Global real estate markets are turning around on the prospect of falling interest rates, says AXA Investment Managers global head of alternative investments Isabelle Scemama.
AXA IM Alternatives is the largest investor in real estate in Europe and the ninth-largest in the world, managing total global assets of $285bn.
“We are probably on the other side of the mountain,” Ms Scemama said in an interview with The Australian.
“There is a conviction that in the course of 2024, we will see good entry points for even the traditional asset classes in real estate.”
“Everyone is conscious of the fact that there is still risk around – the risks that have always been there, the geopolitical risks and the recession risks are still around, and you have bigger deficits creating uncertainty everywhere.
“There are some good entry points (for the property market), but more than ever it is time to make sure we select assets which will be able to generate good income.
“We are probably at a tipping point regarding interest rates and this reopens opportunities in real estate.”
But Ms Scemama said there was still a need for investors to “be cautious and protect themselves from the downside by selecting asset classes where we see strong momentum”.
She said the commercial office sector, which has been depressed around the world for years following the onset of Covid in 2020, when employees shifted to working from home, was starting to turn around in Europe.
“In some of the big cities in Europe rents are at a record high because there is a real scarcity of prime assets which are well located,” she said.
But she said the commercial office sector in the US, particularly in some cities such as San Francisco and Seattle, was still weak, with an oversupply in some areas as the population moved from big cities to sunnier southern states such as Florida.
AXA IM has $8bn in property investments in Australia across more than 40 projects.
Ms Scemama said AXA was confident in the future of the build-to-rent and affordable housing sector in Australia, which she said was far less developed than in the US and Europe.
AXA has become a key player in the build-to-rent market in Australia, completing a deal in November 2022 with Housing Australia (formerly known as the National Housing and Finance Investment Corporation) and St George Community Housing to build 350 affordable dwellings in western Sydney.
AXA believes the increasing problems with housing affordability in Australia will underwrite the growth of the build-to-rent sector, which is much more developed in Europe and the US, where a smaller percentage of people have traditionally owned their own homes.
The dynamics of the sector have been changing in Australia as housing affordability has become a problem for an increasing proportion of the population, particularly in the big cities, which has prompted proactive government policies to help underwrite the development of the social and affordable housing sector.
Ms Scemama said AXA IM had long had expertise in the sector, managing more than €26bn ($43bn) of residential property in Europe.
“We have a strong conviction on affordable housing,” she said. “We are very happy to become involved in the sector in Australia.
“It is something that we have managed for years in Europe, where it is performing well, and we see the opportunity here in Australia. “Our objective is to grow and develop this at scale in Australia as well as we have done in Europe.”
Ms Scemama said Australian institutional investors traditionally had a strong exposure to the commercial office block market.
She said AXA IM Alt’s global property portfolio was aiming to be about 30 per cent office, 30 per cent logistics and 30 per cent residential with some alternatives such as student accommodation, senior housing, life science blocks and data centres.
“All the institutional investors in the world have built-to-rent as a big part of their portfolio,” she said. “It makes sense for the Australian market to move in that direction.”
