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EPRA Monthly Brief
February 2019
The February edition of the Brief comes to you from Asia, where together with the Hong Kong team we are travelling to Tokyo, Seoul, Taipei and Singapore for a series of 35 one-on-one investor meetings. We will also connect with our peers from other property associations part of the Real Estate Equity Securitization Alliance (REESA). On Monday I gave a presentation about the European listed real estate sector at the invitation of the Nomura Global Real Estate Forum, and later I will also speak at the ARES Global Real Estate Investment Forum.

In the meantime, the team in Brussels is finalising the Q1 Index review, which will be published in the coming days. The reporting & accounting department attended a workshop with ASIPA to further promote EPRA’s financial Best Practices Recommendations in the Spanish market, while the public affairs team submitted our feedback on the activities proposed by the European Commission’s technical expert group on sustainable finance to contribute to climate change mitigation.

We also participated in the successful second Iberian REIT Summit in Spain, which acted as a precursor to the EPRA Conference, scheduled for 10-12 September in Madrid.  Registration will open in March and I am pleased to announce that it is already possible to take advantage of sponsorship opportunities surrounding the event by contacting events@epra.com.

Finally, I would like to welcome our newest members Orascom Development Holding, Aldar Properties and Yew Grove REIT, and look forward to catching up with many of you at MIPIM.

 
Dominique Moerenhout, EPRA CEO
EPRA news

EPRA welcomes the Pan-European Pension Product agreement

The Council confirmed a final agreement on the Pan-European Pension Product (‘PEPP’) after several months of intense discussions with the Parliament. The PEPP is another substantial initiative of the Capital Markets Union project for responding to the pension crisis in Europe where the savings shortfall for pensions has been estimated to be EUR 2 trillion per year. It is a growth opportunity for our sector as PEPP providers (mainly insurers) will have the possibility to allocate sufficient amounts of capital of their portfolio to real estate. EPRA particularly welcomed the optionality left to the PEPP taker to invest in shares, as well as the “prudent person” approach in the investment rules. This approach is in line with EPRA’s advocacy aiming at channelling more savings to long-term investments and diversified portfolios. The text will now undergo legal and linguistic review before being officially adopted by the Council and the Parliament. Read more: European Commission’s PEPP factsheet & EPRA’s view on PEPP.

EPRA provides feedback to the European Commission on climate change mitigation

The technical expert group on sustainable finance (TEG), set up by the European Commission last July, launched a request for feedback on their ‘1st round climate change mitigation activities’ and on the usability of the taxonomy.
EPRA gathered the views of the listed property sector and submitted its contribution in late February. While EPRA members fully support the inclusion of economic activities such as new constructions and building renovations in the taxonomy, they provided some recommendations on the mitigation criteria and rationale. We:
  • Proposed to include, alongside new constructions and building renovations, ‘Energy efficiency and low-carbon projects’ to promote soft renovations with high climate change mitigation impact;
  • Stressed that investments should be focused on deep and soft renovations of the existing building stock; new constructions should be promoted only when there is a real market need;
  • Endorsed the use of energy and carbon intensity measures but highlighted the limits of an ex-ante approach and recommended a set of energy/carbon metrics reflecting the impact of the entire lifecycle of the building;
  • Insisted that the performance of a company’s entire portfolio should also be considered in the taxonomy together with single assets, both for new constructions and building renovations;
  • Highlighted the risk of delivering inconsistent incentives if Nearly zero-energy buildings (NZEB) or Energy Performance Certificate (EPC) were used to define thresholds.
EPRA will be reaching out to the expert group in the coming weeks to continue the discussion.

Disruption in the Emerging market

The FTSE EPRA Nareit Emerging Index broke the positive total return of 2017 (which reached 33.83%) and 2016 (4.15%) by dropping -7.05% on an annual basis and accounting for 2.96% in EUR between June and December last year. In a newly released report, EPRA looks at the size and performance figures of the main emerging listed real estate markets, as well as comments on the key drivers and changes observed during the second half of 2018. We also present a short explanation of the main effects of the reclassification in our index series of Saudi Arabia to Emerging market (effective from March 2019) and China A-Shares to Emerging market (effective from June 2019). Download the report HERE.

Germany remains the largest listed real estate player in Europe

EPRA published its Global Real Estate Total Markets Table detailing values at the end of the fourth quarter of 2018. The report shows that despite a slowdown in the sector at the end of the year, Germany maintained its position as the largest market at EUR 91.34 billion, keeping a steady course over the last 12 months. The total commercial real estate value in Europe is estimated at over EUR 6.92 trillion compared to a total GDP of over EUR 15.08 trillion. Download the quarterly report HERE

EPRA activities highlights

Discover our events’ programme for the next couple of months:
  • Don’t miss the first event from the EPRA Real Estate Digest event series, in collaboration with Peel Hunt. Join us for a panel discussion on ‘Beyond the NAV’ with Safestore, Unite Students and Grainger.
  • Join Bloomberg Intelligence and EPRA for the 2019 Real Estate Summit where we will explore how macro policy and regulation can steer the sector and how REITs, developers and landlords can leverage new technology advancements to facilitate and collaborate with the virtual world. Panel discussions on sustainable financing, valuation and regulatory issues will be complemented by insights on the vision for the future of office, retail and industrial property.
  • Save the date for the second Corporate Access Day, which will take place on 26 June in London. See the highlights from the first large-scale event.
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