AEW’s Mike Acton Says Fundamental Property Investment, Asset Management Essential

Mike Acton, head of research and strategy at AEW, told the REIT Report podcast that with interest rates remaining high, and likely to stay that way for some time to come, the next couple of years for real estate are going to be all about income growth.

That income growth is going to be generated through fundamental property investment and asset management, Acton said. That involves picking the right property in the right location, controlling expenses, keeping it occupied, being smart about capex, and having the discipline to sell it when it's time, he noted.

“These are all sort of old school real estate skill characteristics. That's what's going to be rewarded in the marketplace over the next handful of years. It's not going to be taking risk and hoping for yield compression. It's going to be growing income the old-fashioned way,” Acton said.

Acton also said that this is a good entry point into the market, with yields the highest they've been in at least a decade and most assets trading below physical replacement cost. “Those are great entry point signals but it's not broad based,” he noted. Today, it’s very much a sector, location, and property-specific market, he stressed.

Chapters: 

00:00 Back to Basics Investing
00:58 Macro Forces and Rates
02:05 Why Now Is Entry Point
02:59 Income Driven Returns
04:26 Supply and Construction Reset
05:05 Adaptive Reuse Reality Check
05:52 Transactions Tell Truth
06:42 Sector Winners and Activity
07:11 Senior Housing Boom
08:40 Affordability Challenge
09:30 Second Half Themes
10:12 Old School Asset Management
11:13 Closing Thoughts and Wrap