Barings is a $338+ billion* global financial services firm dedicated to meeting the evolving investment and capital needs of our clients and customers. Through active asset management and direct origination, we provide innovative solutions and access to differentiated opportunities across public and private capital markets. A subsidiary of MassMutual, Barings maintains a strong global presence with business and investment professionals located across North America, Europe and Asia Pacific.
*As of December 31, 2019
The Barings Alternative Investments group seeks differentiated sources of returns by offering investors access to a diverse range of opportunities across private equity, real assets, asset-based investments and the four quadrants of real estate.
Barings is one of the world’s largest diversified real estate investment managers, managing or servicing assets for more than 200 real estate clients worldwide. The Barings Real Estate* team offers a broad range of investment opportunities globally across the public and private debt and equity markets. The team invests across all major property sectors with a focus on global relative value and trend-backed preferred strategies. Our distinctive investment style enables us the opportunity to deliver compelling returns to our investors.
Our value add:
Global platform, local execution: Barings Real Estate is one of the largest global real estate platforms with local, experienced real estate investment professionals in core, value-add and opportunistic strategies across property sectors and structures
Four quadrant investor: As an active investor in private and public equity and debt, we gain comprehensive investment insights into pricing and trend visibility
Trusted partner: Our business model embodies a fiduciary culture, alignment of interests, transparency and a history of delivering on client investment objectives Disciplined risk manager: We avoid style drift and target riskpriced investing, and focus on seeking to provide clients with compelling risk-adjusted returns
Sponsor commitment: We exemplify stable ownership with our long-term and cycle-tested investment perspective as well as our ongoing commitment and focus on global asset management.
*As of June 30, 2019. Barings Real Estate is the marketing name used to represent the real estate advisory business of Barings LLC and its subsidiaries.
Industrial: The industrial sector continues to shine and is a favorite of investors, with vacancy reaching an 18-year low of 7.1% in the first quarter of 2019, and rents rising to record highs in many markets. Occupancies held firm or tightened in most markets nationally, and are forecast to remain tight through 2019. E-commerce continues to drive record absorption, a structural tailwind that we expect will support the sector long term. The breadth of demand spreads across all subsectors, from large state-of-the-art logistics centers to older vintage, smaller floorplate infill properties representing ‘last mile’ opportunities. Fundamentals are balanced for the sector, with supply closely tracking demand nationally. We remain bullish on sector fundamentals, though prices for stabilized, current generation assets in primary locations can exceed replacement cost.
Office: The office sector is still on a solid footing, demonstrated by the first-quarter overall vacancy rate decreasing by 10 basis points (bps) from the previous three months to 12.3%, the lowest level since the second quarter of 2001. Fueled by a strong leasing activity, demand has outpaced new supply over the last four quarters in both urban and suburban submarkets. The vacancy rate in downtown submarkets has stabilized around 10.5% for the past three years, 200 bps below its long-term average. Suburban submarkets continue to capture the lion’s share of the sector’s tenant demand and its vacancy rate has fallen gradually to 13.4%, a 20-year low. Nationally, tenant demand for office space in the past 12 months has been heavily concentrated in markets with high exposure to the tech sector. Supply activity is clustered in five major markets: New York, Washington D.C., Seattle, Chicago, and San Francisco. Near-term market fundamentals are balanced, with steady new supply and demand forecast for 2019. Looking forward, we expect healthy fundamentals to prevail along with continued bifurcation in central business district versus suburban performance, and a broadening dispersion among suburban submarket “winners” and losers” as the cycle progresses.
Apartment: The multifamily sector continues to enjoy strong structural tailwinds, pushing national vacancy rates down 20 bps year-over-year. The homeownership rate has picked up from a 2016 low, however home price appreciation, especially in the Western U.S., will be a major headwind to further increases in ownership and delay home buying for many, especially for newly formed families looking for starter homes. Some near-term submarket-specific supply and demand imbalances are evident in several gateway downtown submarkets, leading investors and developers to increasingly focus on suburban locations where supply lags local demand. We remain bullish on the sector long term, but are cautious in the near term as these local imbalances correct.
Retail: Core retail sales growth (a gauge of shopping center sales) improved in April and May, on a month-to-month basis, aided by low unemployment and steadily rising wages. Even though year-over-year core retail sales growth has decelerated slightly to 2.8% in recent months, spending at necessity-based retailers, such as grocery stores, restaurants and health and personal care stores, has provided support. This growth in sales translated into improving fundamentals at neighborhood, community and strip centers in the first quarter, where availability rates declined on the previous quarter by 10 bps to 8.9%, 50 bps below their rate one year ago. Supply has been limited, with completions as a percentage of existing stock averaging 0.5% in the current expansion. We remain cautiously optimistic about the outlook for necessity-based retail, specifically grocer-anchored centers in strong trade areas that remain less challenged by the headwinds from e-commerce.
Hotel: The hotel sector in the U.S. continues to see healthy growth. The national occupancy rate improved 20 bps year-over-year to 66.3%, as of May 2019. Trailing 12-month RevPAR (revenue per available room) growth continues to moderate as occupancy improvement plateaus and average daily rate (ADR) growth decelerates. Demand growth remains robust as leisure travel powers the sector forward from both international and domestic travelers. Supply and demand fundamentals are balanced at the national level, however a bifurcation amongst markets is growing as a handful of markets are seeing very strong supply growth, especially within downtown central business districts, while other markets are seeing very little new construction. New supply at the national level is forecast to peak in 2020 and then gradually decelerate thereafter.
Investment principles & strategy
We maintain an absolute commitment to helping our clients achieve their investment objectives, while remaining alert to the cyclical nature of real estate opportunities and the wisdom of balancing return potential with risk management.
Our approach to real estate investment:
- We operate on a global platform. Our competencies cover a broad spectrum of real estate investment alternatives comprising private and public real estate equity and debt across all major property sectors. Our breadth of capabilities allows us to respond accordingly to cyclical opportunities as they arise.
- Research is at the centre of our investment decision-making, from formulating client-specific strategies across real estate, to tactical execution at the portfolio and asset levels. We apply fundamental research of global economics and the capital market forces that drive relative value.
- Real estate remains dominated by private market relationships and negotiated transactions. Our professionals bring years of cycle-tested experience, and our extensive history in real estate debt and equity markets provides a competitive advantage in accessing and negotiating transactions.
Strategic corporate development
Barings Real Estate’s long-term strategic business plan represents a careful balance between the institutional appetite for real estate investment and the capacity to effectively execute prudent real estate investment and portfolio management strategies. Growth initiatives are undertaken as supported by our focused investment strategies and opportunities, as well as the resources, capacities and competencies of the firm. We have consistently and strategically retained our staff to serve our clients and are prepared to grow the business as opportunities develop. As such, we have the resources to develop and execute new strategies and products. Future growth of the platform will occur as strategic opportunities arise, and we intend to expand our investment offering in response to both new opportunities and investor requirements.
Performance of each portfolio is measured against the relevant benchmark(s) that are the accepted standard(s) for each of the funds under management. All of our real estate managed funds are audited externally each year. Additional performance information is available upon request.
Commentaries on the economy and financial markets contained herein are based on information believed to be reliable, although there can be no guarantee as to its accuracy. They reflect the current opinion of the firm, which is subject to change based on changes in the economy and financial markets, and access to and reliability of relevant data. The forecasts should not be relied upon as investment advice. Data as of 30 June 2019.