Corporate overview
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.
Its asset management arm, Macquarie Asset Management (MAM), manages more than €537bn in assets globally. Macquarie Asset Management provides access to specialist investment expertise across a range of capabilities including real assets, real estate, credit and equities & multi-asset.
Macquarie Asset Management’s Real Estate division is a global real estate investment business with a track record of identifying and investing in sectors backed by global megatrends. The Opportunistic Real Estate team has over 50 investment specialists across 10 cities with experience in investing in specialist operators, seeking to enhance access and returns. The team’s deep network, cultivated over 35 years, and differentiated approach, enables Macquarie Asset Management to create institutional real estate investment opportunities in hard to access sectors.
Macquarie Asset Management has announced plans to spin off the majority of its existing activities in Core/Core Plus real estate to enable the creation of Manova Partners, an independent real estate investment manager. The launch of Manova Partners is expected in Q4 2024, following the completion of customary closing conditions including regulatory approvals.
In addition to the Real Estate division, Macquarie Asset Management has cross platform real estate capability across listed equities, credit and impact investment.
All data as at 31 March 2024 unless otherwise stated. All real restate data reflects MAM’s real estate division only and excludes activities that are part of the Core/Core-Plus real estate business anticipated to be spun out as Manova Partners.
Sector forecasts
INDUSTRIAL: The industrial sector has expanded rapidly in recent years, thanks to the growth of e-commerce and modernisation of facilities to drive down delivery times. We expect this long-term, structural tailwind to remain, though demand is normalising. Trade patterns and manufacturing are shifting with geopolitical tensions, supporting nearshoring and onshoring activity, further aiding demand for well-located facilities. High construction costs and macro volatility are impacting near-term development activity which should support occupancy and rental levels over the medium term. While aggregated demand and supply should remain balanced, real estate investors are expected to focus on supply constrained locations with scarcity of land or planning restrictions.
OFFICE: The outlook 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) appear to be in short supply and high demand. Limited new supply relative to previous cycles and high construction costs is helping 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 real estate 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. This applies for offices globally, with Europe leading the ESG drive and regulatory push towards sustainable buildings.
RESIDENTIAL: Homeownership rates have stagnated or declined in recent years with low interest rates pushing up house prices relative to incomes in many developed markets. Housing affordability metrics for purchase have worsened in recent years as mortgage rates have reset in line with higher policy rates, forcing many low and middle-income households, to rent for longer. With this, further growth is expected in rental housing across various pricing points, including in expensive cities and undersupplied markets. The slowdown in construction in many developed markets is likely to amplify supply shortages over the medium term. From an investment perspective, the sector’s short leases and direct linkages with wages underpin its inflation hedging characteristics. High occupancy, sticky tenants, resilient cashflows and defensive demand drivers should support real estate investor demand through cycles.
RETAIL: Headwinds persist in the retail sector as e-commerce penetration rates rise further and cost of living pressures impact consumer spending which have impacted the overall tenant quality of many assets. However, fundamentals appear to be stabilising, led by markets such as Australia and the US. On the supply side, the lack of development activity over the past seven years since e-commerce growth began to accelerate has also helped to stabilise vacancy rates. Selected segments are proving resilient such as necessity-based retailers, food & beverage, and entertainment offerings as consumers return to in-store shopping. 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 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 and strong demand to propel rental rates. Capital flows from real estate investors have increased, as risk-adjusted returns available in data centres remain attractive across the spectrum with strong rental growth offsetting relatively high cap-ex requirements for long-term holders.
Investment principles & strategy
Investment approach:
- Identify megatrends driving demand: Investing into sectors supported by long-term megatrends and identifying emerging sectors. Over 75% of equity invested since 2009 has been in living, logistics and datacentres.
- Global market selection: Assessing relative risk-adjusted returns with a global perspective.
- Optimising the access point: Experience in optimising access to best-in-class real estate through partnerships with specialist operators
- Generating alpha: Growing and institutionalising specialist operators to create alpha over and above the real estate investments.
Strategy:
MAM’s Real Estate strategy provides clients with the experience of a global investment platform and access to specialist operator expertise. In addition to the 50 dedicated investment professionals in the MAM Real Estate team, there are more than 350 employees with deep sector and local sourcing expertise across the current network of specialist operators. On behalf of clients, MAM Real Estate invests in or alongside these specialist operators.
Across these activities, Macquarie Asset Management is demonstrating its commitment to sustainability. This includes progressing efforts to invest and manage its portfolio, where it has control or significant influence, in line with global net-zero Scope 1 and 2 greenhouse gas (GHG) emissions by 2040.[1]
[1] In December 2020, Macquarie Asset Management (MAM) announced our commitment to invest and manage our portfolio in line with global net zero Scopes 1 and 2 GHG emissions by 2040 where we have significant influence or control. MAM generally only has influence over scopes 1 and 2 emissions. However, to the extent possible, in line with the Net Zero Asset Managers initiative guidance, MAM intends to support assets where it has control or significant influence to reduce their Scope 3 emissions.
Strategic corporate development
Real estate is a strategic priority for Macquarie Asset Management. The MAM Real Estate division continues to:
- Grow its opportunistic real estate fund management business
- Focus on global megatrends seeking to offer clients superior access to best-in-class real estate in sectors with structural tailwinds
- Grow existing investee businesses and mature them into leading specialist operator platforms in region
- Grow and support FIBRA Macquarie, a listed platform focussing on industrial and real estate properties in Mexico
The Real Estate division works closely across other divisions within Macquarie Asset Management. MAM’s cross-platform real estate capability, includes:
- Equities: Global Listed Real Estate specialist team investing in public REITs
- Credit: Private credit platform with expertise across infrastructure, real estate and asset finance
- Impact: Focused on high-quality, purpose-built disability accommodation in Australia
Performance verification
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 as one tool to assess sustainability.
COMPLIANCE STATEMENT
The information herein is provided on a non-reliance basis. It does not constitute legal, tax or investment advice and is not an offer (or solicitation of an offer) to sell or subscribe for interests.
Macquarie Group comprises Macquarie Group Limited and its worldwide subsidiaries. No member of Macquarie Group accepts any liability whatsoever for a direct, indirect, consequential, or other loss arising from any use of the information herein and/or further communication in relation to such information.
No representation, warranty or undertaking is given by any member of Macquarie Group 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.
Other than Macquarie Bank Limited ABN 46 008 583 542 (“Macquarie Bank”) which is licensed in various jurisdictions, none of the entities noted in this document is an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and the obligations of these entities do not represent deposits or other liabilities of Macquarie Bank. Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these entities. In addition, (a) each investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group company guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.
