You’ll never catch Frank Berlepp giving anything less than his all when on the job. The one time he compromised on this principle, it didn’t turn out well.
“At the beginning of my career, I once made the decision to realise a building that I did not believe in – I believed in neither the investment nor the product quality that had been chosen for the location,” recalls the Managing Director of LBBW Immobilien, one of the largest German real estate development and management companies in the country.
“A prime site always requires a top-quality building, while a less prestigious location requires a simpler building,” he explains.
“This development was in a modest commercial area in a peripheral location, but the investor wanted to construct an extremely highquality building. I did it for him but could not put my heart and soul into it, as I thought it was the wrong move. The result was correspondingly poor – the price he envisaged simply could not be attained in that location.
“I learned my lesson and have not since taken on any project that I don’t believe in. Sometimes, you just have to say no. Today, every project at LBBW Immobilien is a project I would personally invest in.” Frank’s ‘all or nothing’ style of working is one that suits the real estate development sector perfectly.
“It’s the only industry where you have the opportunity to follow a product from start to finish. As a project manager, you are in charge of everything from acquisition, design and supervising of the building contractor to selling to tenants or end investors. You get to create, produce and present the finished product to the customer. I don’t think there is any other sector where you can have so much influence over things,” he explains.
As a respected veteran of the industry, Frank has spent the vast majority of his career in a variety of real estate development, management and investment firms in his home country of Germany.
He joined LBBW Immobilien in 2009 as Managing Director and took on his current role as the spokesperson for the management team earlier this year. Despite his experience, Frank says that “there is not one day that is like the last”.
The unpredictability is what keeps him on his toes and interested in his job. “Every day is extremely challenging, whether operationally, intellectually or creatively. I can never prepare myself mentally for a particular day and know exactly what to expect.”
Indeed, change is the only constant in the industry and in recent years, that has been focused on sustainability. “In order to successfully market a building or commercial property today, having sustainability certification is necessary,” says Frank.
“In addition, investors are increasingly placing higher quality demands on urban development, architecture and buildings. All in all, the expectations for quality requirements have seen a significant increase.”
According to Frank, the COVID-19 pandemic has only accelerated the change in focus to more environmentally friendly developments, especially in residential real estate.
“There may be a shift back to nature. Peripheries of suburban centres may see increased popularity especially with families who have learned during the pandemic how pleasant it can be to have a garden or patio,” he predicts.
Fortunately, we run on a long-term investment strategy that isn’t significantly affected by short-term events such as the pandemic.
In contrast, Frank does not expect the coronavirus to have any long-term effects on the commercial real estate sector. This is despite the predicted switch to mobile working that many firms are expected to adopt permanently, post-pandemic.
“The areas that are lost as workspaces will be needed for communication areas, such as new rooms for conducting virtual meetings,” he points out. “So there should be no reduction in the total office rental space.”
Price-wise, he believes that short-term rent reductions will be the reality for a year or two, but he expects them to bounce back after 24 months. This will go hand-in-hand with more flexible rental agreements.
“We are coming out of a time characterised by relatively rigid agreements that are commonly 10 years, or do not go below five years. This is now moving towards a norm that is less stringent.” Frank admits that the pandemic has resulted in a quieter market but claims he is not worried for LBBW Immobilien.
“At the moment, we are seeing a standstill in investments, which means that the purchases and sales of real estate has dropped. The same goes for the conclusion of rental agreements. It’s not that people are shelving real estate investments altogether. They have merely postponed them.
“Fortunately, we run on a long-term investment strategy that isn’t significantly affected by short-term events such as the pandemic. We have a high degree of diversification in our portfolio and, thanks to the acquisitions we have already made, a well-filled investment pipeline for the coming years. Our equity situation is good.”
No matter the market or the challenges presented by world events, Frank is confident in his belief that there are some fundamentals of sound real estate investment that will always remain consistent. In his opinion, these are the factors that can determine success across the industry as a whole.
“First of all, the creditworthiness of tenants will always be one of the key criteria for landlords when considering whether or not to enter into a rental agreement. Second, the location and product quality expected in top inner-city areas has always been high, and still is. Finally, good cooperation with brokers is also paramount.
“Essentially, what LBBW Immobilien does is advance funds through our investments, which then pay for themselves over several years through attaining creditworthy tenants, great locations and product quality. Experience has shown that long-term investments can’t be successful any other way. If any of these factors are neglected, the project will not be successful.”
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