Lee, Evelyn. "Deep Dive: Private Real Estate’s Obsolescence Problem". PERE. December 06, 2021. https://www.perenews.com/...

Asset managers conduct annual portfolio reviews and tenant engagement surveys to identify and manage potential obsolescence issues.  Future pricing is a concern and they understand the risk that many obsolete assets may soon be on the market at the same time, pushing prices down.  Thus, lenders and investors are focusing on future-proof assets.  When the full transition risk is priced in, it is expected that assets will drop in price 15%-20%, which equates to roughly 100bps to expected long-term unlevered returns.  Moreover, green cap-ex and a minimum energy performance certification rating is increasingly becoming mandatory.

Posted on 06/01/22

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