Reflections from Property Webinar Series Session #2
In the second session of the Property Webinar Series, The Rise and Metamorphosis of Property Investment Managers, three panellists Marleen Bosma-Verhaegh (Head of Research and Strategic Advisory at Bouwinvest), Prof. Tuna Tasan-Kok (Professor of Urban Governance and Planning at the University of Amsterdam), and Xavier Jongen (Managing Director at Catella Residential Investment Management) explored the characteristics and behaviour of investment managers as well as their link to regulations and local policy agendas.
In the last decade, investment managers rose to the most influential investor type in Amsterdam’s property market. Existing urban studies and urban planning literature, however, has surprisingly little to say about investment managers. In fact, urban studies and planning scholars rarely differentiate property investors.
If they do, they often do not go further than generalising institutional investors based on their utilized source of capital (Özogul & Tasan-Kok 2020). In-depth discussions on investment managers as a specific sub-type of institutional investors, and their relations to urban development and planning practices, are urgently needed.
Amsterdam’s changing investor landscape
Investment managers are a type of institutional investors. They organize and manage capital on behalf of other investors, often pension funds or insurance companies. The seminar session was inspired by the ongoing work of the WHIG Project in Amsterdam that examines the relationships between contemporary investment flows into urban property markets and the arrangements and public policy instruments that are designed to govern them. Data on the wider Amsterdam property market shows clear results: When looking at changes in acquisition volumes and estimated property holdings of ≥5m€ or ≥ten units over the last 15 years, investment managers rose to the top. To date, investment managers have the highest estimated property holdings and the largest acquisition numbers both in actual numbers and in terms of percentages of total acquisition volumes compared to other investor types. Repercussions of the changes in Amsterdam’s investor landscape may be manifold but require a better understanding of who investment managers are, and how they operate.
Dynamic profiles and the importance of investment horizons
“Specifically related to urban planning and urban policy, we have to distinguish between long-term and short-term investors” -Xavier Jongen
At times, the lines between investment managers and other institutional investors are blurred, or investment managers change their profile. One of the reasons is that investment managers historically come from other institutional investors such as insurance companies or pension funds. In the 1980s, questions surrounding the competences of these large funds emerged: Were they equipped to invest in Chinese residential properties, Australian shopping centres or offices in New York? Influenced by management theories of the time, many institutional investors decided to utilise specialised companies that would invest on their behalf to reduce risks: investment managers were born. At the same time, it can happen that a large fund decides to (re)absorbs an investment manager to have this expertise in-house.
Overall, panellists agreed that investment managers tend to be sophisticated investors with ample expertise and knowledge of property market dynamics. However, to draw conclusions on their influence on urban development, one key characteristic stood out: their investment horizon. The investment horizon, which can differ from investment manager to investment manager, was linked to strategies of risk and a company’s relationship with local authorities. It also represents a major hurdle for urban scholars to develop clear-cut categories or investors types. Understanding investment managers requires comprehensive, time-intensive and tailor-made studies that not only take investors’ hard and quantifiable but also soft behavioural characteristics into account.
Advantages and disadvantages of foreign investment managers
"Foreign investment managers may not have the same view on what is good for the city on the longer term" -Marleen Bosma
The discussion then turned to the differences in behaviour and investment strategies of foreign and domestic investment managers. The existence of international investment managers channelling institutional capital into urban built environments can have the advantage to create liquidity in a market, as foreign investment managers may have different return targets and risk profiles. It also creates diversification, which can serve as an additional layer to minimise risks and to weather ups and downs in local property markets.
Simultaneously, however, the existence of investors from abroad may lead to more opportunism. While many foreign investment managers resemble domestic ones in their behaviour and long-term real estate investment strategies, there may be a higher percentage of investors with short-term investment horizons. For example, foreign investors may employ real estate strategies that target higher returns the further away they invest from their home-base. This, in turn, may affect cities and the collaboration between property investors and local authorities negatively, and thus should be on the radar of scholars exploring the context-dependent consequences of changing property investor landscapes.
New relationships and networks of collaboration
"We cannot understand property markets independently from the public sector or wider institutional network relations." -Tuna Tasan-Kok
As last thematic point, the seminar session addressed the link between investment managers and policy agendas, and the nature of relationships between investment managers and public-sector officials. Panellists deemed national fiscal regulations important albeit to different extents. They were, for example, both perceived as less important than demand and supply of properties, but also as far-reaching such as in the case of the residential transfer tax going up from two to eight percent in the Netherlands. Panellists agreed, however, on the crucial role of local regulations that relate to the built environment and the planning capacity of a city. The mixed sentiment of investment managers toward local regulations and planning systems were discussed, and the lacking flexibility to quickly transform the functionality of spaces – for instance in response to the ongoing Covid19 pandemic – highlighted.
Simultaneously, panellists observed changes in the relationships and collaboration between property industry actors in recent years. In the Dutch context, a shift from conflicts and divergent interests between public and private actors to a more collaborative environment, was observed, for instance to address housing shortages. For urban scholars, the discussion at large showcased the complex institutional relations and fast-paced nature of urban property development. It provided the audience with a number of avenues to explore the influence of investment managers on urban development and planning practices. And most importantly, the fruitful discussion involving a scholar and two property industry actors, provided insight into the wealth of knowledge that can be shared and generated as the foundation of critical urban analyses that are based on in-depth understandings of actual property market dynamics and actors instead of shallow generalisations.
Sara Özogul is a post-doctoral researcher in the WHIG Project and focuses on the interplay between regulation and property investment in the wider Amsterdam area. She is the co-organizer of the Property Webinar Series and an active member of the Urban Governance Research Network (UGoveRN).