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-advisor, 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 delivering strong performance and excellent client service. As a result, the growth path we have set is a measured one.
INDUSTRIAL: The COVID-19 pandemic has fuelled a rapid expansion in e-commerce growth, and subsequently demand for logistics space. Though tenancies that function as links in brick-and-mortar retail supply chains are in some cases struggling, those that service consumers directly are booming. Across the APAC region, government retail sales figures indicate that online spending has grown 50% or more year-over-year in many markets.
E-commerce penetration rates – the share of retail sales occurring online – varied widely across APAC in 2019, from below 10% in Australia and Japan to over 20% in China and South Korea, but all were already growing. The pandemic has introduced new consumers – such as the elderly – to online shop- ping, and many are expanding to a wider variety of goods, such as groceries.
Consequently, investor sentiment remains strong. Data from Real Capital Analytics indicates that logistics volumes have continued to increase compared to 2019 levels.
OFFICE: The office sector remains APAC’s most-traded sector, though the COVID recession has weakened some fundamentals. Across the region, prime vacancy rates have ticked up a few percentage points from baseline since Q1 2020, and rental growth has largely stopped or even reversed. Labour markets and broader economies now appear to be recovering, but it could take up to a year before that recovery begins to stabilise. Outbreaks will continue to threaten recovery until a medical solution is found.
Perhaps more significantly, COVID -19 has introduced questions around the role of office space in future work ecosystems. Partial remote work – or at least a flexible work week – appears to be emerging as a majority preference for office workers globally.
In most APAC markets, we expect the demand deceleration to be relatively mild due to relatively lower COVID mortality, less IT infrastructure, smaller home size, and cultural preferences. For now, although investment volumes have declined, pricing appears to be holding up for prime property.
RESIDENTIAL: The Tokyo multifamily sector – APAC’s most institutional residential market – has already seen heavy and growing investment over the last decade, and activity intensified in 2020 as the sector’s stable rents and occupancy appeared to hold up during the depths of the pandemic. Though rental growth has paused, occupancy rates remain high and appear stable, and supply continues to be limited. More than five portfolios of $100m or more have traded throughout the year, as major offshore investors seek access to the market. 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 farthest along. Though assets still rarely trade on the secondary market, the national build-to-rent development pipeline has grown about 40% over the last 12 months, according to Savills. Across the region as a whole, demographics and changing lifestyles are supporting the secular growth of rental housing over the long term.
RETAIL: Aside from hotels, the retail sector appears to be the hardest hit by Covid-19. Despite unprecendented government support, vacancies are increasing and rental incentives are expanding. Though some retailers continue to seek large scale space, most are scaling back, at least temporarily. In some markets, some retailers are still forbidden by law from operating due to the pandemic.
On the other hand, not all retailers have performed equally. In many cases, the pandemic appears to have actually benefitted non-discretionary retailers, such as supermarkets and pharmacies. Many such tenants have seen year- over-year sales climb as of August. 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 pre- sent themselves.
OTHER: Specialty sectors such as self-storage, purpose-built student accommodation (PBSA), medical offices, and data centers continue to attract investor attention. Investment and occupier markets have gradually progressed toward institutionalisation, though COVID -19 has temporarily halted some of this momentum excluding data centres.
Even so, 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.
On the other hand, APAC PBSA assets are facing headwinds as closed borders prevent students from studying abroad. Though we still consider secular trends to be in favour of increased international study over the long term, it is likely that the sector could take longer than others to recover from COVID -19.
Investment principles & strategy
Heitman appreciates the importance of Global Investment Standards (GIPS®). Performance returns for Heitman’s public real estate securities group have been prepared and presented in compliance with GIPS. Performance returns for Heitman’s North America private real estate equity group have also been prepared and presented in compliance with GIPS. Returns for Heitman’s public real estate securities group have been verified by the accounting firm Deloitte & Touche through 31 December 2019 and returns for Heitman’s North America private real estate equity group have been verified by the accounting firm Deloitte & Touche through 31 December 2019. 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 applicable regulatory schemes. These operating subsidiaries have implemented their own tailored compliance policies to insure adherence to governing rules and regulations.