News Article Austria CA Immo CEE data interview investment
by Ákos Budai | Interview

The real estate industry has been sitting on valuable data for long, now it’s taking advantage of it. Alexander Rafajlovič, who joined CA Immo as Head of Market Research & Data Analytics in January, talked to Property Forum about the importance of data on the real estate investment market and shared his expectations for the year ahead.

You started your new job at the beginning of this year, in a period where I imagine most of your colleagues are working remotely. How would you describe the transition process?

The current situation adds a level of complexity and a certain awkwardness to even small new social interactions. I can imagine this is especially hard for new joiners without prior work experience. In my case, the process has been exceptionally smooth as we worked out a plan of action already in the recruiting process. I have been introduced to several peers early enough and we had time to identify pressing topics to work on from the start. Reaching out over a screen has been hence much easier. And having a friendly group of colleagues with a shared vision is the best way how to start at a new job. Nevertheless, I am looking forward to meeting all of them in person eventually.

Alexander Rafajlovič

Alexander Rafajlovič

Head of Market Research & Data Analytics
CA Immo

Alexander Rafajlovič and his team are responsible for coordinating, structuring, and analyzing all macro and market-related data across the region, as well as tracking, analysing and interpreting trends affecting CA Immo’s business, both for future investment and development opportunities, as well as the existing portfolio. He is a senior real estate specialist with over 15 years of experience in the sector. Most recently, he was a Partner in Cushman & Wakefield’s CEE Capital Markets team based in Prague where he had a leading role in portfolio and single-asset transactions exceeding €2.7 billion of total volume. Previously he was Head of Research (from 2007 to 2012) for the Czech Republic at Cushman & Wakefield and started his career as a Research Analyst at Siemens Real Estate in Prague and Munich. More »

The CEE investment market remained relatively resilient in 2020 but still recorded a 24% decline in the annual transaction volume. In your opinion, what were the main trends driving the market last year? What were the biggest changes you observed?

Investment thrives on stability and predictability. Hence a fall in activity amid a global pandemic does not come as a surprise. Investors reacted to this by focusing on sectors perceived as less vulnerable -logistics, industrial and long leases in general, including offices. On the other hand, activity stagnated in the most affected ones – retail and hotels. It was also interesting to see how pricing generally remained stable or even firmed up for the best product. We have seen a relatively high number of transactions carried out by domestic and well-acquainted international investors, which is good news for the CEE market in general. Unlike in 2008, alternative investments made a step towards broader acceptance – residential, student housing or data centres are becoming a real part of the investment scene.

What are your expectations for 2021 on the CEE investment market?

Prospects of the investment market will be closely tied to the development of the pandemic situation, namely the vaccination progress and suppression of potential mutations. The current situation suggests growth prospects be delayed until the second half of the year, but we should be in a better place than last year overall.

Investors will look closely at vacancy levels and tenant activity. I expect preference to be given to smaller and medium lot size buildings with long leases to tenants from IT, government, industrial and end-consumer related segments. Thanks to firm pricing in the prime segment, good refurbishment and repositioning stories should also be attractive.

We will see more action on the leasing front as expiring contracts form a natural incentive for tenant activity. Luckily, in most office markets pipeline has remained at manageable levels. In case economic activity picks up, we might even see absorption levels equalising the effects of new supply – this could be true especially in Vienna and Prague. Prague and Warsaw have a relatively strong correlation to local GDP growth while Bucharest and Budapest might benefit from broader global trends even sooner, subject to the handling of the pandemic situation.

Industrial and particularly the logistics segment will keep occupying the spotlight this year. Whoever controls the product will have the opportunity to forge deals before times normalise and wheat is separated from the chaff.

In many CEE markets, 2020 saw the closing of fewer transactions with a smaller average deal size if we discount some major one-off portfolio deals. Does this change in the quality of data make pricing more difficult?

In all our markets (Germany, Austria and CEE) we have seen between 10 and 30 office deals last year with enough information to give us comfort in terms of market transparency. We also have first-hand experience from the nine disposals where we achieved significant premiums to book values, plus two acquisitions in Berlin and Warsaw. And it is not just the deals that happen that give us guidance on pricing – tracking live deals, evaluating new opportunities and watching our competition also helps us stay on top of market movements.

Data is more important than ever for any type of business. Do you see real estate market players, in general, making the most of the data available to them?

I think the market is in an exciting phase right now, one where we are moving away from pure instinct-based decision making, where a couple of graphs were used to illustrate the required story. We are closer to genuine insight discovery.

Even in real estate, which is generally lagging behind other industries, the number of trackable variables and their frequency have grown beyond the limits of manual processing – we have gone from anecdotal evidence to a flood of data. It is quite ironic that the industry in fact had the data for several years – we were just too busy doing regular reporting on a low automation level which drained up the energy needed for innovation.

In my experience, the more direct exposure to the underlying business of the customer a provider has, the more attention is being paid to data. The pandemic has certainly accelerated market trends and we will see more hybrid business models being tested and implemented. In the case of offices, this might mean taking inspiration from retail, leisure and hospitality and implementing some of their metrics.

How do you plan to enhance the data analytics team’s capabilities at CA Immo?

On the most basic level, we are focused on ensuring research is woven into the fabric of everyday decision making. We will achieve this by disciplined use of uniform metrics and smart reporting that will improve trend visibility but will keep an exceptionally light administrative footprint. This will be paired with external market data and presented in a set of business intelligence tools and largely self-service data sources.

The second, more strategic vector is to harness the data our portfolio is generating across almost 1.4 million sqm and 80 buildings. We expect to get new insights into how tenants interact with the built environment, test hypothesis and propagate the gained information across the organisation. This will help us adapt and make more informed decisions, achieving long term occupational benefits for our close to 1,000 tenant strong customer base and ultimately deliver higher value to shareholders.

In order to deliver on both promises, I expect more data science and statistics related know-how to be added to the team over time.