What is Cairn Real Estate’s key strategy?
We created an operating platform in the Netherlands that works with new investors, international investors mainly, to execute new strategies in the Dutch markets. We tend to focus on the office sector, and we were an early investor in that space. Three or four years ago the market was completely different and we were able to acquire vacant office buildings in strategic locations, which we were then able to reposition in a bid to to meet the demands of the future tenant.
In addition, we operate a €150 million logistics and industrial fund that holds assets in Germany and the Netherlands, and we have also delved into retail. For both strategies we see the potential to create a German and Dutch portfolio, also leveraging the capabilities of our mother company MPC Capital.
We are part of a consortium that will develop one of the largest residential projects in Amsterdam, creating a completely new suburban district. The majority of our work is in the Dutch market and, fundamentally, we have the same approach to create buildings where people want to be, but it also always has to make economic sense. In markets where rents are higher and the profile of companies is also higher, people are more than willing to pay more, and this is something we consider.
We acquired two portfolios of properties that are all located on top of or next to main train stations in mid-sized cities. These are regional markets with lower rental levels, in Amsterdam and the four largest cities, but it is worth the effort to go a step further with these sorts of projects.
What is your vision for sustainability in real estate?
It is obviously a key topic, and investors are more aware than ever of the impact a building has on the environment. In addition, there are new rules and regulations for investors to follow, and tenants are also much more focused on the topic.
We are not just focused on labels or box ticking. What we try to do is create buildings that are ready for the future and meet the demands of the tenants. We look for durability as well as sustainability to meet the standards of the future. This means we have to be focused on the technical aspects of sustainability, such as energy efficiency, but these are more by-products for us. What we think is important is to create a building where people want to live and work—it has to be a dynamic environment. We strive to create buildings that give our tenants more energy than they came in with.
It works through a combination of humanities, services and technological innovations, as well as designing the building in such a way that it is a positive energy contributor. For many firms it is difficult to attract talent to their companies, and it becomes a strategic decision by the CEO or human resource managers to judge people. The wellbeing of employees is a strong topic of conversation these days and with good building design we can help to create a strong environment for their employees, and even contribute to physical and mental health.
Where and how are you implementing this strategy?
We try to improve on every project we do. We have recently invested in a start-up company called Healthy Workers. It’s application enables users to manage hard data on light, air quality and other elements that influence how people feel in the building. The app then combines this data with a softer set of data, based on questions people answer through the app, and suggests improvements to the company. For example, it may suggest that people need more green spaces, improved lights or better food and sports activities. The app can then also assess the differences that the improvements have made.
We are in the process of redeveloping a building in Amsterdam, positioning it as a healthy working community. We have designed it with maximum health and energy considerations at the fore. What we are trying to do now is take a step back in the development phase and try to work with various suppliers in a different way.
We try to implement this with our tenants across the board, looking at how employees consider at the building. This also changes the relationship between the tenant and the owner. There is so much innovation in technology and, by working together from the beginning, we can develop a new business model, utilising suppliers in the development of the building. Everybody has to change their mindset slightly, but in the end the solution serves everybody’s interests.
Do these projects have a positive impact on returns?
It does, but it is not always easy to say what the impact is exactly—it is not always tangible.
What we definitely see is the elements that investors like in our buildings. Our philosophy is much more around durability, and that’s why we have selected buildings that have the potential to become lively, multi-tenant assets, in sustainable locations. It doesn’t make much sense to have a sustainable office building in a location where everybody has to get there by car. This increases the allure to investors.
Once you label a building and ensure it is sustainable to the highest technical standards, you create an environment where there is much more of a joint effort between the landlord and the tenant. Investors are noting the effort we made on a property that we are currently selling—the building will last longer, so returns are much more stable from that point of view.
It is also important that the buildings are flexible. Mixing uses is important to us. We need to be able to mix retail with offices and, within offices we need to be flexible, creating a mix of activities. Structurally too, we look to answer to the change in demand from occupiers. This will be a key focus going forward, as we don’t know exactly what a building may be used for in the future, and this is an important element for avoiding vacancies, and important for a sustainable outlook.