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Real Estate Finance Day 2023 — A Review
REFD 2023 in Frankfurt again was a truly important forum for the ndustry. Find out more in this article.
By Anthony Baumruk, Partner, Valdivia Consulting GmbH.
New Requirements for Executives in the Real Estate Sector
Opportunity and change go together. Very few industries are currently undergoing a transformation comparable to that in the German real estate sector. Investors, construction companies, service providers and many more feel the pressure growing stronger and stronger. Raised interest rates, the consequences of the new geopolitical situation in Europe, future-oriented and robust ESG strategies (ESG = environmental, social and governance) and the digital transformations within organizations are but a few of the many challenges that the industry will have to confront in the coming years. And so will its senior management. In the process, successful leadership will mean giving new impetus and leading the sector into a new era.
The facts are clear: the real estate sector is of great importance to Germany’s economy. According to official statistics, there are approximately 42 million households, 489 large area shopping centers and more than 323,700 office buildings. With more than 645 billion euros, the real estate industry contributed about 20 per cent to Germany’s total GVA (gross value added) in 2021. The building sector accounted for a third of the German CO2 emissions.
The broader real estate sector and its decision makers on the corporations’ top floors, therefore, hold a lot of economic, societal and social responsibility. In the next years, the market will prefer executives with in-depth operative knowledge about a variety of core areas on the one hand and a wide scope of executive level experience and leadership qualities on the other hand. What is more, these executives will also need to be experienced in setting up and steering sustainable corporate processes. Generalists but also specialists — established executives but also representatives of the new generation. A type of Hybrid Manager is needed.
Increasingly, executive boards and CEOs are becoming dynamic interdisciplinary project managers, who have to deal with the details of special topics and, at the same time, with far-reaching management issues on a daily basis. Managers with profound insight into their companies will be able to weigh enterpreneurial risks and opportunities in the current market period much faster and, for instance, decide whether the development in construction costs or energy prices will present a real, therefore relevant risk for their corporation. Successful managers should get involved in relevant processes in both a speedy and precise way, yet also delegate a lot whilst making sure they have a fundamental understanding of the delegated processes.
Two significant trends will have a long-term impact on the industry: digital development in the enterprises as well as the new ESG guidelines. Digital investment tools, e‑Bilanz, BIM (building information modeling) are essential for executives in order to be able to make well-informed decisions. At the same time, all stakeholders will be provided with a transparent picture of the enterprise. Introducing a digital DNA will be necessary as well. The industry is competing with companies featuring a higher degree of digitalisation – and at a global scale, too. On top of that, executive boards have to assess numerous decisions in investment and asset management processes with regard to sustainability standards. ESG scoring or ESG compliance, respectively, are a comparatively new field, calling for knowledge and competence at top management level.
Leadership needs to be flexible and aimed at integration. However, executives should also possess the decisive qualities to successfully navigate their staff through these challenging times, now as well as in the future. Clear, transparent, realistic communication is of the essence — be it on the ’contruction site,’ be it ’remote’ – and a high degree of empathy in order to lead the staff and, most of all, to retain them. Employees need to deal with topics such as digital transformation or political change as much as their managers.
It follows that successful leaders in the real estate sector will be developing permanently, learning more, understanding the megatrends of the future, e.g. digitalisation or ESG, and they are able to gauge how these aspects will impact their enterprises. With their wide range of experience and their confidence, they get involved in different projects at a time. As a kind of hybrid drive, they can master the new era. Crises-tested, solution-oriented managers with a high degree of creativity and resilience and a good eye for the future are at a clear advantage here.
 e-Bilanz: In Germany, business have to electronically transmit their balance sheets to the relevant tax office. This procedure is known as ’e‑Bilanz’.
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