Corporate overview
AEW is one of the world’s largest real estate asset managers with €79.2bn of assets under management as at 31 December 2023. AEW has over 900 employees, with its main offices located in Boston, London, Paris and Singapore and offers a wide range of real estate investment products including comingled funds, separate accounts and securities mandates across the full spectrum of investment strategies. AEW represents the real estate asset management platform of Natixis Investment Managers, one of the largest asset managers in the world.
AEW is one of the leading European real estate investment managers with €37.0bn of real estate assets under management in Europe as at 31 December 2023. With over 500 employees operating from 12 locations throughout Europe, AEW has a long track record of successfully implementing core, value-add and opportunistic investment strategies on behalf of its clients. In the last five years, AEW has invested and divested a total volume of €20bn of real estate across European markets.
Strategic corporate development
Over the next three to five years, AEW is expecting to grow the European business by launching new funds and continuing to invest on behalf of new and existing separate account mandates. In particular, the firm is expecting to raise further capital for the following funds*:
- EUROCORE: an open-ended, pan-European core fund targeting a diversified portfolio of institutional quality assets in major European markets. The fund is targeting a €2bn equity commitment over time;
- UK Value-Add III: diversified, UK strategy focused on urban repositioning, office refurbishment, industrial & living. A continuation of AEW’s successful track record in the UK value-add space;
- UK Core Plus Property Fund: an open-ended core plus fund investing in a diversified portfolio of assets across the UK;
- UK Impact Fund: an open-ended core fund with a place based impact philosophy investing in sustainable real estate with a social use value across the UK;
- In addition to the above funds the firm is expecting to launch a number of programmatic ventures investing in value strategies in the logistics and alternative investment sectors
* Retail and non-sophisticated investors are not eligible to invest in these funds.
Sector forecasts
Industrial:
The European macroeconomic outlook has improved markedly for the second half of 2024 as there has been a rebound in retail sales and industrial output. The normalization of global supply chains and the ongoing growth of e-commerce are expected to revitalize logistics demand. Corporate revenue growth in sectors like third part logistics providers, retail, and e-commerce has bolstered rent affordability for logistics occupiers. The logistics sector experienced a slowdown in 2023 and early 2024 from the previous pandemic highs, with vacancy rates stabilizing across Europe. However after the recent correction, rental growth projections for the coming years have improved, especially in Southern Europe and Germany. Deal volumes in the logistics sector halved in 2023 due to high interest rates and persistent bid-ask spreads. Nonetheless, a revival in deal volumes and capital values is anticipated following these recent declines. European logistics transaction prices have stabilized, with investor sentiment showing rapid improvement, underscoring the sector’s preferred status among European investors. Looking ahead, the outlook for total return growth in logistics markets has strengthened, with regions like Southern Europe and Central and Eastern Europe expected to yield the highest returns. The sector remains robust, driven by ongoing trends in e-commerce and supply chain adjustments.
Office:
The European office market is undergoing a significant transformation in large part due to the rise of remote working, creating a clear bifurcation between prime and secondary buildings. This shift has emphasized the importance of central, high-quality office spaces that meet modern occupational standards, including ESG criteria. Office usage rates have decreased, and many companies are reducing their office footprints, reflecting a lasting impact on occupier demand. Despite these changes, office-based employment growth and stabilized office space per employee are helping to balance the market. Supply and demand fundamentals show a balanced outlook, with limited new stock growth and increased office conversions expected to rebalance the market. Vacancy rates are anticipated to peak soon and then decline as new developments slow down. There is a notable difference in vacancy rates between central business districts (CBDs) and non-CBD locations. Companies are favoring central locations to encourage employees back to the office, driving demand and rental growth in prime areas. Meanwhile, rents in non-CBD areas remain stable, with increased incentives for tenants. The investment market remains cautious, focusing on prime, central locations. Prime office values are expected to recover faster than secondary offices, offering attractive opportunities for new investments, with prime offices forecasted to deliver strong returns.
Residential:
Prime European residential markets show strong occupancy and stabilizing investment yields, despite the interest rate hikes and reduced lending of 2022-23. The ongoing housing shortage has worsened as higher mortgage rates and reduced lending made home ownership less affordable, boosting demand for rental housing. Positive household formation trends, especially in urban areas, counterbalance weak overall population growth. Limited new housing supply, due to low developer profitability and regulatory uncertainties, further constrains new supply into the market. Consequently, rental growth in prime residential markets is expected to outpace inflation from 2024-28. Investment volumes in 2023 halved due to interest rate increases, but with expected declines in inflation and bond yields, buyer and seller price expectations should realign, restoring market liquidity. The residential sector faces modest refinancing challenges compared to retail and office sectors. Since 2008, residential investment has doubled its share of total investment volumes, confirming its position as a core sector. Prime residential yields are expected to compress from H2 2024, potentially tightening by 40bps by 2028, partially reversing recent yield widening. Despite the challenges, the residential market remains robust, driven by strong demand and stable cash flows.
Retail:
The lifting of lockdowns across Europe has led to a return to more normalized shopping habits, with footfall traffic at high street and shopping center locations exceeding pre-pandemic levels. In-store sales volumes are projected to recover significantly. Despite a challenging macroeconomic environment, increases in mortgage costs, and falling real disposable household incomes, discretionary consumer spending has come under pressure. The retail sector remains highly sensitive to GDP growth, and with modest economic growth, limited rental growth is expected in most European retail markets, especially with some segments still experiencing over-supply. Redevelopment and repurposing of existing retail shops and shopping centers are gaining traction to meet changing demand. However, due to ongoing restructuring and various challenges in the retail industry, many investors have adjusted their valuations downward. This faster re-pricing to higher yields compared to other sectors has led to an improved outlook for retail assets going forward.
Investment principles & strategy
Since its creation in 1981, AEW has been dedicated to creating and implementing real estate investment and asset management strategies for institutional and retail investors. AEW offers investors a wide range of investment solutions across Europe, including separate accounts and commingled funds across core to opportunistic strategies.
Performance verification
AEW measures its performance against a number of benchmarks specific to investment strategy and style. The results of each portfolio are periodically audited by independent third parties and audited financial statements provided to clients.
Compliance statement
Total AUM includes the assets and businesses managed by AEW Europe SA and its subsidiaries and AEW Capital Management. Information relates to AEW as at 31 December 2023. The address provided is that of AEW SA and is authorized and regulated by the Financial Conduct Authority / AMF (French securities regulator). The content offered is for information purposes only. It does not constitute investment advice or a recommendation nor is it an invitation or inducement to engage in investment activity. The information and opinions presented have been prepared internally and/ or obtained from sources which AEW believes to be reliable, however AEW does not guarantee the accuracy, adequacy, or completeness of such information. Opinions expressed reflect prevailing market conditions at the time this material was completed and are subject to change. Investors should consider the investment objectives, risks and expenses of any strategy or product carefully before investing.
