PIMCO: finding yields in logistics, living, and data centres

The current real estate market offers a good moment for investment, but one that requires careful consideration due to geopolitics, interest rates, and other factors that differentiate this cycle from previous ones.

Donato Saponara

“Success today relies on understanding the fundamentals of real estate, adopting local strategies, knowing the local market intimately, and actively managing assets to increase yield,” Donato Saponara, head of South & West Europe and co-head of Investment Europe at PIMCO Prime Real Estate, told CRE Media Europe in Munich. 
He highlighted the impact of secular trends such as demographics, digitalization, decarbonization, deglobalization, and defense on real estate investments. According to Saponara, these trends create opportunities and divergences, requiring a nuanced understanding of specific markets. For instance, in the logistics sector, rental markets vary, with some declining due to oversupply and others thriving due to limited supply in critical locations.
“Logistics and social infrastructure, such as student accommodation and affordable housing, are our favourite asset classes. You need to know in which market to be, and you have the local knowledge and the sector experience to be successful”, he explained. 
Data centres also have potential, particularly in identifying the right locations and navigating the complexities of land acquisition and power. Furthermore, opportunities exist in hotels in Southern Europe and decarbonization efforts across Europe, where assets with low carbon footprints and energy consumption offer both reputational and economic advantages.
Saponara shares the prevalent opinion that there is a more positive environment compared to the last two years, with more people interested in returning to investment. By focusing on fundamental investment principles, creating value, and improving yields, real estate investments can become competitive with other asset classes, according to him.
PIMCO is focusing on sectors like logistics, residential, and data centres, seeking investment opportunities and the repositioning of investment classes, and is active in Southern Europe, particularly Spain, where the economy is performing well. However, Saponara emphasizes the importance of local knowledge, as different regions within Spain offer unique opportunities and challenges due to variations in regulations, space, and market dynamics. 
Sustainability is a key focus for PIMCO, aiming to create resilient assets through decarbonization and energy efficiency, creating value, especially in European CBD assets, where reconversion leads to premium rental and asset values. 

Branislav Pekić