term real asset investment management as its value-added area of growth. It focuses its strategic development initiatives on the following key areas:

  • Strengthening its relationship with clients;
  • Growing its geographic presence;
  • Pursuing selective product line expansion and innovation to meet client needs;
  • Reinforcing its governance, operational excellence and risk management frameworks

Compliance statement

The information, answers, statements and analysis (together the “Material) provided herein by AXA Investment Managers – Real Assets (“AXA IM – Real Assets”) are provided in good faith for the sole use of the company to whom it is addressed and at its sole request. The information contained herein is to be treated as confidential. It is not for use by retail customers under any circumstances. This Material does not con- stitute an offer or solicitation, nor is it the basis for any contract for the purchase or sale of any investment, security or product. AXA IM – Real Assets disclaims any and all liability relating to a decision based on or for reliance on this Material. Analysis and conclusions express the views of AXA IM – Real Assets and may be subject to change without notice. All information, analysis and conclusions herein present AXA IM – Real Assets’ current knowledge and market estimation at the time of its production. Nevertheless, it can come to unintended erroneous statements or presentations and the information may change at any time without previous announcements and/or notices to the recipient of this Material. Thus, a liability or guarantee for the up-to-datedness, correctness and completeness of the allocated information, estima-tion and opinion cannot be assumed. Where past performance, past experience and track record information is provided, this is not necessarily representative of future results: performance is not constant over time and the value of investments may fall as well as rise. No representation is made that any results or other figures indicated in this document will be achieved and that investments will achieve comparable results that targeted returns. Due to simplification, this Material is partial and thus the information can be subjective. The information set forth herein does not purport to be complete and is subject to change without notice.

Responsibility

This document has been prepared and issued by AXA Real Estate Investment Managers, Marketing and Communication Team, Tour Majunga - La Défense 9, 6 place de la Pyramide, 92908 Paris La Defense Cedex.

Sources

The information and data used in this presentation has been sourced from a number of recognised industry providers. We believe it to be accurate and have taken reasonable care to confirm this but cannot offer a guarantee that this is the case. Details of these sources are available on request.

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