Predictions for 2024

How would you describe the 2023 real estate year?

For us, 2023 has been largely positive, with ongoing volatility in the market continuing to create favourable conditions for acquisition, growth and innovation.

The latest in our series of funds has been warmly received and capital raising continues, with early closings agreed and new assets acquired. Single mandate strategies are also running well. We are seeing sustained occupier demand for our investments in urban logistics projects across Germany and the Nordics, with rents greatly exceeding our original underwriting. Major logistics hubs are also moving forward, including plans to double the size and capacity of the rail facility at iPort in the UK following agreement with a new operator. Our team continues to expand, with new generations of talent coming through.

What do you consider to be the main challenges facing the sector and your company in 2024?

We are looking ahead with confidence. 2024 looks set to be a vintage year for investment, with careful asset selectivity being key to the effective use of the capital we will deploy.

Verdion is a discerning stock picker, marrying rigorous analysis with intuition borne of decades of experience and customer adjacency from developing, refurbishing and leasing assets.

It’s not just about macro location and micro location – and reported national or even city vacancy rates are at best a crude guide to the reality on the ground, so depth of demand needs thorough analysis.

Each opportunity is focused around real value-creation, whether through capex intensive refurbishment, redevelopment or building extension, informed leasing risk or securing mispriced opportunities due to market volatility – or indeed a combination of all these possibilities.

This technical ability to price risks and costs (including time risk): access/ power/ ground conditions/ hydrology is crucial. As is this question: is the finished and stabilised product appropriately future proofed, and of true institutional quality in a world where too few people are focused on the risks of obsolescence?

What are likely to be the chief positive influences on strategy as we enter 2024?

Verdion’s hinterland as a specialist developer continues to underpin our value creation strategies from an investment perspective.

We allocate capital through engaging all key functions spanning investment, development and asset management and giving everyone a voice at the table when it comes to selecting our next opportunities.

We’re seeing markets with considerable amount of older logistics assets, with 1970s-90s buildings often offering interesting potential for repositioning or redevelopment in sought after infill locations. A proportion will be properties that have been developed by owner-occupiers and/ or added to over years of continued occupation by one company that may not be suitable for third party use. Others will be where sites are not optimised when it comes to coverage and/or positioning of buildings. Modern, well-located assets with vacancy are also selectively interesting. More broadly, chances to leverage planning/zoning status or existing infrastructure are welcome. Clearly there are higher requirements from all areas on ESG factors which older stock cannot support without significant investment, but new development can incorporate these needs from the start.

Looking at all these factors from an investment, leasing and technical perspective together is especially important for mitigating risk and maximising value. Essential to this approach is our team of technical experts who can see the big picture and commercial reality as well as the detail involved specification, procurement and construction. It all comes back to the quality of each building, which is core to our investment philosophy.

What changes in direction (perhaps in terms of emphasis on sectors or geography, or the scope of your activities) have you made or do you envisage making in response to the fresh challenges, regulations, opportunities or technologies that have emerged in the last year or so?

Urban logistics, delivered through brownfield regeneration, will be our overriding focus in 2024. As interest rates come down and occupational demand increases it makes sense to be ready with the real estate needed to support occupiers in these strategic logistics locations.  For us that means repurposing and transforming infill sites on a speculative basis and executing value-add strategies across markets in the UK, Germany, and the Nordics in particular. This will build on activity in 2022 and 2023 and is central to our business plan.

It will mean being more creative. We are interested in working with the grain of communities and stakeholders, so there will be scope to explore new types of development and mix of uses, still focussed on our core skills but with potential for more innovation, more variety and more ways to maximise each footprint. Knitting logistics into urban fabrics means more than integrating the edges of each site and its access, it starts from the early stages of each different masterplan, responding to the opportunities and constraints each site provides. These assets should be delivered in a responsible, empathetic way as well as being commercially astute, incorporating complex technical components and delivering on sustainability goals.

Looking back at 2023, what has given you the greatest inspiration for the year ahead?

Without doubt, the resilience we have achieved in the past 12 months has set the tone for the year ahead. With an agile team, entrepreneurial approach, diverse sources of capital and different investment strategies deployed across wide tracts of Europe, our approach can successfully adapt and adjust as the market changes. At the same time, this is a vertically integrated business, with investment, development and asset management functions all in house and all collaborating, which gives us greater certainty as well as new and innovative ideas.

So it’s a question of being very discerning about what we do next, a constant adjustment of opportunity and risk and reward and a careful use of our time. But I’m inspired by the potential we’re seeing and look forward to the year ahead.

First published in Real Asset Insight.