Building a stronger Europe – the case for listed real estate

Real estate plays a crucial role in all aspects of our everyday lives. Listed real estate companies are the guardians of many of the highest quality assets in our cities and their contribution to the EU economy is more vital than ever, writes Tobias Steinmann.

Tobias Steinmann is the Director of Public Affairs at EPRA.

Property companies serve businesses and society by actively developing, managing, maintaining and improving the built environment, where we all live, work, shop and relax.

In our recent report, Building a Stronger Europe, we show how the listed real estate sector has proven to yield stable and strong long-term performance to investors, especially pension funds through reliable dividends, effectively contributing to the retirement of millions of people.

The sector is governed by a robust regulatory framework of EU legislation, national parliamentary supervision and local financial markets regulators, yet the liquid nature of listed companies also facilitates the ‘democratisation’ of real estate by providing individual investors with the opportunity to participate alongside larger investors in otherwise inaccessible investment opportunities.

This means that listed real estate represents a viable choice for investors as it provides liquidity to an otherwise illiquid market and delivers solid long-term and diversified returns to the shareholders.

Transparency runs as a red thread in the listed sector, as most of the companies are internally managed by professionals who are directly accountable to the shareholders by way of reporting and performance metrics, including by the EPRA Best Practices Recommendations for financial as well as sustainability reporting.

The direct contact with the shareholders also ensures that the sector is responsive to the dynamics of the market, not only from a financial standpoint but also with regards to Environmental, Social and Governance (ESG) developments.

A notable example includes the emergence of green and social bonds as a potential alternative finance source for real estate, as key listed real estate companies have led the way in this developing market. These companies are already seeking to measure their wider impact and contribution to society at both an asset and corporate level.

They strive to incorporate the best possible standards in terms of construction, efficiency, sustainability and wellness as part of their normal business, while at the same time trying to engage with the broader community through their developments and corporate initiatives.

Aside from transforming the physical environment in which we lead our daily lives, the listed property sector is also directly beneficial to European citizens, as it serves as an important catalyst for job creation and feeds so many distinct parts of the EU economy.

A recent study conducted by PwC for EPRA shows that Europe’s listed property companies are the catalyst for almost 1 million jobs in the EU, an astounding figure. In addition to its role in creating employment opportunities, publicly listed real estate also plays a substantial role in the provision of business and residential accommodation, in so doing serving European citizens by delivering the built environment to meet their needs.

Listed property companies also play an important role in driving up standards and efficiencies in the broader property markets which in turn improve the broader property sectors’ contribution to the economy.

More significantly, the listed companies have proven to be the leading innovators in delivering and operating the built environment, by responding more actively to the needs of tenants, the communities in which they operate in as well as externalities like property sectors’ environmental impact.

This, in turn, has an overall positive effect on the rest of the property sector that boost professionalism, transparency, stability, liquidity and the quality of the entire built environment.

Taken all of this together, the contributions that the listed real estate sector bring to the EU economy are both cumulative and unique, and the effects it brings in terms of health, vibrancy, efficiency and accessibility are undeniable.

Our report, Building a Stronger Europe, makes it clear why the listed sector should be strongly represented in EU policymaking and identifies ways in which European governments and EU legislation can take proactive steps to deliver policies that will further grow the European listed property sector. In turn, this should streamline the broader real estate industry to deliver its full potential and build a stronger Europe.