It Is No Longer Just about Retail

By Hans Touw

At the end of 2018, Redevco stepped into the residential market with a new residential real estate fund and seed capital of some €500 million. More capital is expected to become available, due to heightened interest from institutional investors in this property investment sector.

For Redevco, known in the market for its retail real estate expertise, with its fair amount of high street assets under management in addition to out-of-town retail parks and urban city-center shopping centers, this is a perfectly logical step. Historically, our retail assets have been based in city centers, and many of these have featured spaces above the shops that have been utilized as rental apartments. Urbanization is a global phenomenon, and in Europe alone, 70 million people will move to major cities over the next 30 years. Strong drivers and fundamentals underpin residential rental demand in cities. We believe that the most attractive investment locations in the near future are in multifunctional urban areas – communities in which people live, work, shop, and spend their leisure time. In our view, the residential market is complementary to retail real estate, and combining them in a balanced way will only add to the strength of a location. In that sense, mixed-use developments tie in nicely with our retail background.

Though they are two different animals, the characteristics for the right location for retail are very much comparable to those that make a nice living environment. Social dynamics, consumer profile, and make-up of a city’s population have a fundamental impact on the performance of retail – according to our in-house research – and these factors have commonalities with those that create attractive living environments. We see that convenience has become synonymous with urban living and is part and parcel of its attraction. The ability to enjoy the convenience of social venues close to their homes is high on people’s agendas, as is retail. Communities close to well-connected transport hubs and services attract city dwellers who like the convenience of being connected to their wider environments. Public transport use also appeals to climate change-conscious city residents, who will be more likely to favor sustainability-aware offerings in their neighborhoods and sustainable housing. The rise of European urbanization is, thus, acutely connected to changes in the consumer-retail dynamic.

In the context of changing consumer needs and behavior, Redevco is building a cross-border residential portfolio consisting initially of new, sustainable, high-quality units for, in general, middle-income households. In addition, we also plan to develop sustainable residential complexes at strategic sites where we already own outdated office buildings, or retail properties, that have the potential for conversion in collaboration with strategic partners. It is about creating the right mix of living and leisure in highly urbanized locations. When shops, good public transport connections, healthcare, and sports facilities are combined, all the needs of future residents and communities are served at large. That is what we call: “Creating vibrant places.”

While many core-style residential investors steer clear of multifunctional projects, we have developed the right skills and knowledge over the years that put us in an excellent position to undertake mixed-use ventures. This is part of the solution for optimizing retail locations and creating attractive environments for consumers, as the “Live-Work-Play” environment and a diversity of residents are crucial for an attractive and sustainable community.