Innovations How Do We Build From Here?

As the world of real estate is reimagined, Professor Matthew L. Cypher outlines how structures and raw materials drive economic growth and why real estate professionals are adopting a new approach in a changing marketplace.

Matthew L. Cypher brings 20 years of real estate experience to to the McDonough School of Business as the director of the Steers Center for Global Real Estate. In this role, Cypher is committed to engaging with emerging issues in real estate and is passionate about educating students and other industry professionals on the latest trends, innovations, and opportunities for advancement within the industry.

In a dynamic industry like real estate—where market conditions are driving change at an extraordinary rate—there is a strong need for a relevant real estate education grounded in both rigorous academic coursework and experiential learning. That’s what compelled Cypher to develop the new M.S. in Global Real Assets program, which takes a holistic approach to real estate and infrastructure within the context of environmental, social, and governmental (ESG) concerns.

Here Cypher shares his thoughts on the changing real estate landscape and why now is the time to expand existing real estate concepts through the adoption of real assets.

BUYING:

Real Assets—Investing in the Future of the Built Environment. Global investors are using a broader definition of alternative investments that includes not only real estate, but infrastructure and energy-oriented assets. Real assets tend to perform better during periods of unexpected inflation while offering diversification and better riskadjusted returns, with lower volatility.

When we talk about real assets, we talk about the physical structures and raw materials that drive economic growth. The industry needs professionals who look beyond the concept of traditional real estate to include infrastructure assets such as digital, social, and transportation. In fact, there are emerging career opportunities at leading real estate firms focused on adapting these very concepts into their operations.

Real assets contribute a significant amount of global greenhouse gas emissions and by their definition, have a significant influence on the way people live—both good and bad. These ESG implications will continue to increase in importance over time, and we believe that aspects of ESG will improve investment performance.

SELLING:

Real Estate as a Narrow Definition. Investing in today’s environment has become more complex as issues of rising interest rates, inflation, COVID-19, and ESG dominate the daily headlines. Investors once narrowly considered commercial real estate investments to be office, industrial, apartment, and retail buildings, but the asset class has meaningfully expanded due to a dramatic shift in how commercial real estate is utilized in a world where individuals work from home, investors find value in sustainable business practices, and communities seek a more holistic approach to their infrastructure.

Infrastructure assets such as digital and social facilitate cloud computing and address the need for affordable housing, respectively, which factor very prominently in what is sought by global investors today, and this is just an illustration.

While a flashpoint in the media today, aspects of ESG will result in outperformance for those investors who can identify what will drive value. Institutional investors want to know how you are managing ESG-centered risks within your real assets portfolio and innovators will be the beneficiaries of more capital flows.