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Der Immobilienbrief, January 28, 2011

Column: Change, Change, and Change Again

Contributed by Bärbel Schomberg, Schomberg & Co. Real Estate Consulting GmbH

For decades, the real estate economy has been associated with epithets such as stability and solid performance. This is neither news, nor does it come as a surprise. After all, tangible assets with a long-term orientation represent the very essence of the industry. But even in the real estate industry, the wheels have been turning faster and faster in recent years. The changing times are having an ever greater impact. Starting with the increasing internationalisation, via the noticeably closer affiliation with the financial industry, and all the way to the steadily shifting spectrum of investment vehicles.

The question presents itself as to what these changes are, or rather, have there actually been any changes? The direct links to the financial sector became painfully apparent to all market players in the real estate industry during the events surrounding the collapse of Lehman Brothers and the launch of global stimulus packages of unprecedented dimensions for insurance giant AIG in the US and Hypo Real Estate in Germany and many of the same ilk that used to be subsumed under the "too big to fail" moniker. The consequence was frozen markets, liquidity bottlenecks and the credit crunch. The real estate economy worldwide was hit at its very core – and many actually talked about a "core meltdown."

Even though things are slowly getting back to normal, the necessity remains to adjust companies and products to the strongly shifted parameters. Prominent examples for vicissitudes on the product side are surely the German open-ended real estate funds – a previously less than volatile, almost boring investment vehicle – marked by steady growth and success. Since October 2008, liquidity shortages have made them the subject of much criticism and pressure. Meanwhile, essential changes in the legal parameters have crystallised, and pose a major challenge for fund managers and sales organisations. A mental shift is called for in order to pave the way for this intrinsically sensible investment form into a prosperous future.

The corporate level saw changes of various kinds: Keywords that dominate thought and action include lean management, outsourcing, cost cutting, transfer of operations/personnel leasing, crisis management, risk management and reporting. New regulations on Germany's national and on the European level are also taking their toll.

Meanwhile, the smart minds in the real estate industry have turned back to forward-looking subjects and issues: How do I get qualified professionals back on the staff? How do I create corporate identity and good corporate governance? How can I turn the call for diversity into an opportunity and promote female staff in particular in the real estate industry?

In the most recent past, the real estate industry has seen changes on the senior management level on an unprecedented scope. Any number of examples come to mind. Here as elsewhere, it is true for executives: Those who embrace the changes and are prepared to put a “change management” of their own career into place stand to benefit from the situation – both economically and personally.

If you look at the rapid metamorphosis of the real estate economy and the associated successful redevelopments – be it into a global player, into a specialised asset manager for third parties, or into a broadly positioned service provider – the industry does have the willingness and the means to master the current and upcoming challenges. In this sense, creative and pioneering minds are in higher demand than ever before. Such masterminds and maverick thinkers are exactly what we need to implement the necessary innovations in our industry. That is why the subject of ongoing change should by all means remain on the agenda.

The PDF file for this article is available in German, too.