I have been a member of the Real I.S. Group's Management Board for several months now. It not only makes me proud to be part of a leading pan-European asset management company that was recently recognised once again by Scope, but what makes the difference is mainly the way that Real I.S. deals with change and accepts challenges. Real I.S. is a company that is proving to be resilient even in the strained market conditions at this time. It does not stand still, but identifies and utilises opportunities to develop itself, its managed properties and its products, with a strong focus on investor benefit – even in difficult times.

2023 was undoubtedly dominated by a range of different challenges: the weak global economy, geopolitical uncertainties and rising interest rates have led to a slowdown in investment momentum in the real estate sector. Institutional investors are nevertheless still looking for investment opportunities, and property remains an excellent way to diversify portfolios. Unlike other asset classes, it is much less volatile and has shown that inflation can be hedged by index-linking the lease agreements. At present, however, the yield expectations of buyers and sellers only correspond to a limited extent. As a result, many market players are still holding back on property investments at the start of 2024. Despite this, the first investors are taking advantage of the current price falls and are investing in viable properties.

We too continue to look out for opportunities, and are well equipped to invest in line with our investment strategy when attractive opportunities arise. To do this, we are monitoring the market closely and will continue to leverage potential in the interests of our investors.

The coming two years will certainly remain challenging. We nevertheless expect the market to recover in the second half of 2024. The resulting transactions should then be seen from 2025 onwards, with market turnover rising again accordingly. A trend reversal on the market is also becoming increasingly apparent. This includes, for example, the fact that the ECB is not planning any further key interest rate hikes for the time being, due to falling inflation rates and expectations. The Deutsche Hypo Index as sentiment indicator for the real estate industry also remained practically stable in December 2023 compared to the previous month, while the investment climate once again increased significantly by 1.3% to an index value of 54.0.

For example, we continue to see opportunities in the area of high-quality office properties with an ESG focus at very good locations in major cities – not only in Germany, but throughout Europe in countries with solid economic performance such as Ireland, Spain, Portugal and Luxembourg. Letting this type of office space helps to secure long-term income and makes the portfolio resistant to market fluctuations, due to the stable demand. The reduced supply of new-build space is also supporting the office letting market as a whole. In major German cities, for example, around 440k square metres of office space will not be completed for now, representing considerable under-supply. Yet this does not mean that the success of office property can be taken for granted. Active asset management will continue to be of crucial importance in the future: to ensure stable performance of the properties and to be able to react quickly to changing requirements, to continuously optimise the space, and to adapt it to the needs of tenants when designing new working environments. A key point is to give these new forms of work enough space to put the new approach to "office" into practice. There is no one solution or one office concept, but the design of the space should be geared towards the work processes and the needs of the employees. This is the only way to implement modern ways of working so that survival is assured in a rapidly changing market environment.

ESG aspects are also gaining increasing importance in the design of new workplaces, because employees are placing more and more emphasis on their employer operating responsibly and sustainably. These demands are increasingly being included in the classification of properties.

In addition, the market is currently redefining what exactly ‘core’ is. The boundaries have shifted in this respect. The ESG aspects of buildings already play a major role for all types of use, and will even be much more pivotal as we go forward. The very specific requirements for climate compatibility may be a key factor in the market value of a building even at this stage. For these purposes, both the building's compatibility with the Paris Climate Agreement and its conformity with the EU taxonomy are, in our view, already part of an extended definition of core real estate.

Sustainability and ESG criteria are also an integral part of Real I.S.'s mission statement and are embedded in all areas of the company. The remodelling of the company headquarters is one example of this. Other examples can be found in the property and fund portfolio: REALISINVEST EUROPA is one of the first open-ended real estate funds with a taxonomy quota. More than 50% of the fund's properties (by market value) are already taxonomy-compliant. In addition, 75% of the overall portfolio of our special funds has been upgraded to Article 8 classification in accordance with the EU's Sustainable Finance Disclosure Regulation (SFDR). We systematically use modern, data-driven applications such as the AI-aided building management system Recogizer to make our property portfolio ESG-compatible.

Constantly changing markets require solid solutions that can be adapted to change, with the aim of making portfolios stable and ready for the future. For us, this includes steady income from property rentals, long-term, index-linked lease agreements, and taking ESG factors into account. Asset management is an essential aspect: yesterday, today and tomorrow.

Real I.S. remains true to its commitment to high-quality office real estate and outstanding asset management. In a changing environment, we remain stable and maintain our strategic direction. We monitor the market very closely and identify interesting investment opportunities on behalf of our investors. For us, resilience means not only the ability to survive challenging market phases, but also having the foresight and strength to leverage opportunities actively.