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: Despite the weak macro backdrop, the industrial sector remains strong.Vacancy has ticked up as large amounts of construction deliver but remains well below historical levels at 5.6% in Q3 2020, compared with a 20-year average of 7.7%. Rent growth remains positive on a year-over-year basis, and net absorption picked up in Q3 compared with Q2. Despite declining industrial space demand from brick-and-mortar retailers, the additional warehouse capacity required for e-commerce more than makes up for a wave of shrinking retailer footprints. E-commerce adoption has accelerated significantly as a result of the pandemic, and the success of omnichannel retailers further illustrates the importance of a strong supply chain and distribution network. Long-term tailwinds for the sector independent of the macro environment are supportive of robust demand.
OFFICE: US office market fundamentals are eroding quickly as remote working has been widely adopted – at least temporarily – due to the COVID - 19 pandemic. Office net absorption had its worst quarter since 2001 in Q3 2020, and available sublease space has increased by 40% since Q1 2020.
Rising vacancy and declining rental rates will continue through 2021 as tenants are slow to return to the office and the economy recovers from the pandemic-induced recession. Longer term, there are likely to be lasting effects of the pandemic as remote working adoption is accelerated. This will vary significantly by industry, job function, and market. Highly productive, multi-disciplinary teams will return to the office eventually, while the outlook for back office functions is bleaker.
RESIDENTIAL: Overall apartment market performance has been surprisingly steady throughout the pandemic. Rent collections are holding up thus far despite the expiration of some key fiscal stimulus measures. Pent-up demand from earlier in the pandemic led to a boost in Q3 absorption, with occupancy climbing 40bps quarter-over-quarter to 95.7%. However, effective asking rents continue to deteriorate, down –1.3% year-over-year in Q3. The outlook is uncertain due to the weak macro environment and a lack of clarity around further stimulus measures to support incomes. An elevated supply pipeline will also be a headwind. A slowdown in construction activity typically seen during recessions has been notably absent during the current downturn. Despite near-term uncertainly, the long-term supports to rented residential demand remain strong.
RETAIL: Total retail spending has more than recovered to pre-pandemic levels despite the decline in fiscal stimulus benefits, though shopping centre sales have been slower to rebound. Many categories such as department stores and apparel continue to suffer, resulting in an elevated number of bankruptcies and store closures. Vacancy increased by 80bps year-over-year and by 40bps from Q2 to 7.0% in Q3 2020. The headline numbers continue to mask significant bifurcation in the market, with weaker centers suffering far more closures than dominant ones. Retail remains a challenged sector overall as significant disruption clouds the outlook, though there will be winners and losers to emerge from the current period of turmoil.
OTHER: Specialty sectors have generally held up well during the pandemic and their long-term outlooks are not materially changed by COVID-19. Medical office and self-storage will continue to see strong demand driven by demographics and life events. Student and senior housing face different challenges, but prospects vary considerably by market and a nuanced understanding of supply and demand dynamics is crucial. The emerging single-family rental sector has been one of the star performers of the pandemic, and long-term tailwinds are strong.
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 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 to applicable regulatory schemes. These operating subsidiaries have implemented their own tailored compliance policies to insure adherence to governing rules and regulations.