Something big is going on. The landscape for investors is changing fast. Hospitality is meeting offices to co-work; residential is adopting hospitality to co-live; students are being accommodated in an increasingly hospitable way; and yet investors are still allocating capital in rigid asset classes.
It is time to break free of these constraints and recognise that a real estate revolution is underway that, for many investments, requires the property investor to directly connect with the tenant occupying the business.
The value of the building is determined by what is going on inside it as much as by its location or size. And the sustainability of the rental stream can only be understood if the business paying the rent is also understood.
The hotel sector has been at the forefront of the understanding of operational real estate for decades, evolving new business models to maximise returns in this new world of real estate investment.
This is why the combination of the best media platform for hotel investors and the best organiser of events for hotel investors is so compelling.
How is OpRE re-imagining the sector?
Although hotels are important. So too is student accommodation; senior living and healthcare; the wide array of leisure businesses such as caravan parks, gyms, nightclubs and cinemas; plus pubs and restaurants; and new emerging segments like self-storage, car parking and garden centres.
And this is before considering the impact of hospitality on the big trends in established real estate asset classes, notably residential with co-living and offices with co-working.
Hospitality, and the way it has developed structures for real estate investors to successfully manage operational real estate investments, has many of the keys to unlock value. But other sectors of operational real estate have evolved their own structures some of which are unique but many which have value beyond their respective industry segment.
OpRE is a festival that plans to break down the silos between different bits of operational real estate, enabling the pooling of ideas and the creation of co-investment opportunities.
Alternative real estate sectors covered by OpRE include:
Senior Living & Healthcare
Pubs & Restaurants
Other emerging segments
Cyclical and secular drivers are behind the growth of operational real estate
The hunt for yield and income producing assets in a low interest rate environment created by quantitative easing have widened the appetite of investors.
The evolution of the experience economy is generating demand that requires operational real estate to satisfy.
It’s not just us that thinks so….
Paul Davies, Mintel
[from CBRE’s UK Leisure Trends]
The Leisure industry continues to benefit from the drive towards experiences. Consumers, in particular Millennials, are prioritising what they do, rather than what they own.
As a result participation in leisure activities continues to remain a core priority for consumers, whether it be a casual visit to the pub, attendance at a music festival or a thrill-seeking day out at a theme park.
Urban Land Institute / PWC
[from Emerging Trends in Real Estate – creating an impact, Europe 2019]
The search for yield and income is now edging the industry out of its core comfort zone. Some are moving into alternative or niche areas, like student accommodation, which require more operational expertise. “If you're not able to raise the income on your asset and yields blow out you’re exposed. If you have assets where you can grow the income, or you’re in a sector where income is growing then you’re less exposed,” says a global investor.
Will Hawkley, KPMG
[from KPMG’s Leisure Perspectives]
As consumers, we’re all becoming more mobile, and it’s easier to see the world. With this, we see the demand for travel, hotels, restaurants, bars and entertainment increase.
Consumers are starting to value experiences over ownership. There are generational differences of course, but overall the leisure industry has benefited from this trend globally.