Founded in 1966, Heitman is a global real estate investment management firm. We operate in North America, Europe, and Asia-Pacific, in public and private markets, executing debt and equity strategies across the return spectrum. Through extensive research, innovative investment products, a seasoned management team, and hard work from some of the most talented professionals in the industry, Heitman has the experience and the resources to capitalise on opportunities and achieve our clients’ investment objectives. Our three complementary business units are:
- Private Real Estate Equity: Investing in direct real estate in North America, Europe, and Asia-Pacific on behalf of our commingled funds and separate account clients.
- Public Real Estate Securities: Investing in publicly traded real estate securities in North America, Europe, and Asia-Pacific via separate accounts, UCITS portfolios, and a mutual fund, acting as a sub-adviser, and additionally participating in UMA programmes.
- Real Estate Debt: Origination and management of debt investments secured by real estate in North America.
Strategic corporate development
The firm’s business plan for the next three years is to selectively grow assets under management across our three business units. Our business plan is consistent with the firm’s mission, which is to be the leading real estate investment management firm by consistently outperforming benchmarks on both an absolute and a risk-adjusted basis, and by providing exemplary client service. We do not seek to be the biggest real estate investment manager in terms of assets under management, but rather to grow our business organically by deliver- ing strong performance and excellent client service. As a result, the growth path we have set is a measured one.
INDUSTRIAL: Even as the end of the pandemic is increasingly becoming more apparent, the rapid expansion in e-commerce growth appears to have peaked. That said, demand for logistics space had not quite faded yet as the adoption of e-commerce continues to spread across the distribution chains from goods to services. Across the APAC region, government retail sales figures continue to rise to feed the unsatiable demand of consumers with many countries now reporting above pre-pandemic levels of consumption.
E-commerce penetration rates – the share of retail sales occurring online – continue to grow and are averaging at mid-teen levels for many developed Asian economies compared with the global standard of about 25%. The quickest adoption was witnessed in Australia, Japan, and Korea. China remains the standout with adoption closer to 30% and has become a world leader in e-commerce. We do not see fundamentals declining as increased adoption points to the greater use of technology as more state-of-the-art automation is used in such facilities, including cold storage.
However, given the strong investor sentiment, pricing is increasingly looking rich in some markets and with interest rates normalising and rising, rents must catch up for such investment to remain viable.
OFFICE: Unlike the US and to some extent Europe, the office sector remains the region’s most-traded sector. Across the region, we have started to see vacancy rates settle and in more less supplied markets, trending lower. Rental growth has started to turn around. In cases like Singapore, investor sentiment remained strong. In cities that have opted for a zero-COVID policy, including Hong Kong, rents have turned softer.
The role of the office has also evolved. Hybrid work is now an integral part of workspace arrangements with a greater focus on healthier space, including more service amenities to attract and retail talent.
This positive result has helped support office investment volumes as more investors continue to seek safe havens and markets that adopt this new hybrid model as well as sustainable cities that know how to create a safe work-life balance. Over the past year, we have seen a steady stream of investment, but the cost of debt is increasingly affecting some purchases.
RESIDENTIAL: The living sector continues to grow. Like in the previous down- turns, activity increased in 2021-22 as the sector’s stable rents and occupancy appeared to hold up during the depths of the pandemic. Occupancy rates have once again increased and that will come through rents in the medium term as new supply remains in check. Cap rates continued to be tight as aggregating a portfolio remains a challenge. Non-core investors may struggle to find suitable pipeline in Tokyo’s most central areas, but demographic fundamentals continue to show strength even in many secondary markets across Greater Tokyo and other cities.
In other APAC markets, multifamily assets are gradually emerging as an institutionalised sector. Outside of Japan, Australia is the most active investment market. Across the region as a whole, demographics and changing lifestyles are supporting the secular growth of rental housing over the long term.
RETAIL: With the reopening of international borders, the retail sector appears to be turning the corner, with the exception of China and Hong Kong, given their strict border controls. Retailers have become more cost conscious but have also transformed their businesses to include a digital component to supplement revenue.
CBD retail continues to be one of the hardest hit retail sectors as workers are only slowly returning to the office. For countries that have opened up to the rest of the world like Australia and Singapore, the rebound in tourist numbers has clearly benefited the sector. Meanwhile as employment remains healthy, non-discretionary retailers, such as supermarkets and pharmacies, continue to expand. Many such tenants have seen month-over-month sales climb. Even so, we anticipate that COVID -19 has accelerated secular shifts already underway in the retail market, and landlords are likely to accelerate repositioning or change-of-use plans as vacancies present themselves.
OTHER: Specialty sectors such as self-storage, purpose-built student accommodation (PBSA), medical offices, and data centres continue to attract investor attention. Investment and occupier markets have gradually progressed towards institutionalisation given the merits of these sectors given their superior yields to traditional sectors, shorter leases resulting as a good inflation hedge and the greater awareness by institutional investors.
Across the region, investors holding portfolios of self-storage assets have found themselves rewarded with relatively stable occupancies and rents. We anticipate that such performance could accelerate institutional acceptance of storage assets as markets recover, similar to patterns witnessed in more mature markets after the GFC. Within barely two months of the re-opening of the Australia borders to international students, one of Asia’s most sophisticated sovereign wealth funds rushed to aggregate of portfolio of PBSA assets across four cities.
Investment principles & strategy
Heitman is a research-driven investment firm. Our strategies reflect constant analysis of economic and demographic trends, property market shifts, and capital flows. In addition, Heitman’s various business lines include public market professionals, direct property investors, debt investment professionals and global resources, fostering a creative atmosphere within Heitman. This translates into an information exchange that helps us stay abreast of changing conditions in all areas of real estate. We then use this information to create innovative strategies designed to meet or exceed our clients’ objectives and expectations.
Heitman appreciates the importance of Global Investment Performance Standards (GIPS®). Heitman’s Public Real Estate Securities group and its North America Private Real Estate Equity group claim compliance with GIPS. Returns for both Heitman’s Public Real Estate Securities group and Heitman’s North America Private Real Estate Equity group have been independently verified by the accounting firm Deloitte & Touche LLP. Heitman’s North America Private Real Estate Equity group has been verified for the periods of 1 January 1997 through 31 December 2020 and Heitman’s Public Real Estate Securities Pension group has been verified for the periods 1 January 1993 through 31 December 2020. To date, our European and Asian private equity composites consist of leveraged investment level time-weighted returns.
Certain Heitman subsidiaries are registered with the appropriate regulatory authorities in the US and abroad and, as such, are subject to applicable regulatory schemes. These operating subsidiaries have implemented their own tailored compliance policies to ensure adherence to governing rules and regulations.