The business of real estate investment is also undergoing something of a revolution, its third in fact. The first revolution took rather a long time, spreading from the first US real estate investment legislation in 1960 to the launch of Investment Property Databank in the UK in the 1980s, but drove the institutionalisation of real estate investment.

The second real estate revolution came in the 2000s as sophisticated capital markets techniques were applied to real estate investment and financing for the first time and we saw the rise of the real estate investment manager.

Today, the revolution is in the development of real estate as an operating business. Real estate is generally placed somewhere between bonds and equities, viewed as essentially a bond-style product with an equity kicker, or even just as a bond return with inflation protection provided by indexation or rent reviews.

Investors, especially large core investors, like buildings of this nature; long leases to blue-chip tenants with (ideally) indexation. However, such assets are few and far between. Furthermore, they will remain in short supply, even as emerging markets mature and more prime assets are constructed, because the way buildings are used and managed is changing.

It started with retail and with niche sectors such as self-storage where the operating aspect to the business is equally as important, if not more important than the ‘bricks and mortar’ side. Actually, it would be more accurate to say that the ‘opco’ and ‘propco’ sides of the business are inextricably linked.

This is clear in the management of shopping centres, flexible workspace and hotels, but is also the case for industrial assets, especially with the use of big data, robotics and AI.

Large real estate investment managers are behaving more and more like their private equity cousins in how they manage their assets; just knowing the real estate basics is not enough, although that is not to say real estate skills and knowledge are no longer relevant.

Real estate investments with a heavy operational element can still provide a core return to investors – Heitman does so with its self-storage investments – but for the manager, the skills required are very different from old school management of prime offices.