Uncertainty around the evolvement and duration of the war in Ukraine still dominates the outlook for the coming year. The ensuing energy crisis, consequential high inflation rates and interest rate response of central banks will result in the most uncertain economic environment that we have seen over the last decades. Inevitably this will impact real estate valuations over the coming year and potentially also the volume of funds that our institutional clients allocate to real estate in the short term. The income of Bouwinvest is directly correlated to Assets under Management (AuM) and downward valuations of the AuM will result in lower income for the management organisation. In parallel costs are expected to rise given the continuing inflationary environment. In addition, with the kick-off of project #invest, Bouwinvest will be investing in the further development of the management organisation in order to prepare for further future success. Altogether this makes for a rather uncertain outlook when it comes to the profitability of the management organisation for the year 2023. Bouwinvest has developed several scenarios in order to model the potential (financial) impact of the abovementioned variables and will continue to monitor these closely over the course of the year.
The long-term outlook for the real estate sector is fortunately very much positive. Driven by demographic, economic and sustainability tailwinds, there is strong underlying demand for the development, repurposing and refurbishment of real estate assets across the globe, especially in the residential, logistics, leisure and healthcare sectors. This will require a significant amount of institutional capital to realise and is expected to provide a good basis for stable capital growth and direct returns going forward. Given its market position, organisational competencies, strong culture and focus on ESG excellence, Bouwinvest is well positioned for continued success as a global real estate asset manager.
The main priority of the management organisation in 2023 will be to execute the Fund and Mandate plans and deliver above market results to our investors. In addition, we will invest in the organisation through #invest and ensure that the management organisation is well prepared for the market environment and client expectations of the future.