Macquarie Group is a global diversified financial group providing clients with asset management, finance, banking, advisory and risk and capital solutions across debt, equity, and commodities. Founded in 1969, Macquarie Group employs more than 20,500 people in 34 markets and is listed on the Australian Securities Exchange.
Its asset management arm, Macquarie Asset Management, is trusted by institutions, pension funds, governments, and individuals to manage more than €536bn in assets globally. Macquarie Asset Management provides access to specialist investment expertise across a range of capabilities including fixed income, equities, multi-asset solutions, private credit, infrastructure, green investments, agriculture and natural assets, real estate, and asset finance.
Macquarie Asset Management’s real estate business offers clients a differentiated approach, expertise in local markets and a proven ability to enhance value in real estate. With more than €19bn of assets under management (as at 30 June 2023), its team of approximately 200 real estate specialists, in 29 locations around the world, provides access to opportunities across the real estate spectrum – from investing in and partnering with specialist operators to unlock best-in-class real estate in hard to access sectors to the disciplined investment and management of core/core+ real estate.
All data as at 31 March 2023 unless otherwise stated.
Strategic corporate development
Real estate is a strategic priority for Macquarie Asset Management, and the team will continue to develop the business to deliver solutions to clients across the risk return spectrum:
- Product offering of income focused diversified and sector specific funds across various regions
- Continue to grow existing commingled funds
- Capitalise on the 30+ year experience of the team and selectively add new separate accounts creating bespoke solutions for our clients
- Maintain and continue to grow long-term partnerships with existing separate account clients
- Build out global opportunistic strategies
- Continue to focus on global megatrends offering investors superior access to best-in-class real estate in sectors with structural tailwinds
- Institutionalise businesses of existing partnerships and grow them into leading specialist operator platforms in their regions
INDUSTRIAL: The industrial sector has expanded rapidly in recent years, thanks to the growth of e-commerce and modernisation of existing facilities. We expect this long-term, structural tailwind to remain at play, though demand is normalising as COVID disruptions dissipate. Trade patterns and manufacturing are shifting given elevated geopolitical tensions across the world, which is supporting increased nearshoring and onshoring of production, further spurring demand for well-located facilities. Higher construction costs and general macro volatility is likely to impact near-term development pipelines which should help to minimise any softening in occupancy rates. While aggregated demand and supply should remain balanced, investors should focus on supply constrained locations with scarcity of land or planning restrictions.
OFFICE: The outlook for the office sector remains polarised with both tenants and investors focusing on high-quality assets in central locations, particularly in Europe and Asia Pacific. Best-in-class buildings (highly amenitised, technology enabled, well connected, and green certified) could soon be in short supply and high demand as tenants look to retain and attract employees and progress their ESG agenda. Limited new supply relative to previous cyclical upswings and higher construction costs will also help to protect cash flows and occupancy rates for prime buildings as development pipelines dry up. Higher cap rates for prime buildings are creating better entry points for new investors with dry powder. Older stock is likely to be targeted for upgrade or conversion to other uses as values reset below replacement costs, particularly in central locations and well-connected submarkets. This applies for offices globally, with Europe leading the ESG drive and regulatory push towards sustainable buildings, whereas US CBD markets remain more challenged, particularly in coastal markets that are most exposed to hybrid working trends.
RESIDENTIAL: Homeownership rates have stagnated or declined in recent years with low interest rates in pushing up house prices relative to incomes in many developed markets. Housing affordability metrics for purchase have worsened since early 2022 as mortgage rates have reset in line with higher policy rates, forcing many low and middle-income households, including younger populations, to rent for longer. With this, rental housing is expected for further growth, especially in undersupplied, expensive gateway markets across the world. From an investor perspective, the sector’s short leases and direct linkages with wages underpin its inflation hedging characteristics, particularly in less regulated markets such as the US, the UK and Australia. High occupancy, resilient cashflows and defensive demand drivers (humans’ continuous need for housing) will continue to support investor demand through cycles.
RETAIL: Overall headwinds persist in the retail sector as e-commerce penetration rates continue to rise across markets. However, fundamentals appear to be stabilising, led by markets such as Australia and the US, where footfall has recovered as consumers gravitate back to high-quality malls and shopping centres. The lack of new retail development activity over the past five to seven years since e-commerce growth began to accelerate has also helped to stabilise vacancy rates. Selected segments are proving resilient and provide opportunities such as necessity-based retailers, food & beverage, and entertainment offerings as consumers return to in-store shopping patterns, following pandemic disruptions. Non-discretionary retail should prove relatively resilient if labour markets weaken in a recessionary environment.
DATA CENTRES: The demand for data storage and processing continues to grow as the world becomes increasingly digitised, connected and with new use cases emerging such as AI. Data centre operators with global capabilities are increasingly in favour with customers as they are ideally positioned to meet this growing demand and the requirements of customers.
The data centre sector continues to mature, with increasing barriers to entry. Capital flows from institutional investors in the sector have increased, as risk-adjusted returns available in data centres remain attractive across the spectrum.
Investment principles & strategy
Macquarie Asset Management follows two key investment strategies across the risk-return spectrum in real estate:
- Global income-focused business
- Increasing cash flows and value through active asset management
- Vertically integrated local teams speaking 20+ languages
- Focused on entering and exiting markets ahead of the cycle
- Specialisation in office and logistics
- Stable investor base across separate accounts, diversified and sector specific commingled funds, and club-deal structures
- Focus on investing in real estate for tomorrow’s world. This is supported by global megatrends including technology, demographics and sustainability
- Target sectors: logistics (including cold storage and self-storage), rental residential housing, new economy office and data centres
- Strategy of partnering with and investing in specialist operators to enhance access to the real estate and enhance value
- Establish and grow specialist operators with ‘asset creation’ capabilities giving superior access to best-in-class real estate opportunities
- Ability for investors to fund real estate opportunities in ventures managed by specialist operators Macquarie Asset Management is partnering with experience and expertise to capitalise on countercyclical opportunities, including by unlocking value through privatisations and distressed situations
Across these activities, Macquarie Asset Management is demonstrating its commitment to sustainability. This includes progressing efforts to manage its portfolio in line with global net-zero emissions by 2040.
Macquarie Asset Management has its own performance measurement team dedicated to producing detailed performance reports for internal and external use. Performance is based on local accounting principles or IFRS and externally audited. The business is using GRESB scores to determine sustainability and constantly increasing the number of participating funds.
The sole purpose of this Document is to provide information on a non-reliance basis. The information herein does not constitute legal, tax or investment advice. THIS DOCUMENT IS NOT AN OFFER TO SELL OR TO SUBSCRIBE FOR INTERESTS. The information contained herein constitutes confidential information and shall not be disclosed to any third party.
Macquarie comprises Macquarie Group Limited and its worldwide subsidiaries. No member of Macquarie accepts any liability whatsoever for a direct, indirect, consequential, or other loss arising from any use of this document and/or further communication in relation to this document.
No representation, warranty or undertaking is given by Macquarie or any other person in respect of the fairness, accuracy or completeness of statements, information or opinions expressed in this document. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target is indicative and not guaranteed in any way. Macquarie accepts no liability for any failure to meet such forecast, projection or target.