Interview: “A greater focus on international asset management”
Christoph Schumacher has headed Global Real Estate at Credit Suisse Asset Management (Switzerland) Ltd. since June 2017. The renowned real estate expert's knowledge of the international market is the ideal basis for the unit's international strategy and the continued expansion of its real estate investments in Switzerland.
Mr. Schumacher, it's nearly a year since you were appointed Head of Global Real Estate. What are your thoughts after the first ten months?
It's been a very intense period, marked by continued low interest rates, low inflation, and solid economic growth. These are ideal conditions for real estate investment, and are undoubtedly key factors in the successes that Global Real Estate has achieved in this market in recent months. However, that doesn't mean we can rest on our laurels. We are all too aware that such an ideal macroeconomic environment for the real estate market won't last forever. That's why I'm so grateful to have such an excellent team by my side, working so hard to drive forward our product range in the interests of all our institutional and private investors.
What areas are you currently focusing on?
Our focus is on international investments in Europe, North America, and the Asia-Pacific region. We're increasingly on the lookout for value-added opportunities where we can generate significant increases in value for our investors through refurbishment of the properties. In Switzerland our aim is to achieve continuous and sustained growth. Key activities here include rejuvenation of our portfolios as well as active portfolio maintenance. Today's tenants place great importance on meeting the highest-possible sustainability standards. We aim to satisfy this demand not simply for the sake of our clients but also because it ties in with our own convictions. That's why we have further expanded our activities on the sustainability front.
We're always on the lookout for profitable additions to our existing portfolio – not just in Switzerland but increasingly abroad, too.
Could you give us some examples?
Yes. The Exchange in downtown Vancouver, which was recently added to the Credit Suisse Real Estate Fund International (CS REF International) portfolio, is an impressive demonstration of how energy-efficient and sustainable the buildings of today can be. We placed an extremely strong emphasis on these factors right from the planning stage. We are therefore extremely proud that the property is currently the tallest office building ever to have been awarded a Platinum certificate for Leadership in Energy and Environmental Design (LEED). One of the contributing factors was the inclusion of a rainwater tank and solar panels to help supply the hot water system. Another good example of our efforts in relation to sustainability is the Credit Suisse (Lux) European Climate Value Property Fund, which was launched 2015. It is the first ever climate-neutral real estate fund, and invests in select European commercial properties with the aim of increasing their energy efficiency. The portfolio has now been expanded to four properties. These include the recent additions of two high-quality office buildings in Stuttgart and Düsseldorf (Germany). In recognition of its efforts in the field of energy efficiency, the Credit Suisse (Lux) European Climate Value Property Fund was presented with the inaugural Scope Alternative Investment Award for Sustainability in November 2017.
The examples you mentioned – in Vancouver, Stuttgart, and Düsseldorf – are all outside Switzerland. Does this indicate that you are increasingly concentrating on the international market?
To be honest, it's just by chance that I chose those examples. Naturally, there are also plenty of flagship projects
in Switzerland too. However, it is indeed true that we are placing a greater focus on international asset management than was previously the case. But that doesn't mean that we are now paying less attention to the Swiss market. We're constantly on the search for profitable and logical additions to our current portfolio – both in Switzerland and increasingly in other countries too. After all, investments in foreign real estate offer very promising opportunities for diversification. Just 1.6% of all Swiss pension funds are currently invested in foreign real estate. We think the potential here is huge, and we could see this figure rise to up to 5%. To leverage the potential, we need to further expand our real estate expertise at an international level.
We see considerable potential in emerging markets in general and across the whole of Asia in particular.
From a global perspective, which regions do you see as offering particularly attractive prospects?
Alongside established markets like Japan and Australia, we see considerable potential in emerging markets in general and across the whole of Asia in particular. We base this assumption on the ever-decreasing number of vacant properties combined with simultaneous increases in rents.
Let's return to Switzerland. What opportunities do you see in the domestic real estate market?
In general, the Swiss real estate market is benefiting from the current economic boom. Yet although residential property prices are rising again, the situation remains challenging in the rental apartments, office, and retail markets. Thanks to the economic upturn, we are nevertheless seeing signs of a stabilization in the office market. This has encouraged us to continue the sustained expansion of our portfolio in Switzerland too. As part of this effort, we are focusing on properties that promise long-term returns.
At the start of our interview, you talked about rejuvenating the portfolio. How do you intend to drive this forward in the Swiss market?
There are several ways this can be done. On the one hand we can purchase new builds; on the other, we can sell outdated properties or our investments in them.
Society is becoming increasingly mobile, but is also aging. What influence do you think these two factors will have on the real estate sector?
We expect investors to become more focused on healthcare facilities in the coming years, as society continues to age. Also, the shift in requirements for traditional residential and office properties will increasingly need to be taken into account when it comes to real estate investment. One clear trend in this respect is the increasing demand for smaller, centrally located properties down to the level of micro-apartments.
Has the increase in digitization also had an effect on real estate investment?
Yes, definitely. The explosive growth online shopping has led to rising demand for modern logistics centers. This is also demonstrated by the significant increase in rental income in the Credit Suisse Real Estate Fund LogisticsPlus (CS REF LogisticsPlus). As we see no signs of growth slowing in this segment, we aim to further expand the fund's portfolio – which is already highly diverse and risk-resistant.
Do you have any current examples of this?
Yes, this time in Switzerland. In April 2018, we acquired the new underground car park – currently under construction – at the Kunstmuseum Basel. We have a lot of confidence in this type of property because inner-city car parks are increasingly sought-after and therefore offer good potential returns. The central location and good accessibility guarantee high utilization. The property is therefore an ideal addition to our portfolio of logistics properties.
The real estate world is constantly changing. How can you keep your finger on the market pulse?
Our aim must be to do all we can to anticipate changes. These changes include market opportunities, geographical criteria, but also social change, as we touched upon earlier in terms of digitization and demographics.
The explosive growth in online shopping has led to rising demand for modern logistics centers.
Change brings both opportunity and risk. How do you successfully differentiate between the two?
That requires a lot of specialist expertise, a nose for change, and years of experience, which we have in abundance at Global Real Estate. We know our craft, always conduct deep analyses, and are extremely discerning in our investment decisions.
Head of Global Real Estate