The Need for Innovation in the Private Real Estate Market
The proverb “Necessity is the mother of invention” is one of the oldest and most contemporary sayings, with a debate about its origin – whether it was coined in Aesop’s Fables, by Plato, or by Benjamin Jowett. However, it is certain that invention is necessary in today’s private real estate capital market, especially in capital formation and deployment. The first half of the year saw the worst fundraising in a decade with the lowest aggregate amount closed since 2013, according to PERE data. On the deployment side, global volume was down by 57 percent in the second quarter. In this context, private real estate managers and investors must be creative and drive efficiencies to stay ahead of the curve. Engaging new practices and repositioning strategies to both keep current value resilient and take advantage of today’s changes has led to increasingly numerous examples of innovation.
The Introduction of Private Real Estate Innovations Award
The editorial team at PERE has discussed this year’s PERE Global Awards and fast agreed on introducing an award recognizing the best innovations in private real estate – the Innovation Investor of the Year category. This category recognizes innovations by firms over the last 12-months. Entries should demonstrate new or unique approaches to improving investment decision-making or business operations through data and technology or a unique approach to capital formation or deployment. A broad range of inventions can be considered. With the category, we intend to recognize innovations that address imperative needs in today’s private real estate market.
Examples of Innovation in Private Real Estate Ventures
New Jersey-based manager PGIM Real Estate recently launched an innovation laboratory, RealAssetX, aimed at developing technologies to accelerate advancements in the real assets industry. The firm works in partnership with leading universities to develop sustainable technologies, artificial intelligence, and deep tech that can be adopted by real asset firms. PGIM’s RealAssetX is an excellent example of innovation that could qualify for the award, and it aligns with the category’s criteria, which recognize firms whose innovations can improve investment decision-making or business operations via data and technology.
Dutch pension manager, APG, is another perfect example of innovation. The company incorporated large language models into its AI technology earlier this year, which enables everyone on the real estate team to engage with their “digital colleague” Samuel, boosting decision-making capabilities around existing and potential investments. APG’s Samuel proves that innovation is possible in the most unexpected areas of the private real estate market.
Urban Partners by NREP
In May, Copenhagen-based Urban Partners, a city-focused conglomerate, was launched by the senior executives of real estate manager NREP. The firm was repositioned as one of four businesses, including a private equity firm, a real estate debt business, and a technology venture business. The company’s thesis is that this transformation will enhance its ability “to address complex challenges facing cities.” This approach is a unique and effective means of innovation in the industry, which could make the company worthy of nomination for the Innovation Investor of the Year category.
The private real estate market is facing a challenging time with the worst fundraising in a decade and a global volume down by 57 percent in Q2. In such a muted backdrop, firms in the market are looking into innovative practices to drive efficiencies and stay ahead of the curve. The Innovation Investor of the Year category is a perfect way to recognize and reward those firms whose innovations have addressed the imperative needs in today’s private real estate market, even in the most unexpected areas of the industry.
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